London, UK, 6 December 2023

Edison issues flash on SDCL Energy Efficiency Income Trust (SEEIT): H1 results confirm attractive potential total return

SDCL Energy Efficiency Income Trust (SEEIT) has taken a prudent approach to discount rate adjustments in the period, leading to a 10.9p reduction in net asset value (NAV) per share from 101.5p to 90.6p. This was largely driven by a 100bp increase in the weighted average unlevered discount rate to 8.7%. The portfolio valuation at the end of H124 stood at £1,066m and investment cash inflow from the portfolio was £47m (a c 9% increase from H123). SEEIT has declared a total aggregate dividend of 3.12p per share for H124, which is in line with its FY24 target of 6.24p (a 4% y-o-y increase), while maintaining a dividend cash cover of 1.1x, which is expected to grow by the end of FY24 and over the medium term. SEEIT is currently trading at a 33% discount to NAV with a 10% dividend yield.

In our view, SEEIT presents an attractive 10% dividend yield and a potential 45% additional return if the discount to NAV closes. The investment manager sees the discount as unwarranted and not reflective of the value of the portfolio. To address the valuation gap, SEEIT has stated it is pursuing selective disposals to further strengthen its balance sheet and focus on delivering accretive projects and other upsides to drive growth in NAV. Buying back shares also remains an option following the £20m share buyback programme completed in H124.

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