Last checked at 
26 Apr 2023 17:20
NB Private Equity Partners (NBPE)
26/04/2023
Results analysis from Kepler Trust Intelligence
NB Private Equity Partners (NBPE) has released its 2022 Annual Financial Report and 31/03/2023 Monthly NAV Update. Over the 12 months to 31/12/2022, NBPE saw a -7.5% NAV total return, with the decline driven by changes in quoted holdings and FX. The private investment portfolio rose by 4.4% over 2022 on a constant currency basis, a result of a strong underlying operating performance from companies in the portfolio, with average 14% LTM revenue growth and 12% LTM EBITDA growth over 2022.
NBPE benefitted from $143 million of announced realisations during 2022. In the first three months of 2023, there have been $27 million of announced realisations, including a realisation of one public stock position, the partial sale of one portfolio company, and continued realisations from the legacy Income portfolio. This leaves NBPE well positioned to take advantage of investment opportunities, with $308 million of cash and undrawn credit line available.
At the current price, the shares trade at a discount to the 31/03/2023 NAV of 31%. The board have stated that in their view the current discount materially undervalues NBPE's portfolio, balance sheet strength and prospects.
The Chairman, William Maltby, states that "NBPE is well positioned to deliver long-term value for shareholders". He believes the company's strong financial position and its investment model enables NBPE to be highly selective about where and when it invests. He observes that the managers with whom NBPE co-invests have a number of tools at their disposal to unlock and drive long-term value … away from the glare of the public markets. Importantly, as owners, private equity managers are also able to adapt quickly to change, a great strength in the current environment.
Kepler View
2022 was a challenging year for most listed equity markets. However, NB Private Equity Partners' (NBPE) private equity portfolio has continued to deliver strong revenue and earnings growth, which has underpinned their valuations somewhat despite valuation multiples reducing ("which declined by over two turns").
With $1.4 billion invested across 93 private companies, NBPE's portfolio is well diversified by company, manager and sector. Activity has slowed over 2022, with NBPE completing only two new investments (totalling $41m in 2022), and the Chairman states that the board do not expect the pace of new investments to pick up materially in the near term for NBPE. NBPE's co-investment model means that it does not have to commit to investments a long way in advance, and so if the pace of realisation activity does not pick up, this does not present any problems for the trust.
The board have re-affirmed their commitment to the dividend policy. The historic dividend of $0.94 per share is equivalent to a dividend yield of c. 5% at the current share price and exchange rates. The discount to NAV is at historically wide levels. Certainly there are uncertainties on the horizon, but the portfolio is well diversified, and as the Chairman states, private equity backed companies are generally well equipped to deal with just this sort of uncertainty. Private equity is a long term investment asset class, but in ascribing such a wide discount to NAV, perhaps the stock market is focussing too much on the short term? The board adjusting the buyback arrangements with its broker may see more activity in this regard, which could provide support to the discount at the current level.
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