Investment Company Eppley Limited indicates that while COVID-19 has “suddenly and dramatically changed the investment landscape,” companies should look to weaknesses that make them vulnerable in times of such crisis.
The company’s directors, in remarks prefacing its annual report this week, said, “While it is first and foremost a public health problem, its economic consequences will be far-reaching.
“Investor sentiment is likely to react even more strongly than underlying economic fundamentals. If markets are a struggle between greed and fear, there is no question that for the last few years greed was in ascendancy.”
Eppley said that the re-emergence of fear as the primary driving force in markets will have profound consequences for investors.
In relation to its own operations, the company said impact will be softened by the “considerable momentum” coming from record profits in 2019 and “a steady and stable growth over the past five years.”
Directors said they believe the impact of COVID-19 on Eppley’s business “will be mitigated by several steps we’ve taken over the years make our business resilient to any shock.”
The company cited as portfolio diversification as its principal strength, with investments across multiple asset classes “many of which like real estate, infrastructure and secured loans and leases are defensive.”
The company also indicated that it is not heavily exposed to any one industry, including tourism.
Directors added, “Our asset management business provides a stable stream of recurring earnings largely insulated from credit, market or liquidity risks.
“For example, we estimate that in 2020 we could substantially cover our entire finance costs with our fee income alone.”
The company said focus in 2020 will be on navigating the landscape created by COVID 19 “and preparing to seize opportunities as they emerge.”
Eppley is an investment company focused on credit, mezzanine, and investment products. The company is headed by General Manager Justin Nam.
It produced earnings per share of $0.85 in 2019, a 26.5 per cent return for shareholders.
The company has now produced compounded average annual returns to shareholders of over 35 per cent as a public company.
At year-end 2019, its investment portfolio was $3.8 billion and the average return on portfolio was 12 per cent.
Company chairman is P.B Scott and the Managing Director is Nicholas A. Scott.