Member Info for steph

I’m getting hypertension just waiting for interim results. Maybe boosts Aktiia.

Large and fruity - good. You must be a hitchhikers guide fan.

I called again for Ben (CFO) and receptionist confirmed unaudited results (my wording) coming up very soon. Supposedly the delay in getting back to me is them burning the midnight oil. I too expect a surprise on the upside. We will know soon.

Unaudited update for results ending Sept 30 are now later than they have even been.

We tend to go up when new information is provided and drift down when there is none.

I called GROW for guidance on when and no reply yet.

Of the core portfolio we know about they are all flying and only one which is not - modest decline. The top 7 seem to add up to + 91m for first 6 months. This is more NAV upgrade than predictions for the whole of 2021-22. So we continue to fly.

1) Cazoo +11m will give us an 11m uplift based on Sept 17 2021 update. Cazoo still trading at 9 quid offer price so this 11m uplift is stable.
2) Trustpilot +18m We still owned 7.9% of trustpilot march 31 2021 page 43 “realizations”. Not clear if our NAV Mach 31 calculation is the pre ipo price or actual IPO. IN any case trust pilot well above IPO price so we might get a small windfall. Market cap is 1.3bn multiplied by 7.9% or 103m up from 85.5m in our March 31 NAV calculation. I’m expecting a NAv improvement for Trustpilot of 18m.
3) UIpath -6m? valuation of our asset seems to be fully inclusive of IPO price at 100m on last annual report although it might be the pre ipo disposal price referred to. Current price is 52.8 and IPO was 56 so we might get a slight reduction of 6m assuming previous nav was based on IPO.
The rest we know about are flying.
4) Graphcore +12.5m is flying and adding sales and employees every day. Our NAv valuation went from 86.8m in 2020 results to 108.8 in 2021 results. NO reason to think this pace has slowed so half of 25 year on year is 12.5 for half year.
5) Aiven +30m. Our NAV from Aiven more than doubling every year. Open source cloud data a real sweet spot and they seem to have found critical mass and a market niche. Aivon had a 800m valuation march 2021 and got a further round in October 2021. Even assuming some dilution we got a bit NAV upgrade for these half year results based on final round. I put 30m not 50m for this reason. Was 12.8m in March 31 2020 and 45.5 March 31 2021. Just flying
6) Ledger + 20m Crypto and block chain support is flying as a sector. Last year our NAV from ledger went form 17.7m to 41.1. At that pace 20m in first half of 2022 a good assumption.
7) Aircall +10 Flying. If a cloud based telephone call system has not been flying during the pandemic what else possibly could –beyond covid oriented PPE and new vaccines. Went from 9.9m in 19 to 24.7m in 20 and 32.8m in 21 results.
8) Etc etc.

Valuation: 15%+ annual NAV/share growth since IPO
Investors increasingly recognise that Draper Esprit warrants a premium as a rapidly scaling leader in the technology sector, which has delivered a 15.1% FY16–20 NAV/share CAGR, with a promising portfolio of investments and a growing fund-management business. As such, the company trades at 1.35x historical NAV (H121: 600p). Catalysts for a re-rating include further scaling of the business, a main market listing, growth in third-party fee income and successful exits and IPOs.

Your played it well on your remortgages. Wish I had done the same.

Pure crystal ball gazing but I think central bank interest rates will now fluctuate between 0 and 2 % into the foreseeable future. Not enough to reverse asset inflation that has occurred -nor enough to stop at least a bit more in future. Strange times.

Yes from the opposite end of the political spectrum we will need a better fairer way of levying tax and to use that to support the losers in this % shift to disposable income based on assets from income based on wages.

Consumption taxes can only go so far. Some form of wealth tax on “unearned” income will be needed. I am also a supporter of public but silent partial or full ownership of profit making companies. Not part of any national strategic plan at all. Just for tax reasons. Tax avoidance and tax arbitrage to the lowest demanding jurisdiction is just too prevalent in our globalized economy and global company structure. The oil, fur and railway barons of old were principally national. ALl the new ones operate nearly equally in 192 countries simultaneously - with a few Chinese exceptions.

A silent public share in profits earned anywhere in the world gets around that problem. Might even help to keep UK companies on shore and the jobs that go along with that. Can’t see public finances being up to the job otherwise and the public will get increasingly alienated and restless.

Sage

Not in my investments but n my remortgage strategy I have been assuming since 2010, in line with all major economists, a sharp rise in interest rates that never came. As a result in my preference to protect myself from imminent interest rate rises I remortgaged too early and used 5 year fixed deals to do so. I "lost" 10's of thousands o f interest against an assumption they would rise more slowly than mainstream economists were stating.

I've now switched sides on this. After 10 years of economists (myself included) crying wolf about imminent sharp rises in interest rates I feel the reason they have not risen against all predictions they would return to a "normal CBR of 4% or so in 10 years are powerful, a new paradigm and will persist -especially post COVID (when most G7 fiscal polices seems to be contractionary (higher taxes to pay for the COVID binge).

The unintended consequence of such a long period of low interest rates with a good deal of G7 printing money as well (nothing like this has ever occurred in 350 years.) is asset price inflation both property and shares but also niches like art etc.

I think we are at the beginning or at least middle of this rebalancing to a new level of asset prices. For example house price inflation was traditionally limited by multiples of income (affordability) but the traditional "speed limit" assumed a central bank rate of 4% and a mortgage of around 5% or so for the most creditworthy.

We now have had over a decade mortgage rates of half or even 1/3 that which in theory triples affordability on an interest only mortgage.

ON share the P/E multiples are closely related to the risk free alternative and of course this is close to zero right now. Shares get jittery assuming this must change but will it really?

SO jitters an volatility as the new paradigm gets slowly accepted to be sure but sharp interest rate rises that will for a multi year period depress shares -I don't think so.

You are a better investor than I.

I will stick my neck out and predict a nice surge this week on unaudited results and a drift up until audited results.

https://www.dailymail.co.uk/debate/article-10148317/HAMISH-McRAE-Rishi-gambled-future-rates-staying-low.html

I think we are in for several years of interest rates well below inflation and a new normal after that of low interest rates for decades.

This will accelerate trend to asset price inflation both property and shares. Cash really is not king unless shortly before a substantial but temporary correction.

nhanced focus on Fund of Funds Strategy to increase exposure to earlier stage companies for Series A investments at lower valuations (by quantum).
Continued focus on liquidity (including through access to debt facility) in the event of a decline in valuations.
Diversification of risk through fee income from management of third party funds to mitigate impact of potential downside in valuations.
Ensuring portfolio company businesses are well capitalised for future growth.
Ensuring participation in deals with a robust syndicate of high quality co-investors.
Continued downside protection through preference share

Launch of Growth Fund with access to third-party funds under management to provide greater competitive advantage.
Increased focus on ESG as a point of strength and differentiation.

I would imagine we will get unaudited results update today.

3 post ipo shares helping since last Update and rest of portfolio we know about flying.

Even cazzoo back up to Ipo price and trustpilot nicely up still. Uipath down a modest percentage.

We shall see shortly.

I agree with sage that this recent deep dip means we will take time to get back to near 12 quid but we have been there twice before and we now will have further nav/share improvements so we will get there again. Could be by end of November but I feel final results in July the max barring a general market crash of course and then it will be a different landscape for all shares.

Volatility a pain

Last year we also drifted down a bit before unaudited half year results and then very steady up afterwards. Let’s hope justify repeats itself.

Nice to see some cash realizations post IPO. I make it out to be roughly 10m cashed out.

All siimilar valuation methodologies take into account one way or another the excess growth rate against some benchmark growth rate.

They all assume however unlimited barriers to entry. This occurs when the asset is s single company and there is no other way to buy that growth rate other than buying shares directly in that company.

Trusts are different in that there are other way to buy the growth rate of the underlying portfolio other than buying the trust. Maybe one can buy the same portfolio company and getting the same growth rate without paying a large premium of NAV/share.

For a trust that is 100% traded shares the barriers to entry are zero. One might pay a very modest premium for the stock picker function but that is it. No chance of even a 20% premium on traded shares. Just too easy to buy with 0% premium.

For a trust that say specializes in private companies and it by policy is the only or dominant fund able to own those private companies then barriers to entry for other funds are near 100% -similar to a single entity and the premium over NAV/share for a very fast growing trust collection. That theoretical circumstance could support a large premium over NAV/share based on the expected growth rate brought forward as a net present value.

GROW sits somewhere in between. Some parts of it’s asset base have very high barriers to entry. Those companies may never have a future funding round and are not interested in IPO for the foreseeable future. Even when they do have a future funding round it is at double of more the price of the last one. SOme of the consultancy and fees GROW earn are single entity type earnings and can’t be purchased separately. SO confusing fo investors.

I imagine this is the reason for our recent volatility. FTSE 250 Investors can’t decide which of those two extremes we are. IN time we will reach a market consensus and settle in a more stable range of premium over trailing NAV/share but for now it may bounce around between a very modest premium and over 50% where where have been recently. That is a big range to bounce around in within a calendar month. Having a holding of approximately 20% of our NAV/share in recently IPO’d shares is adding to the confusion. For me it will be nice to know we have cashed out in whole or in part and started to recycle the earnings upstream. I can buy those companies without GROW so there is no advantage for GROW to hold them on my behalf.

Strange history. 24 OCt in 2017 and 2018. 29th of October in 2020

However on 28 oct 2019 there was only a single line in update saying on track leaving it all for the audited half year results in late November.

SO no guarantee we will get a substantive update this week.

Might need to wait until end of November for any fireworks related to NAV/Share upside surprise.

https://simplywall.st/stocks/gb/diversified-financials/lse-grow/draper-esprit-shares

For various reasons discussed we will not achieve this but surely the current SP is wrong.

Just one other share seems (as reported in July 15th 2021 update) to give us a first half uplift nearly equal to the "projected 0.79p/share . According to page s 24 and 27 or our annual report this was not at all our year end NAv/share calculations.

We are just rolling in dough.

some time from today to Friday we will get the unaudited update to cover the first half of the year.

Earnings (the difference between start and finish of the year's NAV/share) were forecast to be "only" 0.79 while last year earnings were a supercharged 2.08.

All indications are that we wild exceed 0.79 within the first half of the year never mind over the full 12 months.

Of the 3 core portfolio shares we have post IPO even UIPath went up 7% in NY yesterday and is no major drag on earnings compared to IPO price we have in our existing NAV/share calculation. Cazoo is up 5% in NY as well. p24 of our annual report indicates that our NAV/share calculations did not yet include the projected IPO proposed price for August 23, 2021 so the 20% drop in post IPO price in NY is not material. Trustpilot which we have more invested in has absolutely flown post IPO.

All news on the rest of the portfolio has been exceedingly positive. I'd be very surprised if we did not have "earnings" of 1.00 for the first half and good prospects to have anouther 1.00 by year end so 2 quid for the second year in a row. It might be better than that. If the market thinks we can sustain earnings growth of that speed and there are barriers to entry to duplicate our success the sky is the limit. For now I don't think we are frothy at all. Conservative I think.

Mystery to me our current SP. Perhaps simplistic benchmarking against other trusts pulls us erratically towards trailing NAV/share and not pricing in some of our fast future growth. SO we oscillate a bit violently and unstably between pricing in some future growth and then not.

https://www.theguardian.com/business/2021/oct/23/fear-not-there-is-little-danger-of-inflation-running-wild?CMP=Share_iOSApp_Other

To have a sp substantially over NAV/share there needs to be some barriers to entry. Not enough just to like the fund picking ability of the fund manager.

Of course no barriers to entry for the 3 companies we have post IPO. I trust this is transitional. They represented about 20% of NAV/share. Probably % down a bit due to realizations not yet announced.

Our ecosystem and seed funding structure has high barriers to entry. Would take substantial effort over a period of time for a rival fund to duplicate. THis structure gives us first pick on Series A funding rounds.

A rival fund mirroring our strategy on company picks at the funding round stage of growth will need to wait for a future funding round to get in. Future rounds are almost always much pricier than the last and some never ask for further rounds and self fund growth on retained profits.

Plus GROW earns some money by managing funding rounds. NOt easy to duplicate.

GROW has a presence on Boards of seed companies as they work their way through the funding cycle. This “feet on the ground” (or more accurately bods on boards) is hard to duplicate and takes considerable time to set up.