Update on The European Smaller Companies Trust

European Smaller Companies Tst PLC

09 August 2023

 

London, UK, 9 August 2023

Edison issues update on The European Smaller Companies Trust (ESCT)

In contrast to many industry participants, The European Smaller Companies Trust's manager, Ollie Beckett, is positive about the prospects for European small-cap companies as he believes that low valuations discount a recession. Although small-cap equities have outperformed large caps in Europe over the long term, unusually, small caps are currently in their third consecutive year of underperformance in anticipation of an economic downturn. The trust's cyclical bias and a double-digit share price discount to NAV suggest a potentially attractive entry point if the European economy proves more resilient than many expect.

Now could be a favourable time to consider ESCT as European small-cap equities are trading at the lower end of their historical valuation range. Also, the trust's 13.2% share price discount to NAV is wider than most of its peers' despite ESCT's high-ranking NAV returns and is above its own 11.9% 10-year average. Given the trust's cyclical bias and a meaningful level of net gearing, ESCT's shares have the potential to re-rate if there is a recovery in the European economy.

  
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