RCS - Down MicroCap InvTst - Results analysis from Kepler Trust Intelligence

Downing Strategic Micro-Cap Investment TrustAnnouncement

10/05/2022 16:30

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RNS Number : 9978K  Downing Strategic Micro-Cap IT PLC  10 May 2022

Downing Strategic Micro-Cap (DSM)

11/05/2022

 

Results analysis from Kepler Trust Intelligence

Over the financial year to 28 February 2022, Downing Strategic Micro-Cap's
(DSM) NAV increased by 5.3%, versus the FTSE AIM All‐Share which was down
12% over the same period, representing significant outperformance over the
period.

DSM is a 'value' strategy, in that the portfolio constituent's quoted prices
are significantly below the value at which DSM's managers place their
achievable market value.

The discount has averaged around 15% through the year. The board has announced
that it plans to provide a significant redemption point on 31 May 2024,
assuming no serious market disorder. That redemption will enable shareholders
to redeem or have a matched sale for up to 50% of their holding. In the
Chairman's view, this should "encourage the market to improve its rating of
the company's shares as we move towards that redemption point".

DSM's chairman said "DSM has now achieved two years of distinctive
performance. It deserves more market attention". The manager states that they
are currently "positive on the prospects for our holdings which are generally
cheaper than the wider market, with stronger balance sheets and good growth
prospects from the compelling products or services they provide".

 

Kepler View

Downing Strategic Micro-Cap (DSM) is a highly differentiated strategy, and one
that employs the advantages of the investment structure to enable it to
provide a very different exposure for investors than would be found in many
other smaller company trusts. Performance in the calendar year to date perhaps
reflects a change in the fortunes of DSM, in being the only trust in the UK
Smaller Companies sector to have increased its NAV.

Over the year, DSM invested in six new companies deploying £11.1m in cash,
and follow on investments in five existing holdings, deploying £3.4m of cash.
At the period end the company had net cash of £3.8m, around 8.8% of net
assets.

Performance since IPO has perhaps not been everything that the board and
manager would have hoped. However, performance during the last financial year
has been impressive, in a period which has seen the peer group struggle.
Despite this strong performance, DSM's discount has widened from the average
level during the last financial year, and is currently wider than 20%.

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