Member Info for steph

Thanks Rapper.

yes "lucky" resolution 13. Hard to know but probably a good sign. Silly we are sub nav/share and maybe GROW management think so too so best use of capital to enhance shareholder value for company to buy some of it's own shares at a discounted price.

From Investopedia:

"There are other sound motives that drive companies to repurchase shares. For example, management may feel the market has discounted its share price too steeply.[2]? A stock price can be pummeled by the market for many reasons such as weaker-than-expected earnings results, an accounting scandal, or just a poor overall economic climate. Thus, when a company spends millions of dollars buying up its own shares, it can be a sign that management believes that the market has gone too far in discounting the shares—a positive sign. "

https://draper-esprit.s3.amazonaws.com/production/uploads/document/file/44/DraperEsprit_AnnualReport2020_FINAL3.pdf

worth a read

next results for q1 ending September 30th 2020. Normally out in early November.

Strange times but I expect a drift up to NAV/share over the next month or so and a major boost in November on q1 results that hopefully should correct for the COVID 19 panic valuations on March 31, 2020. With that we should be closer to broker forecasts currently averaging 645p for 12 months forward. We will probably consistently lag broker forecasts for a few years due to being under known but so long as the lag is consistent and the upgrades consistent with performance of the underlying portfolio we still should see plus 20% growth year on year from 500p/share. It is just we have some spare gas in the tank so to speak.

I'm expecting some very good q1 results with natural growth of the portfolio over 10% plus maybe a 12%+ correction for the COVID 19 valuations made March 31. So with 10% second q maybe a 30%+ year.

https://www.bvresources.com/blogs/bvwire-news/2019/07/31/ebitda-multiples-by-industry-2q-2019-analysis-on-private-company-selling-prices

" Selling price/EBITDA median is 4.4x EBITDA multiples are highest for the information sector (11.1x) and the mining, quarrying, and oil and gas extraction sector (8.4x). Meanwhile, the lowest EBITDA multiples are in the accommodation and food services (2.6x) and the other services sectors (3.0x). The median across all industry sectors is 4.4x."

I really don't understand why a portfolio of fast growing tech companies should be at 3.2. I'd expect something above average and towards the information technology end of things for sure. Of course if one goes to listed tech companies in the tech sector the EBITDA ratio to SP is always above 10 sometimes well above 10.

Of course a listed market leader in tech should have a higher EBITDA ratio they have monopoly powers to protect their market that a smaller private company in the same sector does not. Still the private companies in GROW portfolio are not as a whole small revenue unstable start ups who will have a high failure rate to average in. 3.2 for the valuations seems like a bargain to me. It seems seriously underpriced and an arbitrage opportunity for the foreseeable future. Results are results and over the next 5 to 10 years the 3.2 valuation made on the 31st of March 2020 is either broadly correct or overly conservative. My money is on very conservative.

valuing private fast growing tech companies at 3.2 earnings seems incredibly low to me. Indeed during the dot com boom most had no earnings at all. It was all "burn rate" -as I have a bruise or two to show for it.

Can someone more expert than me explain what the catch is? It just seems to good to be true.

" IC View from June 29th 2020

It’s not easy to value any business right now, especially fast-growth private firms re-evaluating their business models. However, Draper marks the carrying value of its core portfolio at 3.2 times this year’s expected revenues, which Peel Hunt points out is a discount to the MSCI Europe IT index. The Aim-traded company’s track record suggests that is unwarranted, as is the discount to trailing NAV. Buy."

RAISES DRAPER ESPRIT PRICE TARGET TO 690 (680) PENCE - 'BUY

https://www.investorschronicle.co.uk/shares/2020/07/09/modern-monetary-theory-or-magic-money-tree/

Thanks again for the info.

My less experienced take is the big boys do play around and when they do they SP is about to make a significant change up or down. For my money and for reasons already discussed I think these shenanigans are occurring at the foothill of a climb and not along the gentle decent towards a cliff.

I would imagine a big buyer would certainly wish to remain hidden lest they affect the price and might even sell a few if there is light trading in order to lower SP expectations for when they do try to buy in volume.

We have been getting quite a few large uncrossed trades which I understand is a pre agreed price between a buyer and seller. What we don't know is when those prices were agreed. They as I understand it need not have been agreed minutes, hours or even days before the actual registration of the trade which we can then see.

I topped up a bit more yesterday. Can't believe the general market even in USA at these levels but it has been an induced recession so new territory for all.

Money has never been printed at this scale and so quickly by all the major Central banks before. ECB took ages to get around to it during the 2009 financial crash. EU bond market this time round fantastically stable given the worst recession on record. Many EU counties have negative interest rates and will have for some time. It must inflate assets and the stock market first among those assets. Property second but that is some time off.

For my money I think in September medical solutions for CORONA will start to emerge and the market will go up further on anticipation of mass production. The money printed will never actually be paid back so the new defect levels are only on paper.

The whole long term impact of CORONA will be an acceleration of ecommerce and AE trends already present and an induced V shaped recession more or less fully paid for by printed money.

GROW is well positioned to benefit and rightly or wrongly I stand on my 850 SP prediction for mid July 2022 embedded in my spreadsheet. I know that is quite a bit faster than your far more sensible 15% but these are extraordinary times.

thanks for all the information

Can't imagine anyone shorting GROW now. A lot of hidden value with what I feel was an overreaction to the impact on GROW portfolio of COVID 19 when the evaluations were done March 31 2020. So if any short positions remain they need to get out.

Rightly or wrongly I have GROW marked down in my 2 year risk reward spreadsheet for 30% sp growth until July 2021 (basically 12 month broker guidance coming true to the letter supported by NAV revaluations upwards in Nonmember 2020 and July 2021) and 24% fro the 12 months after that until July 2022. Thus finishing in July 2022 at 850. A shorter's nightmare share.

Of course volatility along the way but if you want to short a potential dip in the market why include GROW? EU looking quite stable judging by 10 year bond yields (even the bad news benchmarks of Italy, Greece and Spain) and UK can't go broke as it has access to printing presses and the bond market seems willing to let them. Pond GROW fish in quite stable.

agreed

after an initial COVId dip digitally based stocks doing well and reaching highs better than before the panic.

GROW due to private nature of holdings and simple lack of exposure lagging the bounce back.

Weird day

Battle i of the big boys behind the scenes

precisely 12% under due to a panicked CORONA markdown March 31 against an already conservative projection in November 2019.

That is on top of the general undervalue tendency due to low valuations of EU profit making yet undervalued private sector tech companies. I understand valuations at 3.7 earnings which is plain silly.

So "catch up" in 3 stages.

1) catch up (maybe as early as November) to the largely artificial 12% CORNA mark down. SO NAV/share September 30 2020 maybe 20% up on March 30 2020.
2) as GROW and sector get better known over the next few years catch up to general market norms.
3) EU private sector tech sector 0ver the next 10 to 20 years just keeps growing at rates beating international tech index year on year. Eventually performance will attract equivalence of capital flows compared to USA.

10 years out:

4) 10+ years out GROW and EU sector will become normal and 20% year on year increases of NAV/share increasing difficult to achieve.
5) 10+ years out Tech sector though will continue to grow at the expense of traditional sectors so and thus and ever expanding pond for GROW to fish in. Accountants, lawyers, engineers, architects and skilled and unskilled service sector jobs to be swallowed up by tech sector.

Driverless vehicles and automated home/office delivery will result in many new unimaginable services. An internet of objects to sit in parallel with the internet of data. The thing about driverless and internet of objects is it needs a lot of government participation and legislation to work commercially.

As with COVID defense (Where USA was best prepared on paper but lacked government leadership to make use of the resources) it will be countries that can delivery the government side of the commercial enablement that in the end (after USA has wasted an early start due to concentration of leading high tech firms) will prevail.

These new services coming are a bit Maoist in the sense of being a 1000 blossoms (or whatever the original quote was) rather than a few big firms leading. Commercially this is a decentralized revolution not a battle between big armies. It is a positive to have so many EU private start ups backed by so many different technical universities and eager governments desperate to keep up in the race for tech jobs that will prevail.

Of course a GROW equivalent for CHINA even more attractive than and EU based one but I don't know any. Also geopolitical risk on CHINA (and USA to a lesser extent) which I don't have on EU.

EU has roughly the same number of high tech SMEs but only 1/8th the private sector funding for them as USA. The result is the EU ones are cheap compared to their own growth prospects. Just too little money chasing too many opportunities. Trump helping by spooking the markets a bit especially on skilled immigration restrictions. Skilled immigration is the lifeblood of smaller high tech firms.

Until the overall lack of private sector capital for EU private high tech SME's changes substantially there is no reason why GROW can not achieve it's 20% NAV growth (and thus SP growth) into the foreseeable future.

Shows his silly marking valuation down 12 % in middle of Covid panic.

All will correct itself in half yearly results

Meanwhile good buy in price for us long term holders

thanks

Hopefully when the dust settles we will see an SP rise.

broker consensus for 12 months is now 645 and all buy.

Personally even that I think excludes the 12% NAV COVD mark down against November 2019 projections for March 2020 that will in time reverse itself, probably on top of 20% year to year NAV growth.

The more I know the more comfortable I get as these buy in prices against my strategy and risk tolerance.

I honestly think from this sub 500 SP these have a decent shot at 20% + SP growth for 10 years.

That is 7.38x any investment made today when compounding is taken into account. For me that would be life changing and I don't have to rely on any improbably economic assumptions nor bet on UK or US government being, competent, helpful as that might be on the margins. Just need GROW who operate in a huge EU pool of young growing tech companies to keep doing what it is doing now for 10 years.

IN the long run GROW's success will attract imitators and the margins will drop as the private companies grow invest in will have more options for raising capital. However that is a long way off and the insanely low multiples of earnings these firms are valued at for private capital raising has some space to rise without affecting the 20% year on year valuation growth shown by GROW.

I dare not hope but from this sp more than 20% over 10 years actually possible. Even 23.2% average SP growth is 10x any investment made today.

Also the way compounding works if we have a 32% SP boost this fiscal year due to 12% catch up, Brexit (sort of) sorted, broker guidance and COVID (sort of) over does not need anything more than exactly 20% a yearly after that to hit 10x in 10 years. Entirely credible scenario. Might even be a credible central assumption but I don't want to get too hopeful.

Well maybe 750 by this time next year too far ahead of NAV/share. Maybe 700 then.
Steph

IC View
It’s not easy to value any business right now, especially fast-growth private firms re-evaluating their business models. However, Draper marks the carrying value of its core portfolio at 3.2 times this year’s expected revenues, which Peel Hunt points out is a discount to the MSCI Europe IT index. The Aim-traded company’s track record suggests that is unwarranted, as is the discount to trailing NAV. Buy.

Last IC View: Buy, 490p, 16 Jan 2020

By Alex Newman
On the day the UK went into lockdown, Draper Esprit (GROW) told investors it had enough cash to support its portfolio companies, 80 per cent of which were deemed to possess sufficiently robust balance sheets and cost controls to trade until the end of 2020.
Since then, the tech-focused venture capital firm has been encouraged by the resilience of its investments. “We’ve not seen anywhere near the demand we thought we might see,” chief executive Martin Davis told us. “There’s not been the need to bail people out, which is very encouraging.”

Given the sectors Draper is oriented towards – cloud infrastructure, online gaming, digital healthcare and digital payments among them – that shouldn’t be much of a surprise. Nonetheless, the financial impact on companies that are more directly affected by Covid-19 and lockdown led to lower growth estimates for 2020 and 2021, and a dip in net asset value (NAV) to 555p per share at the end of March. Last September, this was 574p.

Initiating coverage with these results, Berenberg analysts forecast NAV will rise to 624p per share by March 2021, and to 742p by the end of FY2022.

by further concentrating on GROW only.

with NAV per share on 550, broker consensus all buy on 640, NAV calculated in the depth of the COViD scare depressing it by 12%+ against recent projections, fast growing sector, underlying shares doing well, good news since results were calculated, etc

I think this year we will see the 20% GROW normally get on NAV/share increase and 12%+ catch up on the NAV calculations, plus maybe a COVID bonus as on line and AE based products and services accelerate, plus the broker upgrades as all this happens.

As Dell boy might have said "by this time next year our SP will be 750 and we will all be rich". Assuming COVID lets us I'll be at the July 2021 AGM and either have to eat my words or be riding high.

6/30/2020 Jefferies Financial Group Reiterated Rating Buy

thanks

For my money any discount to nav per share in a fast growing sector made up of impossible to buy private companies (when the NAV was done based on conservative valuations done in the depths of the corona scare now fully past us for all tech shares except this one) is not justified - and a serious buying opportunity.

Agree that some churn occurring. Some funds maybe waited for results to reduce who have wanted to reduce for some time. Ever since we hit 510 we have had an odd countercurrent every time we start to rise and regardless of wider market sentiment.

Maybe even a few short term speculators who bought in mid march who are taking profit. Thus some temporary pressure to keep us below 500. It will pass.

In time it will rebalance on top of natural 20% growth so probably 20% plus for a few years.

I expect a major rebalance in November when the September 30 half year is announced. That should give COVID free valuations.

I'm all in for now. Might diversify later but not until at least November.

the -2% in last half for 10% capital growth overall why we are below 500.

As report says valuations conservative. 37% or so are on last round, which is obviously a lagging indicator of portfolio value and rest benchmarked but in the middle of the worst COVID panic.

I'm now comfortable for GROW to be 100% of my ISA and to stop worrying about my investment strategy further. Just let is sit there for 10 years or more.

I really do expect 20% + sp growth from here over 10 years. Even 20% exactly with the magic of compounding is 7.2x my investment value as of today over 10 years. It is a get rich slowly strategy.

I can't align my investment strategy more precisely than GROW already do. I can't directly invest in the many private sector fast growing EU tech companies they do. Well worth the 1% overhead. I think 460 a great buy in price and substantially undervalues the obvious growth potential.