Foresight Solar Fund Ltd (LSE:FSFL) revealed net asset value held up much better than expected, said analysts, as the trust was the first of the solar investment trusts to report on the fourth quarter.
NAV was supported by strength in power price forecasts, with no increase in UK discount rates, analysts noted, with a cut in fees and a strategic review both unveiled by the board should be welcomed by investors.
"This is a much better result than delivered by the funds focused on wind projects," said Stifel's Iain Scouller.
Over the full 2024 calendar year, the analyst noted that Foresight's NAV was down 5.2% in capital terms, with a key factor being low irradiation, with 2024 having the lowest number of sun hours since the company's IPO in 2013. This could suggest a scenario where solar funds revise down long-term irradiation expectations, Scouller said.
The trust's board has joined the trend for lower management fees, the Stifel analyst noted, with the basis changed to an equal weighting of average market cap and quarterly NAV, which is likely to reduce the total amount paid to the manager by circa 19% and "should be welcomed by shareholders".
After consulting with shareholders, the board said "some have expressed a desire for liquidity, others are seeking ongoing exposure to the listed renewables sector through a vehicle with greater secondary market liquidity and scale to drive efficiencies. The board's role is to balance these objectives and deliver value to shareholders in an efficient and effective manner by exploring all options available."
Stifel said the shares "appear to offer 'value' on a 31% discount" but retained a 'neutral' rating on the shares, but acknowledging that the sale of the Australian portfolio could be a catalyst if the price is not too far below the current valuation.
Analysts at Jefferies also highlighted the corporate and strategic initiatives, with the marketing of the Australian assets appearing to have already begun, with the Australian Financial Review yesterday reporting an indicative price of AUD$200-300 million for the portfolio, which seems to include some assets not owned by the fund.
The fee reduction and the fact that the board is "exploring all options available" provides hope for shareholders "that a more specific path forward is outlined ahead of this year's discontinuation vote", Jefferies added.