London, UK, 31 October 2019
Edison issues review on The Merchants Trust (MRCH)
The Merchants Trust (MRCH) offers investors the potential for long-term capital growth along with a high and growing level of income. Helped by the refinancing of the trust's high-cost, long-term debt, for FY20 (ending 31 January) the board's intention is that MRCH's annual dividend will be at least 4.2% higher year-on-year. Manager Simon Gergel at Allianz Global Investors (AllianzGI) is optimistic about the trust's prospects, citing a broad opportunity set due to attractive valuations in the UK stock market. He says that at some stage the deeply depressed sentiment towards UK shares should improve, which could lead to a meaningful revaluation of the domestic market.
Despite Brexit uncertainty, MRCH has re-rated from a c 6% discount and now regularly trades close to NAV. The current 0.1% share price discount to cum-income NAV compares with the average 0.4%, 3.7%, 3.7% and 2.2% discounts over the last one, three, five and 10 years respectively. MRCH has a progressive dividend policy and offers an above-market 5.4% yield.
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