Murray International 11 January 2023
Disclaimer
Disclosure – Independent Investment Research
This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.
Murray International Trust (LON:MYI) offers investors a differentiated investment solution which incorporates both global equities and bonds to achieve capital growth and an attractive yield. MYI is managed by longstanding lead manager Bruce Stout who is supported by fellow portfolio managers Martin Connaghan and Samantha Fitzpatrick. This experienced trio sit within the income focused team which is within the broader global equities team at abrdn. As discussed in Portfolio, their process is centered around bottom-up stock picking, leading to a portfolio focused around identifying the strengths of the underlying companies. Profit taking over the last 12 months has resulted in a slight rotation away from Asian equities and China and into Europe where valuations have become more attractive due to the effects of national lockdowns and geopolitical uncertainties.
The trust’s underlying yield is boosted by the emerging markets fixed income allocation which currently makes up 6.9% of the portfolio. However, this allocation has declined over the past 12 months, reflecting the better opportunities the managers are seeing in the equity markets. MYI offers a progressive Dividend, which has not been fully covered over the past couple of years, however underlying revenues are trending up following the coronavirus lows.
As discussed in Performance, MYI has underperformed its global sector, and global high dividend yield indexes over the long-term. However, over the past 12 months it has been the strongest performer in the sector, generating a NAV total return of 7.8% versus the sectors unweighted simple average total return of -0.1%. This is reflective of the trust's diversified allocations to sectors that perform in cyclically driven environments, in addition to the commodity driven sectors which have rallied on the back of supply chain constraints and Russia’s invasion of the Ukraine. MYI now trades at a 1.9% premium - the narrowest in the sector and narrower than its long-term average.
MYI’s performance has benefitted from the structural changes to the economic environment that have taken place over the past 12 months resulting in it becoming the leading performer within the global equity income sector. This period has seen investor sentiment shift away from high growth, high risk strategies, into more valuation sensitive and diversified investment strategies. MYI’s valuation sensitive and flexible, benchmark agnostic approach, which includes a relatively high allocation to emerging markets and a dedicated fixed income allocation compared to alternative global equity strategies, may mean it is well placed to benefit. However, MYI’s performance still lags the global income sector average over five-years which can in part be attributed to its underweight allocation to the US and technology sectors.
Despite the rally in its share price, MYI still offers investors an attractive yield generated by the portfolios underlying investments. Although the trust’s ability to fully cover the dividend has waned in recent years, revenues have started to recover following the coronavirus pandemic and the use of its revenue reserves in the interim has maintained dividend growth.
The trust is currently trading on a premium in absolute terms but also to its longer-term average which may present a hurdle for some investors. MYI’s discount has been volatile over the last 12 months although the board’s approach to managing the discount has usually kept it rangebound over the longer term and the shares trade at a 1.9% premium at the time of writing - narrower than the long-term average of the trust and the peer group. MYI’s charges remains one of the lowest in the sector as it continues to benefit from its size as the largest trust within the sector.
Bull
- 17 years of consecutive dividend growth and high yield compared to benchmarks
- Diversified geographical and sector exposures relative to peers and benchmarks
- Sector leading short-term performance may continue in structurally different economic environment
Bear
- Performance has lagged the peer group average and reference index over the longer term
- Currently trading at a premium compared to the peer group and long-term average discount
- Two consecutive years where the dividend was not fully covered