Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
Sure but the current c. 70% discount already reflects a hell of a lot of that...
In other words, the market is pricing that 70% of GROW portfolio is written down to zero. Genuinely a tail risk event where I am happy to bet against. Investing into special sit' is all about odds and this bet is skewed in favour of a rerating.
Not implying back to 1200p but the 550p mark is my target and implies another 30% cut to NAV whilst still leaving 120% upside potential. As mentioned in previous post, the macro is turning more favourable.
STRONG BUY
AVI Global Trust, c. 1bn fund increasing its stake by 1.5% to 4.5%.
"The investment strategy identifies valuation anomalies to create a concentrated, unique and diversified portfolio of stocks. The investment manager then engages with these companies to improve shareholder value."
They know... planets are aligning ;)
Jefferies this morning - very much applying to GROW
The holiday hangover was evidenced by lots of Bloomberg ‘red dots’ yesterday which included a couple of the Jefferies trusts team. But a lot of people are back today so we might get a pick up in activity. The market suddenly feels a bit more perky and multiple conversations with clients reveal a consensus emerging around the incredible once-in-a-generation opportunity afforded by investment trusts’ discounts. It is a mistake to attribute all of the widening in the last year or so to the change in the macro picture even though it is, of course, huge. Negative ETF flows leading to multiple sell baskets tend to be horrible for investment trust share prices in thinly traded names. Plus the regulatory headwinds about which we have repeatedly written have effectively barred many institutions from buying listed funds. Add to that the redemption pressure suffered by many multi-asset funds and you get a toxic confluence of negative factors. Even if the macro picture remains challenging (vis “higher for longer”) we may be getting closer to the point when some of the other factors dissipate. The UK stock market is cheap relative to other developed market comps and international investors are beginning to recognise that fact. An uptick in M&A driven by overseas investors could help to catalyse a reversal in the 8-year negative trend for FTSE250 tracking ETFs. 38% of that benchmark is made up of investment trusts. Were the regulatory environment to change too, it could release much more institutional capital into the CEF sector. That’s why the smart money is starting to get itchy fingers. Pools of capital are being raised to buy deeply discounted paper. Fear could quickly give way to FOMO if we have a good equity market backdrop this autumn. And when that happens, thinly traded names turn on a sixpence. Punters who were around in Q1/Q2 2009 will testify that it’s a case of blink and you miss it.
- US data keep on backing a pause
- Jackson hole implied a pause
- UK inflation is firmly rolling over
- BoE to pause post September 25bps
Things move slowly but surely, I am confident that by this time next year the price will be much higher as uncertainty dissipates and we price in rate cuts.
STRONG BUY
Lmao - dem crooks panic so they issue some worth less RNS to... guess what.... increase SBC ahah!
STRONG SELL
This morning read across from Princess Private Equity, NAV up +5.5%
Princess Private Equity (PEY) – 1H to end-June 2023
• Returns: NAV of EUR14.77 and NAV TR up 3.5%, share price TR was up 27.8%. Value creation (+5.5%) was the primary driver for Princess' NAV growth, while currency effects (-0.4%) had a minor negative impact on performance. The largest three contributors were: KinderCare, Ammega and Techem. Within the direct portfolio, 50 companies contributed positively to value creation during the period.
• Dividend: The first interim dividend of EUR0.365 was paid to shareholders in June, in line with the objective to distribute 5% of opening NAV for each financial year, via semi-annual payments in June and December. The FX hedging strategy was discontinued on 1 April 2023.
• Investment activity: PEY committed EUR30m to Partners Group Direct Equity V fund (“Fund V”). EUR10m was invested over the period including drawn investments from Fund V and follow-on investments in portfolio companies. Distributions totalled to EUR14m, of which EUR9m came from direct investments.
• Portfolio: The geographical exposure of the PEY portfolio by value as at 30 June 2023 was split between North America (46%), Europe (44%) and Asia-Pacific & Rest of World (10%). Top sectors of industrials, healthcare and consumer discretionary make up 66% of the portfolio. The maturity profile shows that 49% of the portfolio investments are pre-2019.
• Balance sheet: PEY finished the period with around EUR5m of cash and cash equivalents, an undrawn credit facility of EUR127.5m and unfunded commitments of EUR132.2m.
• Other: Global private equity exit activity decreased by 37% on a year-on-year basis over the second quarter of 2023, totalling almost $100bn in value across almost 400 transactions. The most prevalent exit strategy during the quarter was trade sales, which accounted for 77% of total exit value.
• Peel Hunt view: PEY failed to fulfil its dividend objective in 2022, leading to discount volatility, but it appears that things are back on track. PEY currently trades on 27% discount to end-June 2023 NAV versus its own 12-month average discount of 33% and the peer group (ex-3i) average discount of 29%.
Jefferies explaining how listed P/E and VC vehicles and more broadly invest trusts are being disproportionally hit by market participants shorting the FTSE250 as a proxy for the UK economy. All in all, this means that when the UK economy shows a bounce and the BoE explicitly pauses (ceteris paribus, remember we already have one more 25bps priced in September and that's all) GROW should rocket up as short positioning is unwound and the NAV stabilises giving confidence to investors. Planets are aligning, accumulate and get ready!
Harbourvest Global Private Equity’s (HVPE LN) share price is down a whopping 8.5% since we wrote that heading, placing the shares on a completely bonkers 43.7% discount to its end July eNAV. So what, pray, is going on here? The answer is that there was an index basket traded on Friday and all the LPE names were disproportionately hit because, as always, they have the thinnest natural bid stack and there is really very little risk capital to make a price to absorb the trade. That in turn usually draws in momentum traders/algos who just follow the trend - computer-driven stuff. In other words, you get a bit of a negative feedback loop after index sell baskets whack the price. HVPE’s index weight is bigger than its peers so it tends to bear the biggest hit when that happens. To add to the pressure, there was a broker downgrade elsewhere.
Private assets such as wind farm are being realised. Other P/E funds are realising.
Holdings within GROW are profitable - I am pretty sure that they would have many investors willing to buy.
Indeed, it is irrationally cheap.
Lmao drucker panick selling and dumping shares to bagholders... not a great sign of confidence...
Jefferies making a good point here:
When do we see exits in 'full bloom'? The next logical question is at what point will these green shoots turn into a material amount of exits? To this end, we note a study published by Neuberger Berman in December 2022, providing an analysis of distribution patterns following the bursting of the dotcom bubble and during the GFC. Although distributions in both periods immediately declined, the subsequent rebound in exits lagged the recovery in public equity markets by only a few quarters, before staging a full recovery. If Q3 2022 represented the equity market trough, historical patterns would therefore suggest exit activity will pick up in the next few quarters (see below). The main impediment to this is likely to be the current stand-off between buyers and sellers over valuations. Despite this, we believe any further (and broader) recovery in equity markets could help buyers gain more confidence, and against this, sellers may need to compromise to return capital back to LPs in order to support fundraising efforts.
==> time to accumulate!
From investec:
That decision was unanimous but the minutes revealed that ***sentiment on the Fed may be moving away from any additional tightening. Indeed the minutes revealed that a couple of participants had indicated a preference to holding rates steady in July***.
With regards to inflation, participants continued to view it as being too high, with the risks to the upside and with most believing that these risks could warrant further tightening. However what was also evident within the minutes was a more cautious sentiment around further tightening creeping into members' views, with a ***number of the FOMC raising concerns over the risks of overtightening and that risk having become more two-sided***. In broad terms we would judge the minutes as indicating that the ****Fed is nearing or indeed at peak rates, with our own view being that the July hike was the last in the current cycle****.
What will matter in the next few weeks will be the data, in particular the August inflation figures, with CPI released just one day before the 14 September FOMC meeting. We would also point to next week’s Jackson Hole Fed conference as an opportunity for Chair Powell to guide markets over the Fed’s latest thinking.
Despite a hawkish bias, the minutes stressed, as have Fed Chair Jerome Powell and other officials since the meeting, that policy will be data-dependent and that future rate hikes are not pre-ordained.
Base line forecast: NO FURTHER HIKES.
All in All we should see some stabilisation in the base rate landscape which is a key input when you raise money for PE/VC.
Planets are aligning slowly but surely, accumuate with a 12m horizon.
You can’t make this up really… the p-ss take is maximised with this RNS!
Reported EBITDA $-3.6m whilst adjusted is +$21m from which $6.5m is stock based compensation ahahahhaha oh it’s not even over 12m but 3m !!!!
These crooks are literally transferring your cash into their pockets.
TRMR is the poster child of what not to do in accounting when you are publicly listed.
STRONG SELL
Seeing CNIC showing strenght today +2.8%, back above the 200MA, when most stock in the UK, US and EU are deeply red brings confidence in my view that this year will see a strong rerating.
We are probably due for some pause, above the 200 MA as the classic technical analysis metrics cool down (RSI, MACD, Stochastic).
From Jefferies - I guess variables impacting PE also apply to VC.
Is the Long Winter for Listed Private Equity Finally Over?
We said last week (see “Private Equity Stirring” Monday 7th August) that successful exits are the key to a recovery in listed private equity. Matt Hose wrote, “Resurgent exit activity would help validate carrying valuations by crystallising structural conservatism in marks”. The Q2 Marks Outlook looks encouraging as the big GPs are reporting positive Q2 valuations. Last week KKR reported Q2 marks + 5%, and TPG reported +2.5% bringing the average across the U.S. listed GPs to +3.3% for the quarter. Meanwhile, the bid/offer spread between buyers and sellers of assets is narrowing as the pressure on GPs to return cash to LPs grows. That should increase the number of exits. Pantheon’s (PIN LN) buyback programme announcement might just have been the kicker that was required to jolt investment trust investors to sit up and take notice of the improving market backdrop for private equity. Share prices across the sector started to move and people are beginning to notice. Despite the positive signs, there are ongoing compelling reasons why listed PE funds trade at a discount to NAV. The evergreen structure (no pull to par as you get closer to cash), limited secondary market liquidity, limited transparency, discounting of future fee loads and concerns about the impact of the rising cost of debt as well as hidden layers of debt (via subscription lines and NAV financing). Extraneous factors such as FTSE index inclusion (a headwind when ETF flows are negative) and the regulatory treatment of reporting of PRIIP fees (most, but not all, LPE funds are PRIIPS) also continue to impact the sector disproportionately. As a result of this, the listed PE market is analogous to the private equity secondaries market where the supply of paper outstrips demand and where there are forced sellers for non-economic reasons. But, as Michael Oliver Weinberg, Professor of Economics and Finance at Columbia Business School, argues in Institutional Investor, Now Is the Time to Buy Private Equity Secondaries. Savvy investors, he says, can “conservatively underwrite investments to a midteens net return with an attractive risk profile” if they “sharpen their pencils”. We would echo those thoughts for the listed PE sector. Despite all these factors mentioned above, the last time LPE discounts were as wide as they are today was in January 2009. The next three years saw a huge rally and a handful of savvy institutional investors took full advantage of others’ pain. It is interesting to observe that, after a long absence, those same clever folks are back in the market today being “brave when others are fearful”.
Look this one is a special sit stock - not for the light hearted. 15% loss is not important as I trade small lot each time to average in. 1.01 rule - Picking the bottom aka timing the market is near impossible.
I do think planets start to align. Time to accumulate. Good luck.
Q&A:
• CEO revealed that CNIC is in a tender process with the UK government for “big contracts” and that RNS should follow when done -> narrative gave me confidence CNIC is in a top position to win
• CEO said that he expects the “first notable impact in Q4” from the Microsoft contract
• Regarding margins, CEO said product mix is expected to consolidate so GP margin should not erode much further
RNS: pretty positive, not much surprise following 1H udpate
• Positive outlook: "at least in line with current market expectations for the full year." Consensus: FY23 Revenue: $ 783 - 834m ; Adj EBITDA: $ 91 - 98m
• "Online Marketing and Online Presence segments, gaining market share"
• Online marketing (c. 77% group revenue) - 1H23 Revenue: +18% yoy ; KPIs were positive: The number of visitor sessions increased by 49% from 3.5 billion for TTM 2022 to 5.3 billion for TTM 2023 and the RPM remained stable at USD 100.
• Online Presence (c. 23%) - 1H23 Revenue +20% yoy ; KPIs were positive: The number of processed domain registration years increased by 7% from 12.0m for TTM 2022 to 12.9m for TTM 2023 and the average revenue per domain year increased by 6% from USD 9.83 to USD 10.46. The share of Value-Added Service revenue TTM 2023 was 7%
• New prime clients despite the current macro backdrop: • Zeropark, CentralNic's commerce media business, has announced three strategic partnerships: 1) becoming a Tier 1 Demand Partner of Sovrn, a leading publisher technology platform. 2) a significant deal with booking.com, the global online travel agency. 3) Klarna, the Buy Now Pay Later platform has become a direct publisher on the Zeropark network ; • Voluum, CentralNic's flagship ad tracker, has announced the launch of a new integration with popular e-commerce platform Shopify, allowing customers to directly feed conversion data from their Shopify stores into Voluum, bolstering their ad, product, and page performance
Remains a strong buy
Look can't say more than this is a tremendeous entry point for a 12m horizon.
TAM is huge, end market have been pricing in some weakness.
KWS remains profitable and cash generative with double digit organic growth. STRONG BUY