MIDAS SHARE TIPS UPDATE: Our tip SDCL Energy Efficiency Income Trust powers ahead… efficiently
With energy prices soaring and Russia playing havoc with global gas supplies, governments, businesses and individual households are more focused than ever before on how to use less power and electricity.
Turning down the thermostat or switching off the lights can help, but there is another option that could transform the amount of energy we consume and the bills we pay.
Today, more than 65 per cent of UK energy is wasted through inefficient generation, transport and distribution, while poor insulation takes that percentage even higher.
Every little helps: SEEIT owns assets including Tesco solar panels
SDCL Energy Efficiency Income Trust, known as SEEIT, was set up specifically to address this problem and generate attractive returns for shareholders.
Midas recommended the stock when it floated in 2018 at £1 a share. Today, it is £1.22. The group has also announced dividends of more than 17p since flotation and analysts expect a payout of around 5.7p for the year to March 2023, putting the stock on a yield of more than 5 per cent. Over the past three years, SEEIT has amassed a £1billion portfolio of assets spread across the world.
In the UK, these include solar panels for Tesco supermarkets; electric vehicle chargers for BP garages; LED lights for Santander bank; and an onsite generator at St Bartholomew’s Hospital in London, which provides electricity, heating, cooling and hot water.
In the US, SEEIT provides electricity, heating and water to the former Kodak site in New York state, now one of the biggest business parks in America and home to more than 100 customers.
The group operates a huge project in Indiana too, providing onsite heating and power for steel mills, using a blend of natural and waste gases. Other projects include a biomass facility to make olive oil in southern Spain; the Stockholm gas grid, powered mainly by gas from waste; and a cooling system for big industrial firms in Singapore.
SEEIT chief executive Jonathan Maxwell tends to buy assets that are up and running so he can be sure to deliver steady dividend growth to shareholders. But some projects are developed from scratch and there are also plenty of organic growth opportunities from providing more services to existing customers.
In every case, efficiency is the goal, helping businesses and individuals to use less energy and reduce their bills while benefiting from reliable supplies of heat and power. The firm tends to finance upfront costs, such as the installation of onsite generators, and then provides energy, power, lighting or all three as a service over several years. This means income streams are predictable and frequently inflation-linked too.
Looking ahead, SEEIT is expected to continue growing at a steady clip. The world is waking up to the need to become more energy efficient and Maxwell and his team are at the forefront of that trend. The group is in exclusive negotiations on new investments valued at around £100million, with a further pipeline of opportunities worth more than £250million.
Midas verdict: SEEIT shareholders have already benefited from an increase in the share price and a decent stream of dividend payments. They should stick with the stock, while new investors could also step in at current levels. Energy efficiency is likely to become an increasing focus for governments and businesses and SEEIT is a top player in the field. At £1.22, the stock should go far.
Traded on: Main market Ticker: SEIT Contact: seeitplc.com or 020 7287 7700