RE: I did not understand...13 Feb 2024 15:30
December, Crescent Point Energy finalised its acquisition of
Hammerhead, which resulted in a $175m distribution to REL and the receipt of 8m shares
of Crescent Point Energy (CPG). In addition, Onyx's valuation also increased from 3.00x
to 3.20x Gross MOIC. However, the decarbonisation portfolio dropped 22.9% in value,
driven primarily by its position in Enviva, which lost 85.4% of its market value due to
missed earnings targets, plant-level operational disruption, and ongoing restructuring. In
addition, FreeWire lost 75% of its value due to reduced growth projections as the
company works to preserve cash in a challenging fundraising and growth environment
for EV-related businesses. With the exception of Infinitum, the remainder of the
decarbonisation portfolio continued to suffer from fundraising headwinds caused by the
impact of rates and lower risk appetite from investors. RSE says that these businesses will
remain susceptible to market volatility until they reach profitability.
Having updated our model, our live NAVe falls by 1.2% from $15.76ps/1248pps to
$15.57ps/1233pps, down 2.5% since 31/12/23, reflecting overall weakness in the listed
holdings, with a notable 57% fall in Tritium, 48% in Enviva and 10% in Crescent Point.
RSE continues to show its commitment to capital returns, with its announcement today
to return $200m via a tender at a 16% discount to the 31/12/23 NAV. The tender price is
fixed at 1050pps, a 31% premium to last night’s close and a 16.4% premium to the current
price. If approved by shareholders, this would lead to an estimated uplift of around 8.7%
to our live NAV. The potential impact of the remaining buyback capacity would be to add
around 1.7% to NAV in the absence of the tender. But it becomes more powerful if
deployed post tender as the £22m would buy back a larger proportion of the remaining
shares at potentially a bigger discount to NAV (we argue that post returns of capital the
headline discount should widen to reflect the smaller amount of cash on the balance sheet,
with the price constant, and the NAV enhanced). At current prices the combined impact
would ab an estimated overall 12% NAV per share increase. The price has responded well
to the tender news, and is up 13.5% to 908pps (@9.30). This implies a headline discount
of 26.3% to our live NAVe. But stripping out cash and listed this is a 106% discount to
the remaining unlisted holdings (this is the metric to focus on in our view, and should
remain constant before and after any capital returns). This remains very good value in our
view and thus overall we remain Overweight