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Well bald_eagle, you've sold and I've added again on this morning's price weakness - that's what makes a market!
I've hit my size limit on this Trust, so now it's a matter of being disciplined - not being tempted to buy any more if the price drops further, because I could be wrong, nor being tempted to sell too early if the price starts rising, because I want to reap the full reward - and generally staying very, very patient.
Good luck - it's been brutal out there.
Bought a few last week. After reading 'the report' I realised there was more going on than an undervalued company...which the company is addressing. Too much for my little brain to process. So I sold up today. Only a little punt anyway, therefore only a small loss.
Wont be posting here again. Best of luck to investors. There are some interesting companies in the portfolio. Hopefully the winners exceed the losers by a large margin. But not for me.
I was thinking the same thing. I don't know. The report didn't say. I assume there must be some sort of lock-in period when they cannot sell...if not the 'logic' used by the adviser would make even less sense.
Is there a time limit on when they can sell. Are they still holding those shares?
More questions than answers with CHRY which the Board need to address before there can be any confidence.
"The ongoing charges ratio for the year ended 30 September 2021 was 0.77% excluding performance fees (as is normal practice) and 10.70% including performance fees."
They are hoping to come to agreement on performance fees....Turkeys voting for Christmas springs to mind!!
"The fee has no clawback arrangement, but the adviser argues that by electing to be paid in shares for a substantial part of the fee, it has participated in the subsequent share price fall and that is akin to a clawback."
Very interesting logic!....no wonder they are so highly rewarded.
Wow!!!....what a pig of an investment. A £63m investment with 'potential' I imagine.
Usually governance issues - which CHRY advisers should have know about - are a red flag.
"CHRY’s advisers added to the stake in October and November 2021, but the share price continued to fall.....The governance aspects that have been highlighted in the press since the share price fall should, the advisers think, have been reflected into the IPO price"
Win some, lose some.
"Revolution Beauty.... In July 2021 it listed on AIM. CHRY committed to invest £45m at the time of the IPO with other Jupiter funds putting in a similar amount between them."
Currently REVB is suspended on AIM at 19p awaiting the audited accounts. So if the initial IPO was at 160p, a large chunk of that inital £45m has currently been lost....unless they have managed to divest along the way.
You win some, you lose some!!
"The advisers think that if Klarna can maintain its annualised revenue growth at around 25% and achieve planned overhead reductions, and if loan impairments fall back to historic levels, Klarna could breakeven in 2023."
But what do is the probability (as estimated by the advisors) that some or all of these things will happen?
Some things are under the control of Klarna's management, others are market forces. Hard to see 'loan impairments' at historic levels if there is a recession, so that perhaps seems optimistic (IMO). looks to me like the CHRY team will have to decide whether to invest more in supporting Klarna over the coming months....or perhaps they have enough funding already.
"they could quite literally sell everything, shut the doors and generate a 100% return to shareholders, according to their NAV. Maybe they should consider that!"
====================================================================
That would be interesting.....we would then know for certain whether those valuations incorporated in the NAV are accurate.
As long as they aren't under pressure to sell then they should continue to invest according to their convictions. Unless they are investing in 'pigs in a poke' they should be OK when sentiment changes....as long as their research & due diligence is robust.
Just to say, the research was paid for by CHRYs small print at the end of the paper.
I suppose they are saying it is a buy.
9th September 2022
Shepherding its portfolio through the storm
In its first three years, Chrysalis Investments (CHRY) generated significant net asset value (NAV) and share price returns for investors by building an exciting portfolio of fast-growing, disruptive and potentially market-leading companies. An abrupt change in sentiment towards these types of businesses has since impacted on CHRY's NAV, with falls in the values of listed investments and a notable write down in the valuation of Klarna. However, this is set against good news coming from portfolio companies such as Starling Bank and wefox.
In a market where financing for growth companies has become harder to obtain, CHRY is fortunate to have cash on hand from its first full exit to support portfolio companies, if needed. However, increasingly, these businesses are becoming profitable and cash-generative.
The extreme discount that CHRY's shares trade at relative to NAV represents a significant cushion against any further bad news. In time, sentiment will switch back, and if the portfolio lives up to the potential that the advisers believe it has, CHRY's current share price has a long way to climb.
I'm with you on this one Agricore.
I had dipped my toe in the water with a 'quarter position' at 86p just 3 weeks ago, thinking I'd then just watch and wait. However, the share price kept dropping fast, so... I kept adding... with another 'quarter position' at 79p and another today at 72p... So, I've already built up three quarters of a full position in this Trust and I've done it much more rapidly than I expected.
No doubt my initial coyness towards CHRY was in part due to my bad experiences with SUPP (now at all-time lows, but still holding!)... but I'm managing to rationalise all of that now and am feel increasingly comfortable about CHRY's prospects.
Chrysalis forecast EPS for the next 12 months has increased to 21.1p EPS +36% to forecasts 3 months ago:
https://www.investorschronicle.co.uk/tips-ideas/2002/01/02/latest-update-companies-smashing-broker-forecasts/
I topped up at 73p today.
NAV is 163.48p
24.1% of market cap is cash and listed equities (17.6p a share or £105m) that leaves £867m worth of unlisted investments as at 30/6/22 valuation. So you're in effect paying 55.4p for 145.88p of unlisted - so a whopping 63% discount.
Of that 55.4p when you consider these 2 are approximately worth 55p:
Starling Bank: 17% ROTE and already profitable. Growing.
We Fox Insurtech: Strong growth (nearly 100% forecast for 2022) almost profitable. Insurtech is the most "undisrupted" area and therefore is ripe for digitisation disruption. (Source: the chap from Augmentum Fintech)
You are getting holdings in: Klarna, Smart Pension, The Brandtech Group, Graphcore, Featurespace, Deep Instinct, Wise, InfoSum, Tactus, Sorted, Secret Escapes, THG, Revolution Beauty all for free.
Of those Klarna is well funded due to recent downround. Strong expansion. Demand for credit will grow not shrink in current env't. If they can manage credit risk. And even if you value THG and REVB at zero then there's still serious value here.
I hadn't seen this but actually picked up 50k shares in CHRY this morning, definitely feels like capitulation has happened.
Some seriously good discounts in the closed end space at the moment.
Abridged version:
'You are always running a risk buying – or indeed tipping – an investment trust that is trading at a premium, and Questor’s advice to readers in June last year to buy shares in Chrysalis Investments at an 18pc premium has rather proved that rule.
That premium has now morphed into a discount of about 56pc. As is often the case with trusts, movements in the discount or premium amplify what is happening to the value of the actual portfolio – the net asset value – and in the case of Chrysalis, the NAV has also fallen severely since our tip.
Take the two things together and we are in the red to the tune of about 70pc.
Partly, in Questor’s view, this reflects the fact that the NAVs of trusts that invest in unquoted assets are updated with a time lag that usually runs to three or six months.
But there is nothing to prevent improved investor sentiment lifting the share price (in other words, narrowing the discount), and the fact that this has not happened suggests to this column that investors have given up on the trust.
This feels like the point of maximum pessimism – the best time to buy, even if strong nerves will be needed.
Questor says: buy'
I hope so baldeagle, but this one keeps dropping - 30% in just a month - and it already feels v uncomfortable to be a holder....
Jupiter's open-ended funds forced selling investments in common with this Trust, cannot be helping. I well remember Neil Woodford's open-ended funds selling out and causing similar grief to the portfolio of ex-Woodford Trust SUPP (formerly WPCT).
However, unlike SUPP, I hope CHRY keeps sufficient liquidity to continue making follow-on investments when good prospects become desperate for cash. If they play that one smartly, there could be some good opportunities out there looking forward.
To improve transparency and create more confidence in CHRY the Board could help by providing more frequent NAV's than the current quarterly updates.
Unhooked, probably my misuse of single quotation marks.....I use them to highlight a word, especially one that can have several meanings or is important to the meaning of the sentence.
I reserve double quotations marks for referring to what someone actually said. So 'comfort' was my word. It was intended to mean that some people derive comfort from a sizeable discount to NAV but in the case of CHRY, where that NAV is based on valuations of PE holdings then that may be misplaced (as we have been finding out).
As I mentioned the assessment of NAV is being tackled....so 'hopefully' no futther shocks.
I was gobsmacked by the fees handed out by the fund......they seem excessive by every conceivable metric. Again 'hopefully' they have a handle on that too.
I think you are right to invest in quality growth companies and some of the CHRY investments seem to fit the bill.
I expect in 3-5 years you will be laughing and wondering what all the fuss was about.....but it does depend on whether CHRY has 'fixed' the issues....and there aren't any new ones!!
Hi baldeagle, all these points are well-known - at least by me - and I had considered them before investing.
You put the word 'comfort' in quotation marks, but I can't see anyone who used that word. I described the 53% discount to nav as 'compelling', but I can assure you that the discount to nav was just one factor in my decision to invest.
Addressing the well-known issues:
NAV valuation. I think they're addressing it. They've set up an independent valuation committee and seem to have become increasingly prudent. Klarna, for instance, has had its valuation cut by 80% - in line with listed comparators.
Performance fee. It's paid, it's gone now, but I don't believe there'll be another one as they've totally reformed the scheme.
Sentiment towards 'growthy' companies. Yes it has been a tough market, but I've invested here with a 3-5 year view and I actually like a number of the companies in the CHRYS portfolio.
All of this doesn't mean I was right to invest of course and I'm down on my buys already. As always, the question will be is it all reflected in the current price?
Final point: I've only 'dipped my toe in the water' at this stage and am monitoring. The hope is that this is now 'A Trust on the Turn'.
"The board of the £1bn Chrysalis investment trust has confirmed it is reviewing the fund's performance fee structure after the two managers were paid a £60m performance bonus for the year to September 2021......They are both employees of Jupiter, and the firm itself will receive an amount of just over £50m in cash as its performance fee for managing the trust."
I wonder if they could get that money back.
Is my maths correct but that equates to £170m fees & bonus....from a £1bn fund. That cannot be correct?
I might be wrong but the Jupiter managers are in place, Jupiter hold a biggish stake in Chrysalis and seemed to have a lot of overlapping holdings which they are now selling. Looking at Chrysalis it still seems to have some really good holdings. Why have Jupiter not bought or merged Chrysalis any ideas?
Unhooked, isn't the problem that Investors take 'comfort' in the 53% discount to NAV but when the NAV is questioned that 'discount' loses meaning?....people must be asking "What is the true value of Klarna?".....and other similar investments on the book.
So there is a question over the 'real' NAV of the assets....which CHRY seem to be addressing. Then there is the recent shift away from growth stocks.....which may be temporary but could be a type of bubble that needed deflating, leaving the true growth businesses and removing the deadwood (obviously CHRY has only diamonds). Then there is a loss of confidence in the strategy of the management.....which may be perfectly sound but may be tested in more difficult market conditions.
Lots to ponder.....but relying on NAV alone (as we have seen with Klarna) may be a mirage.
I'm not sure PE companies are "allowed to value themselves". If not profit making, they normally get valued according to the last fundraising round. Of course if these fundraisings were a while ago, the valuations will likely be out of date and revised downwards (given current conditions) at the next fundraising. Additionally, Chrysalis seems to have taken on board recent criticisms and now have an independent body looking at the share price performance of listed comparators (if any), and adjusting valuations accordingly.
Anyway, the market still hates this Trust and the price continues to drop. At 77p to buy this morning, it's at a pretty compelling 53% discount to the latest recently published NAV.
Notwithstanding today's inflation and interest rate picture (which won't last), I also believe CHRY's beaten-up secular 'growthy' businesses will be a good place to be if we're to endure many years of no or low economic growth.