Foresight Solar Fund Ltd (LSE:FSFL)’s portfolio is being conservatively valued by a market, which has "indiscriminate concerns" about the “valuations and the outlook” for the sector as a whole.
This, at least, was the conclusion of Singer Capital Markets, in a note following Foresight’s (FSFL) annual results.
“On our calculations, using the fund’s sensitivity analysis, we estimate that the market is valuing FSFL’s assets at around an 11.5% discount rate,” the investment bank said in a note to clients.
“We note that the renewables and infrastructure sectors as a whole have also been deeply de-rated and that FSFL has not been singled out. In our opinion, the market is signalling significant, indiscriminate, concerns about valuations & the outlook.”
Singer pointed out that Foresight had managed an exit from assets in Spain at a 21% premium to book value, while a “significant third-party transaction” in the UK had been completed at around 15% above the fund’s “valuation mark”.
“Given this evidence, we believe the market’s concern is misplaced and view the implied asset valuation (c11.5% discount rate) as attractive,” Singer said.
Earlier, Foresight provided a bumper update for income seekers, saying the total dividend would rise to 7.5p from 7.12p, representing an annual yield of 8.2p at current prices.
Foresight’s net asset value ended the year at £697.9 million, or 118.4p on a per share basis, compared to £771.5 million and 126.5p in 2022.
The firm’s debt gearing was reduced from 40.5% to 38.8% with some £40 million repaid.
“After a challenging year for markets, we believe there are reasons for optimism,” said chairman Alexander Ohlsson.
“The energy transition is one of the biggest investment themes of our generation. The solar power opportunity alone is immense.
“Industry fundamentals remain attractive and solar generation continues to be one of the cheapest and most reliable sources of electricity available.”