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BlackRock Grtr Eur (BRGE)

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Friday 15 March, 2019

BlackRock Grtr Eur

Portfolio Update

BLACKROCK GREATER EUROPE INVESTMENT TRUST plc (LEI - 5493003R8FJ6I76ZUW55)
All information is at28 February 2019 and unaudited.

Performance at month end with net income reinvested
 

One
Month
Three
Months
One
Year
Three
Years
Launch
(20 Sep 04)
Net asset value (undiluted) 4.4% 1.2% 1.7% 44.2% 350.8%
Net asset value* (diluted) 4.4% 1.2% 1.7% 44.8% 351.3%
Share price 5.0% 2.3% 3.0% 41.4% 337.8%
FTSE World Europe ex UK 2.1% 0.4% -3.3% 38.7% 228.4%

* Diluted for treasury shares and subscription shares.
Sources: BlackRock and Datastream
 

At month end

Net asset value (capital only): 345.82p
Net asset value (including income): 346.16p
Net asset value (capital only)1: 345.82p
Net asset value (including income)1: 346.16p
Share price: 333.00p
Discount to NAV (including income): 3.8%
Discount to NAV (including income)1: 3.8%
Net gearing: 3.2%
Net yield2: 1.7%
Total assets (including income): £295.5m
Ordinary shares in issue3: 85,373,101
Ongoing charges4: 1.09%

1  Diluted for treasury shares.
2  Based on a final dividend of 4.00p per share and an interim dividend of 1.75p per share for the year ended 31 August 2018.

3  Excluding 24,955,837 shares held in treasury.
4  Calculated as a percentage of average net assets and using expenses, excluding interest costs, after relief for taxation, for the year ended 31 August 2018.

Sector Analysis Total 
Assets 
(%)
Country Analysis Total 
Assets 
(%)
Industrials 29.6 France 17.0
Health Care 22.8 Switzerland 16.9
Technology 14.2 Germany 12.7
Financials 11.1 Denmark 12.0
Consumer Goods 9.6 Netherlands 9.2
Consumer Services 6.8 Italy 7.2
Basic Materials 4.2 Israel 4.1
Telecommunications 2.3 United Kingdom 4.1
Net current liabilities -0.6 Spain 4.0
----- Sweden 3.8
100.0 Russia 2.3
===== Finland 2.2
Ireland 2.2
Belgium 1.9
Greece 1.0
Net current liabilities                  -0.6
-----
100.0
=====

   

Ten Largest Equity Investments
Company Country % of
Total Assets
Safran France 6.7
Novo Nordisk Denmark 5.8
SAP Germany 5.4
Sika Switzerland 5.0
Lonza Group Switzerland 5.0
RELX United Kingdom 4.1
ASML Netherlands 3.5
Unilever Netherlands 3.3
Thales France 3.1
Fresenius Medical Care Germany 3.0

Commenting on the markets, Stefan Gries, representing the Investment Manager noted:

During the month, the Company’s NAV rose by 4.4% and the share price by 5.0%. For reference, the FTSE World Europe ex UK Index returned 2.1% during the period.

European ex UK markets continued to rebound in February, supported by a slightly better than expected earnings season. The earnings season has given market participants the first chance to judge the extent of the global slowdown that led to such weakness in equity markets in Q4 2018. Thus far, both earnings and outlooks support the case for a slower rate of global growth but not recession. Forward guidance has largely remained unchanged, which has comforted investors. Expectations, which had been very elevated, look now to be more realistic and we feel some management teams have guided conservatively, giving themselves room for upgrades later in the year.

The Eurozone composite Purchasing Managers’ Index surprised to the upside, as did composite measures in France and Germany, both rebounding from prior months’ weakness. But the Eurozone manufacturing PMI fell to its lowest level in nearly six years at 49.2.

Stock selection was the primary driver of the Company’s outperformance of the reference index over the month. Sector allocation was also additive, with the higher weighting to industrials aiding returns. The lower weighting to utilities also benefited performance, as this sector lagged the market reversing some of the gains it had experienced into the end of 2018.

The largest contributing stock over the month was a position in Alpha Bank, which rallied almost 40% after shares had come under pressure in Q4. Elsewhere in financials, a position in Italian investment platform business Finecobank aided returns. In a challenging environment for Italian asset gatherers, Q4 proved strong for Finecobank, increasing their fee revenue by 16% year-on-year. All Key Performance Indicators for the business remain robust: new customers, flows and new lending, all of which supported an earnings upgrade.

Within the industrials sector, Thales was amongst the largest contributors to returns. Having been weak on no news in January the shares recovered lost ground in February, supported by the disposal of its data encryption business, a required remedy for approval of the Gemalto deal. The full year results were slightly ahead of consensus estimates, implying solid growth in the second half. Within the same sector, owning Kingspan was also positive. The company, benefiting from a global drive to improve energy efficiency, reported revenue growth of 19% for 2018. The outlook remains strong, though it did note a slowdown in the UK in the first couple of months of 2019.

Sberbank proved the largest detractor over the period as political volatility weighed on the shares as a new US sanction bill passes through Congress. The majority of relative detractors to performance, however, were those positions not held in the Company. Not holding Airbus, for example, detracted from performance over the month as their Q4 results proved better than expected.

At the end of the period the Company had a higher allocation than the reference index towards industrials, technology, consumer services and health care. A lower allocation was held in financials, consumer goods, utilities, telecommunications, basic materials and oil & gas.

Outlook

The European market is set to face a number of issues this year, not least the impending Brexit date. However, we believe much has been priced into European equity markets, including a greater potential of recession than fundamentals currently point to. We see opportunity for a gentle increase in European growth as we move through the year. This could be driven by fiscal stimulus, abating headwinds and resilience of the consumer. Given the significantly bearish sentiment and positioning towards European equities, we could be nearing the point of maximum pain for the European market, particularly if fundamentals stabilise and improve from here. Where optimism for growth is low, optimism for earnings seems slightly overeager in our view and we see risks of earnings downgrades across the market, particularly in leveraged companies. We believe a selective, stock focused approach could provide meaningful uplift to investors’ portfolios in this higher volatility environment. Our portfolios have become more defensive at the margin but we are selectively adding to high conviction ideas which have experienced pull back in their share price with limited or no change to fundamentals.

13 March 2019

ENDS

Latest information is available by typing www.brgeplc.co.uk on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal).  Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.


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