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RM Secured Direct Lending: DEEP DIVE

RM Secured Direct Lending confident on delivering sustainable income and returns for shareholders

  • £102mln of investments across 35 loans
  • Dividend yield of about 6.5%
  • Trust shifting investment stance towards non-cyclical sectors
OVERVIEW: RMDL The Big Picture
The firm has a cautious outlook on wider economy
We remain confident in our investment manager's approach in ensuring the portfolio is well balanced and set to deliver sustainable income and returns for shareholders

Norman Crighton, chairman

What RM Secured Direct Lending does:

RM Secured Direct Lending PLC (LON:RMDL) is a UK-based closed-ended investment trust focused on secured debt.  

The company aims to generate attractive and regular dividends through loans sourced or originated by its asset management arm, RM Capital Markets Limited, with a degree of inflation protection through index-linked returns where appropriate.

The loans the company invests in are mainly secured against such assets as real estate, plant and machine or income streams like account receivables.

What it owns:

The group owns RM Capital Markets Limited, which provides advisory, capital raising and risk management services, a direct lending platform, and currency and fixed income trading services.

Within RM Capital Markets is credit asset management business, RM Funds, a fixed-income specialist with a focus on secured lending and debt investments.

RM Secured Direct Lending has the VT RM Alternative Income Fund, which invests primarily in listed equities within the alternative income sector, including real estate investment trusts and other trusts in areas such as asset lending, direct lending, peer-to-peer lending, infrastructure debt and equity, property, structured credit investments and renewables.

Inflection points:

  • The net asset value at the end of February was 98.38p per share, compared to 96.96p at the end of last year. 
  • For the 2018 financial year, total loan investments had risen to £102mln from £76.9mln in 2017, while the average yield had increased to 8.55% from 8.23%.
  • The total return, counting the ordinary share NAV and dividends, rose to 5.5% in 2018 from 2.8% the previous year.
  • RM paid a total dividend of 6.5p per share in 2018 and aims to increase the payout this year.
  • The group’s portfolio has grown to 35 debt investments last year from 23 in 2017, while the number of sectors widened to 14 from 11.
  • Since the start of the 2019 fiscal year, RM has made five new investments including in two hotel brands, Praetura Commercial Finance, the invoice discounting sector and a business that installs boilers for energy efficiency in homes.

What the chairman says:

Norman Crighton, chairman of the company, said: "RMDL continues its track record of sourcing strong credit opportunities and actively deploying funds into high quality investments. We remain confident in our investment manager's approach in ensuring the portfolio is well balanced and set to deliver sustainable income and returns for shareholders."

What analysts think:

Analysts at Hardman & Co Research said: “RM Secured Direct Lending offers investors an ongoing 6.5% dividend yield, whose sustainability is supported by multi-year assets, a rising revenue yield and economies of scale.

“Credit, we believe, is well controlled, and we provide readers with a detailed review of its assessment, monitoring and recovery.”

The analysts added that it thinks the company’s gearing level is appropriate, the investment manager's interests are aligned to shareholders, and that any discount will be actively managed.

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RM Secured Direct Lending Timeline

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