CRYSTAL AMBER FUND LIMITED
(“Crystal Amber Fund” or the “Fund”)
Monthly Net Asset Value
Crystal Amber Fund announces that its unaudited net asset value (“NAV”) per share at 31 December 2016 was 218.02p (30 November 2016: 196.64p per share).
The proportion of the Fund’s NAV at 31 December 2016 represented by the ten largest holdings, other investments and cash (including accruals), was as follows:
|Top ten holdings||Pence per share||Percentage of investee equity held|
|Hurricane Energy Plc||85.9||14.1%|
|STV Group Plc||19.9||13.9%|
|Leaf Clean Energy Co.||12.6||29.9%|
|Sutton Harbour Holdings Plc||7.5||29.3%|
|Hansard Global Plc||4.7||3.3%|
|Shepherd Neame Ltd||2.5||1.3%|
|Total of ten largest holdings||210.5|
|Cash and accruals||(7.1)|
Investment Adviser’s commentary on the portfolio
Over the quarter to 31 December 2016, NAV per share increased by 7.9 per cent. This return is calculated after providing for a 2.5p per share dividend declared on 14 December 2016 in respect of the year ending 30 June 2017. Adjusting for this dividend, total returns in the quarter were 9.2 per cent. For the six months to 31 December 2016, NAV per share increased by 41.8 per cent. Adjusting for dividends of 5p a share declared during the period, total returns were 45.0 per cent.
The top three positive contributors to NAV growth over the quarter to 31 December 2016 were Hurricane Energy plc (10.6%), Northgate plc (2.1%) and Grainger (0.8%). The main detractors were Leaf Clean Energy Co (-0.9%), STV Group plc (-0.8%) and Sutton Harbour Holdings plc (-0.4%).
Hurricane Energy plc (“Hurricane”)
During the Quarter, Hurricane released several positive drilling results and raised £70 million to fund drilling an exploration well at Lincoln, to acquire subsea equipment and to fund engineering studies for the Early Production System phase of the Lancaster development.
Crystal Amber was pleased to participate in the fundraising, investing a further £10.7 million in line with the Fund’s stake in the company at the time of 15.3%.
In November 2016, Hurricane was awarded a new licence (Halifax) in its West of Shetland acreage, further expanding the footprint beyond its Lancaster oil asset. Further exploration of this prospect has the potential to not only increase Hurricane’s resource base, but also to help determine how far the Lancaster field extends.
On 19 December 2016, Hurricane announced very positive interim results at its Lincoln exploration well, adding to its increasingly substantial resource base. Results demonstrated a 660m deep oil column which exceeded the company’s expectations and led to the company stating that the pre-drill estimate of 250 million barrels may be conservative. Hurricane’s drill rig will now be moved on to drill the Halifax prospect.
Recent drilling results reinforce the Fund’s view that Hurricane has a significant resource base, potentially in excess of one billion barrels of oil. We expect to see further positive news flow over the coming months, which should serve to de-risk the asset base further and may attract potential partners.
Over the quarter, Hurricane’s share price increased by 26.8 per cent.
Northgate plc (“Northgate”)
On 6 December 2016, Northgate announced interim results broadly in line with expectations. The company stated that the UK business has stabilised and vehicle hires were increasing. The Spanish division continues to develop well.
In December 2016, Northgate announced the departure of its CEO, Bob Contreras, and the appointment of a new CEO, Kevin Bradshaw, former CEO of Wyevale Garden Centres and former UK CEO of Avis Europe. The Fund welcomes this development: in July 2016, the Fund announced that it had called on Northgate to carry out a strategic review to include a potential sale of the business.
The Fund maintains the view that there is a significant opportunity to better capitalise on the Northgate brand and market positioning. The Fund also notes that Northgate’s shares trade on a historic PE ratio of 10.5 and regards the company as attractive to acquisitive investors in the sector.
Over the quarter, Northgate’s share price increased by 12.5 per cent.
Grainger plc (“Grainger”)
On 1 December 2016, Grainger announced positive full year results, highlighting progress in refocusing and improving the efficiency of the business.
The Fund continues to engage with Grainger’s management regarding optimising capital structures and balance sheet efficiency. Despite improved focus and a reduction in the previous excessive administrative cost base, Grainger’s shares continue to trade at a significant discount to its net asset value of 287p a share. This figure excludes 78p a share of reversionary surpluses accruing to Grainger as its reversionary portfolio becomes vacant.
Over the quarter, Grainger’s share price increased by 3.3 per cent.
STV Group plc (“STV”)
In December 2016, STV announced that an agreement had been reached with the trustees of the company’s defined benefits schemes. The Fund welcomes this development and believes that it will allow STV to provide greater clarity on how it will deploy capital. This could involve increasing the dividend payout or a share buyback.
Although television advertising revenues have come under some pressure as a result of Brexit uncertainty (as evidenced by ITV’s trading update in December 2016), the Fund maintains the view that STV holds a strong franchise with a fast-growing consumer division and valuable production content activities. Trading on 10 times current year consensus earnings, the Fund regards STV as undervalued and an attractive takeover target.
Over the quarter, STV’s share price fell by 4.7 per cent.