HarbourVest Global Private Equity (HVPE) posted an NAV decrease of 0.7% between July 2019 (last interim results) and May 2020, largely due to the COVID-19 induced market downturn in March (ytd NAV performance since end-2019 was a 4.8% decline). Although increased capital calls left HVPE with a historically low coverage ratio, we perceive HVPE’s liquidity (supported by its US$600m credit facility) as sufficient to cover near-term commitments. HVPE withstood the 2008 global financial crisis (GFC) well compared to the broad public market and enters the current turmoil with high exposure to resilient sectors such as tech and software and healthcare.
Companies: Harbourvest Global Private Equity L
HarbourVest Global Private Equity (HVPE) has recorded a 12-month rise in NAV (based on a preliminary figure at end-July 2019) of 8.7%, which is a solid beat versus the public benchmark. Over the last six months, HVPE remained a net investor deploying US$202m into HarbourVest funds (compared to US$139m distributions), mostly on the back of the real assets deal in February. We note that despite HVPE’s limited UK portfolio exposure and long-term NAV outperformance vs UK equities, its short-term price returns are largely driven by the UK market sentiment.
HarbourVest Global Private Equity (HVPE) has recorded an uplift in NAV since end-July 2018 of 4.9% and 5.6% in US dollar and sterling terms respectively, with limited impact from increased public market volatility of Q418. Following successful realizations, HVPE aims to rebuild its exposure to the primary strategy (44% vs target 55%), and to the US market (55% vs 65%). Moreover, HVPE looks at further diversification through investments in real assets which are characterized by low correlation with equity markets and provide stable cash flows. Following the transaction in February 2019, HVPE’s exposure to real asset and mezzanine investments now stands at 14% (at end-April 2019).
Supermarket Income – Increase in issue size | Civitias Social Housing – Acquisitions and debt update | HarbourVest Global Private Equity – Investment update | Hipgnosis Songs – Acquisitions
Companies: SUPR CSH HVPD SOND
HarbourVest Global Private Equity’s (HVPE) first-half results showed good progress in NAV (+6.8% in US$ terms), ahead of its listed equity benchmark and a private equity index, both of which were negative over the period. Looking ahead, HVPE notes the high valuations prevailing in the private market and the risks of further listed market volatility. In this environment, the portfolio’s diversification and HarbourVest’s experience in manager selection are likely to be particularly valuable attributes.
HarbourVest Global Private Equity (HVPE) aims to provide shareholders with access to the best private markets opportunities globally, through investing in a portfolio of HarbourVest funds. HVPE’s portfolio is broadly diversified by underlying manager, vintage, strategy, stage and regional exposure. Its recent performance has been strong in its US dollar functional currency, with a 16.2% NAV total return in FY18, although currency moves have weighed on its performance in sterling terms. After three years of strong portfolio distributions, the 2018 commitment plan has been drawn up with a view to ensuring that HVPE moves closer to a fully invested position over the next two to three years.
HarbourVest Global Private Equity (HVPE) offers broad, selected exposure to leading private equity managers globally, and has a highly diversified underlying portfolio. HVPE celebrated its 10th anniversary in December 2017, and its 10-year sterling NAV total return of 12% pa is ahead of its global listed equity benchmark’s 10% pa return, as well as the 6% pa return of the LPX 50 Index, representing its global listed private equity peers. However, an 11% gain in sterling versus the US dollar (HVPE’s functional currency) has weighed heavily on its one-year sterling returns. Looking ahead, HVPE believes its unique access to HarbourVest funds should enable it to capture the opportunities created by key global megatrends that are expected to dominate private markets over the next 10 years.
HarbourVest Global Private Equity (HVPE) is celebrating 10 years since its launch in December 2007. Over the period since its inception to end-October 2017, HVPE has outperformed global equity markets and its listed private equity peer group, represented by the LPX 50 index, in both NAV and share price terms. In this note, we analyse a series of alternative performance measures which show that, on a risk-adjusted basis, HVPE’s share price performance has tended to compare favourably to global equity markets, while its risk-adjusted NAV returns have also compared positively to its listed private equity peer group over most time periods.
HarbourVest Global Private Equity (HVPE) gives investors access to selected private equity (PE) managers globally and a highly diversified portfolio of over 7,000 underlying companies. HVPE will celebrate its 10th anniversary in December 2017 and since inception its shares have outperformed global listed and unlisted equities, represented by the FTSE All-World and LPX 50 indices, by 11% and 36%, respectively. This solid performance is consistent with the mandate to generate long-term capital growth above global equities, and has been achieved with relatively low volatility due to HVPE’s high level of diversification.
Judging by prevailing discounts to net assets, broad fund of fund investors in private equity are not a particularly favoured group within the investment company sector. However, a fund such as HarbourVest Global Private Equity (HVPE) can be seen as having appealing attributes: in addition to a still wide discount, it is structured and managed to ensure diversification by vintage, stage, geography, strategy and industry. The management team has substantial experience, a wide industry network and follows a consistent approach to investment, further mitigating the risks inherent in private equity investment. The NAV performance since inception compares well with the MSCI All World and private equity indices.
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Litigation Capital Management has announced FY20 results with gross profit up 7% to A$21.7m and PBT of A$9.2m, slightly behind expectations albeit the Group had already flagged that delays to 3 cases during the year would result in resolutions in FY21, thereby impacting FY20 results. That said, excellent strategic progress through the year and good news flow as well as increasing scale suggests more value to come. Reiterate buy
Companies: Litigation Capital Management Ltd.
To achieve YoY revenue growth over H1/20A despite the challenges of Covid-19 and its impact on the travel sector is testament to Equals' resilience and increasing focus on B2B and International payments services. While weaker gross profit and EBITDA margins have impacted profitability in H1/20, we see potential for an earnings recovery in H2/20 given cost reduction measures currently being undertaken. This should lead Equals to cash breakeven in Q4/20 and FCF positive by early FY21.
Companies: Equals Group Plc
FY20A results largely reflect a period prior to the Covid-19 lockdown, yet show Duke entering a more challenging FY21E with momentum. Yesterday's trading update demonstrated another notable rise in quarterly cash receipts for Q2/21, as royalty partner trading continues to improve. As some partners' forbearance measures will expire this month, Q3/21 receipts should continue this upwardly momentum. This opens the door to a return to cash dividends at some future point. Today, Duke also confirms it is now seeking new royalty partners, alongside follow-ons.
Companies: Duke Royalty
Interim results demonstrate YoY growth and a resilient outcome that has exceeded management's expectations from the start of the Covid-19 pandemic. This is testament to the degree of recurring revenue generated across the business. FY21 trading looks to be more challenging, as notably lower new insurance sales post-lockdown will translate into lower premium income. A number of organic opportunities are being worked on to fill the shortfall. Rising UK redundancies and their impact on policyholder retentions creates great uncertainty, hence our forecasts remain withdrawn and recommendation remains Under Review.
Companies: Personal Group Holdings Plc
Sigma Capital (“Sigma”) has partnered with global alternatives manager EQT to deliver and manage a £1bn GDV private-rented sector (“PRS”) housing fund focused on Greater London. EQT will invest £300m equity, complemented by debt (including a Homes England facility), to build 3,000 homes in 5 years. Sigma will generate fee income as development manager, a recurring fee income stream from managing completed assets, as well as participation in returns via a minority co-investment (£16m) and a profit share. We estimate that the fee income alone is worth £45m to Sigma in the first five years: 50% of the current market cap. Crucially, this is a step up in AuM bringing a high quality long-term recurring earnings stream. We will reforecast following interim results (expected tomorrow) to provide full context.
Companies: Sigma Capital Group Plc
In June, faced with the task of replacing its longstanding portfolio manager, Alistair Mundy, Temple Bar Investment Trust’s (TMPL’s) board reiterated its commitment to a value style of investing. The board has now opted to hand the management contract to Nick Purves and Ian Lance of RWC Partners, two managers with considerable experience of managing income portfolios using a value-style approach. Value investing, where managers buy stocks that are valued more cheaply than market averages – based on measures such as price/earnings, price/book and yield – is deeply out of favour. The RWC team says that value stocks have never looked more unloved in the 30- odd years that they have been managing money. In their view, this makes it imperative that TMPL investors keep faith with the strategy and it also means this is an attractive entry point for new investors. One important change, however, is a cut to TMPL’s dividend to a level that the RWC team believes will be more sustainable.
Companies: Temple Bar Investment Trust
In line interim results to 30 June 2020 show the strength of this business amid a difficult environment. This is the first step in what should be an exciting growth trajectory toward a larger, scaled up business with high recurring revenues and ownership of the full supply chain in the personal injury and clinical negligence market for clients requiring long-term, risk-adjusted returns. We reiterate our TP of 50p, noting further upside potential as acquisitions are completed.
Companies: Frenkel Topping Group Plc
HSBC’s future should be clarified as soon as the US and China come back to the negotiation table. This will not happen before the US elections are over. In the meantime, HSBC will continue to be instrumentalised and its share price will remain under pressure.
Companies: HSBC Holdings Plc
Today's news & views, plus announcements from VOD, POLY, SMDS, BLND, BYG, WEIR, DC, SNR, SHI, INTU, IHR, CNC, ARE, INCE
Companies: INTU SHI INCE
The impressive full year 2019 results included some eye-catching numbers, including a record PBT of £40.1m (nearly 3x FY18 @ £14.3m), £620m of reserves acquired over 16 legacy deals, and $842m of (estimated) Contracted Premium in the Program business – on track to breach $1bn in FY20 as previously guided and $1.5bn-$2bn in 2022-2023.
Companies: Randall & Quilter Investment Holdings Ltd.
As anticipated, Record has confirmed a material uplift in AUME following the rebound in financial markets from April. We upgrade FY21E forecast EPS by +18%, with higher staff costs offsetting some of the benefit. We expect AUME growth to be more modest from herein. While no performance fees have been recognised over Q1/21 and will be harder to achieve due to Covid-19, any future recognition would have a materially positive impact on earnings. Covid has temporarily paused new client wins, but we expect further additions to come as conditions improve.
Companies: Record Plc
Mercia’s FY20 results reflect continued progress, delivering on management’s three-year strategy. AUM climbed 58% to £0.8bn, while FUM rose 73% to £658m. Following the acquisition of the NVM VCT fund management business, the company is operationally profitable on a monthly basis, with annual revenues exceeding operating costs for the first time in FY20. Net assets rose 12% to £141.5m, with the direct investment portfolio stalled at £87.5m reflecting the impact of COVID-19 fair value adjustments and a £15.7m net investment. The group remains well-placed for a downturn with £30m of unrestricted balance sheet cash and £320m of group cash. Post period end the group exited The Native Antigen Company, with £5.2m in cash (8.4x return, 65% IRR) expected. Despite the group’s progress, Mercia’s shares continue to trade at a material discount to NAV (0.60x), even before considering the embedded value of the third-party fund management business (> 4.5p at 3% of AUM).
Companies: Mercia Asset Management Plc
COVID-19 and a further cut to power price assumptions saw NAV per share fall to 309p in H120 (FY19: 337p). However, PPP performed well, bidding momentum has picked up recently and John Laing Group (JLG) expects ‘modest’ NAV growth in H2. New CEO Ben Loomes highlighted digital connectivity and energy transitions as potential future investment themes, and will set out further details in November. We cut our FY20 NAV per share forecast by 14% to 308p. The share price stands at an 8% discount to FY20e NAV per share.
Companies: John Laing Group Plc
Trident Royalties Plc (AIM: TRR) has, this morning, announced the acquisition of a 1.5% Net Smelter Royalty (NSR) over the resourcestage Lake Rebecca Gold Project located in the highly prospective Eastern Goldfields province in Western Australia. The royalty package is being acquired from a private seller for a total consideration of A$8.0 million (c. US$5.63 million), comprising of A$7.0 million in cash and A$1.0 million in new ordinary shares in Trident. The acquisition is Trident’s fifth overall and its third gold deal. As per strategic guidance the company is moving fast assembling a diversified portfolio with a paying cashflow stream from iron ore and copper production and several strategic gold royalties with the potential for near term revenues. The market is paying attention with TRR shares up 49.8% since its IPO on AIM in June this year. There is clearly more to come with c. US$7.5 million of uncommitted cash as well as the potential for debt funding and the ability to use equity as acquisition consideration. The Lake Rebecca Gold Project operated and wholly owned by Apollo Consolidated (ASX: AOP), is located 150km ENE of Kalgoorlie in the Eastern Goldfields Province of the Yilgarn Craton. The Project, envisaged as a simple open pit operation, is close to existing gold infrastructure namely Saracen Mineral Holdings Limited’s (ASX: SAR) Carosue Dam Operation whose processing plant is in the process of being upgraded to increase throughput to 3.2 Mtpa.
Companies: Trident Royalties Plc
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA