# Miton UK MicroCap analysis of results from Kepler Trust Intelligence

- Link: https://www.directorstalkinterviews.com/miton-uk-microcap-analysis-of-results-from-kepler-trust-intelligence/4121123768
- Published: 2023-07-12T11:24:38+01:00
- Author: Ethan Davis

**Miton UK MicroCap Trust** ([LON:MINI](https://www.directorstalkinterviews.com/company/miton-uk-microcap-trust-plc/mini.l))
has released its financial results for the year ending 30/04/2023. Over the year,
the trust has seen its NAV decline by 29.3% on a total return basis, which compares
to a total return of -11.2% for the Numis 1000 Index and the average return of -
7.7% for the AIC UK Smaller Companies sector.

The trust’s discount widened from 5.0% to 7.3%, over the financial year. However,
in the subsequent period it has again narrowed to 5.2%. The redemption mechanism
helps the trust to trade at a narrower discount than the peer group’s simple average
which is currently 14.6%.

Chairman Ashe Windham commented “…your directors believe that Miton UK MicroCap 
Trust has the potential to have bursts of strong returns.” He added, “When quoted
microcaps start at what we consider to be extraordinarily low valuations, combined
with such modest institutional allocations, favorable trends can be sustained over
the coming decade or two.”

**Kepler View**

The most recent financial year has proven challenging for Miton UK MicroCap (MINI).
The ongoing volatility in financial markets fueled by the uncertain path of inflation
and interest rates have had a disproportionate effect on small and micro-cap stocks
in particular. However, we believe MINI offers investors a genuine diversification
opportunity through its concentration of holdings at the smaller end of the market
cap spectrum, which has proven that in the right environment can generate significant
outperformance.

It is hard to escape the inherent volatility associated with small and microcap 
investing particularly during uncertain times. According to the managers, the reactions
from investors from near misses or even when stocks exceeded the forecast has either
been overdone on the downside or muted on the upside. Gervais and Martin believe
this period of uncertainty may provide a longer-term opportunity for the trust. 
Gervais argues the underperformance of the small and microcaps has opened up a number
of opportunities at unusually low valuations which appear to have disproportionate
upside potential, that during uncertain times can also enhance the diversification
across the portfolio’s holdings.

Finally, the board continues to offer shareholders access to the annual redemption
facility which should provide reassurance to investors by providing some downside
protection to the value of their investment by ensuring they will be able to buy
and sell relatively close to par, which in our view enhances the risk/reward characteristics
of the strategy. With the trust currently trading at a discount of 5.2%, this may
prove an attractive entry opportunity – particularly given Miton UK MicroCap Trust’s
ability to generate exceptional returns if the economic environment permits, as 
demonstrated by the NAV total return of 277% generated between March 2020 and May
2021.

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