TIDMCYN
RNS Number : 1193K
CQS Natural Resources Grwth&Inc PLC
23 August 2023
CQS Natural Resources Growth & Income Plc
Monthly Investor Report - July
The full monthly factsheet is now available on the Company's
website and a summary can be found below.
https://ncim.co.uk/wp/city-natural-resources-high-yield-trust
Enquiries:
For the Investment Manager
CQS (UK) LLP
Craig Cleland
0207 201 5368
For the Company Secretary and Administrator
BNP Paribas S.A., Jersey Branch
Dean Plowman
01534 813 967
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Fund Description
The Fund aims to generate capital growth and income,
predominantly from a portfolio of mining and resource equities, and
from mining, resource and industrial fixed interest securities.
Portfolio Managers
Ian Francis, Keith Watson and Robert Crayfourd
Key Advantages for the Investor
-- Access to under-researched, mid and smaller-cap companies in
the global Natural Resources sector
-- Quarterly dividend paid to shareholders
-- Potential inflation hedge
Key Fund Facts(1)
Total Gross Assets GBP159.59m
Reference Currency GBP
Ordinary Shares:
Net Asset Value 214.67p
Mid-Market Price 180.50p
Dividend Yield (estimated) 3.1%
Net gearing(4) 10%
Discount (15.92%)
Ordinary Share and NAV Performance (2)
One Month Three Months Six Months One Year Three Years Five Years Since Inception
(%) (%) (%) (%) (%) (%) (%)
NAV 6.3 6.5 -10.00 2.5 117.4 92.3 630.1
Share Price 7.9 3.0 -12.3 7.7 122.6 103.8 580.3
Benchmark 4.0 -0.8 -9.6 10.9 35.4 69.7 590.3
Commentary(3)
Commodities were stronger over July, supported by optimism on
Chinese financial stimulus in response to continued soft economic
data. Risks remain around China's economy and its property sector,
which is why the fund remains weighted to Energy over Base Metals,
as it is not clear on how material property stimulus will increase
Base Metal demand. The fund still holds no Iron Ore for the same
reason.
Brent Oil gained 13.5%, as OPEC+ announced an extension to
voluntary production cuts for a further month at least. Notably
Saudi Arabia and Russia offered 1million barrels per day and 0.5
million barrels per day output reductions respectively.
The improved sentiment also helped buoy copper which gained 6%
over the month. Sentiment for precious metals remains muted with
gold prices rising a more modest 2%, although Silver increased 9%.
Regional gas prices remained under pressure with US benchmarks
remaining below marginal production costs, a factor which is
driving a reduction in rig deployment which will see some level of
supply correction to balance the market.
Performance
Including the final quarterly dividend per share of 1.82p the
Fund returned 6.3% in July. Performance was driven by strong
contributions from energy related equities. The improvement
In particular, US land driller Precision Drilling and offshore
driller Transocean made strong contributions, followed by US
onshore oil and gas producers EOG and Diamondback. These shares
rose 34%, 24%, 15% and 11% respectively in sterling terms over the
month.
Weighing on performance, pre-production base metal names were
softer. For example nickel explorer Talon Metals declined 23% in
sterling terms over the month. Similarly, lead-zinc developer
Galena also acted as a drag over the month with its quarterly
update indicting activity on the mine's ramp-up was improving after
some rainfall delays earlier in the year. The valuation gap between
producing and non-producing or smaller capitalised names is looking
near extreme levels and the fund continues to be opportunistic in
adding to depressed names we believe should catch up to or be taken
out by producing peers over time.
Positioning
Trading was minimal over the month. Some of the Fund's position
in Euronav was switched into Frontline given a better risk-reward
profile.
Outlook
Despite recession concerns we note supportive supply side
discipline remains a fundamentally supportive factor for investment
in the sector and is translating into much improved Fund revenue.
In addition, the rising prospect of Chinese stimulus, to counteract
slowing exports, should help support commodity demand in the second
half of the year. While supply dynamics for all commodities remains
constrained given the lack of investment since 2015, energy is
generally less discretionary and thus less susceptible to demand
declines in a softening economic backdrop. For this reason the Fund
continues to hold a larger relative weighting in energy related
sectors.
Sector Breakdown(4)
Top 20 Holdings (% of MV)(1,5)
Company % of
MV
Transocean USD0.01 5.9
Precision Drilling Com NPV 5.9
LEO Lithium NPV 5.2
Nexgen Energy NPV 4.7
BW LPG USD0.01 4.4
Diamondback Energy USD0.01 3.8
Diversified Energy GBP0.01 3.6
Emerald Resources NPV 3.5
Vermilion Energy COM NPV 3.1
EOG Resources USD0.01 3.0
REA Hldgs 9% Cum Pref GBP1 2.9
West African Resources NPV 2.4
Euronav NPV 2.3
First Quantum Minerals NPV 2.1
Foran Mining Corp NPV 2.0
Sigma Lithium Corp NPV 2.0
Talon Metals Corp NPV 1.7
Lynas Rare Earths NPV 1.7
Calibre Mining Corp NPV 1.6
Galena Mining NPV 1.6
Top 20 Holdings Represent 63.4
Sources: (1) CQS as at the last business day of the month
indicated at the top of this investor report. (2) Total return
performance net of fees and expenses as at the last business day of
the month indicated at the top of this investor report. The
Company's investment benchmark is 80 per cent. Euromoney Global
Mining Index (sterling adjusted) and 20 per cent Credit Suisse High
Yield Index (sterling adjusted). Performance data is calculated
from 1 August 2003 (total return basis). (3) All market data
sourced from Bloomberg unless otherwise stated. All returns quoted
in local currency unless otherwise stated. The Company may since
have exited some or all of the positions detailed in the
commentary. (4) CQS as at the last business day of the month
indicated at the top of this investor report. (5) CQS, as at the
last business day of the month indicated at the top of this
investor report. For methodology details see Article 4(3) of
Directive 2011/61/EU (AIFMD) and Articles 6, 7, 9 and 10 of
Delegated Regulation 231/2013. (6) CQS as at the last business day
of the month indicated at the top of this investor report. For
methodology details see Article 4(3) of Directive 2011/61/EU
(AIFMD) and Articles 6, 8, 9, 10 and 11 of Delegated Regulation
231/2013. (7) All holdings data are rounded to one decimal place.
Totals may therefore differ to sum of constituents. These include
historic returns and past performance is not a reliable indicator
of future results. The value of investments can go down as well as
up. Please read the important legal notice at the end of this
document.
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