UK Edition
When we last wrote about BioPharma Credit, in October, we said it was “by all accounts extremely choosy about who it lends money to”. Now, six months later, it has finally found another borrower.
As we have come to expect from this trust, it has managed to combine charging a high rate of interest (8pc) with a high degree of confidence that the borrower will be able to pay the interest due and, in time, the principal.
The latest borrower is LumiraDx, a private British company that makes diagnostic tests that can be carried out “on the spot” as opposed to in a laboratory elsewhere (its testing equipment is approved for the detection of Covid-19 antibodies among other things).
What gives us confidence that it can pay its bills? First, its customers include the NHS and a health programme in Africa in collaboration with the Bill & Melinda Gates Foundation (which has also invested in the company).
Second, its management team has a successful record of creating and growing diagnostic businesses. One, Alere, was bought by Abbott, the American healthcare giant, for $5.3bn (£3.9bn) in 2017.
Third, the company has filed paperwork for a flotation in America, which we would expect to raise funds that will make the firm more solid financially and offer greater comfort to lenders such as BioPharma Credit. Its loan is secured against LumiraDx’s cash and against all rights to its products.
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As we have reported before, the trust, which listed in 2017, has never suffered a default. Our only niggle, which we covered in detail in the column last year, is the very large amount it has lent to one company, namely 25pc of its assets to Sarepta Therapeutics.
This latest transaction doesn’t change that figure because it’s simply a redeployment of the trust’s assets from cash to the LumiraDx loan. However, we remain reassured by the collateral that BioPharma has in the form of Sarepta’s assets.
What the LumiraDx loan does change is that the trust’s dividend will be much more nearly covered by its earnings. If it can deploy its remaining cash the divi should in time be fully covered. We can then expect a new round of capital raising and deployment into loans, which should finally reduce the relative size of Sarepta’s. The yield is 7.1pc.
Questor says: hold
Ticker: BPCR
Share price at close: $0.98
Update: Gore Street Energy Storage
A lot has been happening at Gore Street, which owns and operates what are in effect big rechargeable batteries that help national electricity grids balance supply and demand.
It has just started to earn a new source of revenue from National Grid: it now helps that company to maintain the all-important frequency of the electricity supplied to homes and businesses within a fraction of the 50Hz target. It said the new revenue stream could, if current prices for the service persisted, “result in a material uplift in the company’s revenue for the current calendar year”.
Last week two storage sites in Northern Ireland became operational; they almost doubled the capacity of Gore Street’s operational portfolio, which now stands at 210MW. But the trust won’t stop there. “The company’s pipeline of new investment opportunities continues to grow and now amounts to over 1.3GW in attractive opportunities in the UK and internationally,” it said.
To help fund this rapid growth the trust is raising money from shareholders and this gives any readers who have not already bought shares a chance to do so more cheaply than they could in the market.
The trust is offering shares to private savers at 102p each via the PrimaryBid platform. This represents a discount of 3.1pc to last night’s close, while you can also avoid brokers’ commission and the “spread” between brokers’ buying and selling prices that can sometimes mean you pay more than you expected.
The trust also announced a 2p-a-share interim dividend, due to be paid to shareholders today. This takes the total so far this year to 6p so it remains on track to meet its target of an annual divi of at least 7p when it announces its full-year results.
The trust seems to have a good grip on its operations and growth plans. We will hold but advise anyone who wants to invest to consider the PrimaryBid offer.
Questor says: hold
Ticker: GSF
Share price at close: 105.25p
Read the latest Questor column on telegraph.co.uk every Sunday, Tuesday, Wednesday, Thursday and Friday from 6am.