NB Private Equity Partners - Strong NAV contribution from exits

NB Private Equity Partners (NBPE) continues its strong performance driven by exits and valuation uplifts in existing portfolio holdings. In the 12 months ending October 2021, it delivered a NAV total return of 57.8% in US dollar terms, with 5.4pp from the recent IPO of the warehouse automation business AutoStore. The performance was also supported by growth in the remaining portfolio companies. The realisations have left NBPE with increased dry powder, while the investment level remained within

How Do You Like Them Apples

Very few investors need to be reminded that the US market has hugely outperformed the rest of the world in the historic bull market following the Great Financial Crisis. Unfortunately, the discretionary fund managers that manage the portfolios of British retail investors need reminding even less, having been as a group systematically underweight in the US in their equity allocations. In the below chart, we have plotted the average US weighting in the equity portion of UK multi-asset funds in the

Even better than the real thing

Private equity investing has been around for many decades. However private equity is making the headlines like never before. The recent bidding war for Wm Morrisons is a case in point although, over the last decade or so, private equity has been steadily increasing as a share of global M&A transactions as the graph below shows.

Bargains galore

We last updated our discounted opportunities portfolio in July. Since then markets have been grinding higher but discounts have not moved – and perhaps slightly widened. We think readers will largely agree that it is hard to have conviction about the direction of markets and leadership at the moment, which may explain the static picture regarding discounts. At a directional level, the easy gains in the recovery have been made, and government support schemes have still to be wound down, creating

60/40 and other dinosaurs

Over the decades, investors’ ideas about how to build the perfect investment portfolio have evolved. Large independent pension fund investors have typically led the way, with consultants and smaller pension funds following, and then discretionary private client wealth managers followed by individual retail investors echoing trends as they trickle down. Markowitz is identified as the architect of modern portfolio theory and, to an extent, over time investors have been working with and adapting t

Grade inflation

Markets had a great first half to 2021 following on from what was a strong 2020, just as we all would have expected during a pandemic, no doubt! Our discounted opportunities portfolio has performed respectably in the six months to the end of June. We had one great success, with a trust leaving the list after a barnstorming rally, but overall results from a NAV and discount perspective were mixed, as we discuss below. Overall share price ratings are now high in the investment trust space, with de

NB Private Equity Partners - Direct co-investments the key return driver

NB Private Equity Partners (NBPE) delivered a 12-month NAV total return to end-May 2021 of 52.3% in US$ terms, strongly supported by its exit activity. This includes 10 deals announced in 2021 with an estimated uplift of US$160m (15% of end-2020 NAV), most of which is reflected in the current NAV. NBPE received c US$139m from all its realisations in 2021 until 15 June and expects a further c US$116m once all the above deals have closed. The remaining portfolio also performed well, benefiting fro

NB Private Equity Partners - Overview

NB Private Equity Partners (NBPE) is unique within the London listed private equity (LPE) sector, with its focus on equity co-investments. These are equity investments made alongside third party private equity sponsors and have generated strong returns for the fund, as we examine in Performance. Equity investments will have a greater influence to NAV returns than they have historically, given they now represent c. 90% of the portfolio. As detailed in Portfolio, NBPE has exposure to a broad spre

The complexity premium

Demand for alternative assets has soared in recent years, as investors have sought yield and low NAV volatility outside the bond market in a low interest rate world. The investment trust sector has been a major beneficiary, with many closed-ended funds offering these characteristics through their ability to invest in illiquid assets. Historically, alternative assets have offered the potential for higher returns by (in technical terms) harvesting the illiquidity premium. In more natural language

Wide Boys

When we last updated our portfolio of discounted opportunities, markets were basking after a vaccine-pumped rally which proved good for NAVs and saw discounts narrow. The last three months (since 07/01/2021) have been rockier. While the news about the timetable for re-openings has been good in the UK and in the USA, and the results from the Israeli experiment have been close to ideal, Europe and the emerging markets have had setbacks. There has been some volatility in the hottest sectors in the

Get 'em while they're hot!

The period since our last review of investment trust discounts on 22 October has been a pretty good one for investors in trusts, and has seen the average discount on the sector narrow from 3.5% to under 1%. In fact, despite the tumultuous events of 2020, it is now almost as if the year had never happened: the universe entered the year on a discount of 1.5% and ended it on a discount of 1.1%, where it remains as of 07/01/2021.

Now that's what I call a discount!

The accelerant effect of a closing discount adds considerable appeal to investment trusts for many investors, boosting the impact of a rising net asset value (NAV) when it happens concurrently, and leaving the shareholder with what is a de facto ‘geared’ return. Identifying trusts which are trading in a discount to NAV which is likely to close is no mean feat, though, with more than 450 investment trusts to choose from – and typical discounts among conventional trusts around the 10% mark. Last w

The haves and have nots

2020 has not exactly been ‘topping’. Following a K-shaped recovery from COVID-19, the divergence between the haves and have nots has been stark. This trend is reflected in the graph below, which illustrates how dramatic the impact of COVID-19 has been on swathes of the equity market. The positive effect on consumer staples and technology has been almost as shocking as the negative impact COVID has had on the energy and financials sectors. The dispersion in returns has been staggering, with the

Can the passive bull market continue forever?

Passive investing has, it seems fair to say, attracted a fair few fans globally. (Indeed some have taken it even further, and are now investing passive aggressively. Whenever they’re asked for their opinion on their index fund’s top holdings, they simply respond ‘never mind’). Whilst passive investing was primarily championed as a practical solution by Jack Bogle and Vanguard, Francis Galton’s observations on the wisdom of crowds can highlight some of the underlying intellectual justifications f

NB Private Equity Partners - Overview

NB Private Equity Partners (NBPE) is a London-listed private equity investment company. It has a unique approach to investment – through direct equity co-investments. However, the shares have de-rated dramatically (along with the entire sector), and in share price terms remain behind equity markets despite the portfolio having shown marked operational resilience to COVID-19. A lack of liquidity during the crisis, perceptions of NBPE being more highly geared than peers (as discussed elsewhere, we

Cenkos: Healthcare Sector - Ward Round

Weekly round-up of AIM-listed healthcare news. Venture Life Group, GENinCode, Kromek, Alliance Pharma, Polarean Imaging, Benchmark Holdings, Ondine Biomedical, Verici Dx, Faron Pharmaceuticals, Avacta Group, Abingdon Health, Open Orphan, Belluscura, Hutchmed (China), Oxford Biodynamics

SHORE CAPITAL - H&T Group+ (HAT, House Stock, 322p)

Earnings in line, NAV ahead, caution being exercised

Urban Logistics REIT (“ULR”) has delivered a solid FY22 performance – deploying capital apace and driving strong returns through active asset management. Earnings and dividend are both in line vs SCMe. EPRA NAV is 190p (+7% vs SCMe); as yield compression came as a bonus. Caution is being exercised in deploying remaining capital, which impacts FY23e earnings only. We upgrade EPRA NAV by 14-20% incorporating some (but not all) recent yield compression. We increase our Target Price to 210p (FY23e E

Right Tech, Right Touch, Right Service Level

Argentex Group (“AGFX” or the “Group”) is a regulated, commercial FX specialist, offering a range of service-led and technology-enabled FX products to corporate, institutional and HNW clients. The Group’s core business has a strong growth track record and we expect a normalising market environment post-COVID to support organic growth within this. Additionally, we see attractive opportunities across its newly launched platform with a range of technology-enabled products as well as its continuing

Morning Note – 6 July 2022

FY22 – Strong Operating Result & On Track for Targets

Mercia Asset Management reported FY22 results, with a significant uplift in adj. operating profit to £8.4m, driven by strong management fee margins of >2% on stable FuM as well as strong finance income during the year. Group AuM has grown to >£1bn post period end, driven by fundraises across the Northern VCTs. The Group is well set to achieve its Mercia 20:20 Vision, with ~£27m (~46%) of its cumulative three-year PBT target delivered in year one. We increase our adj. EBITDA forecasts by 1-26% on

LIBERUM: Real Estate Investors* - Further profitable sales set to drive capital return strategy

Hybridan Small Cap Feast 01/07/22

1 July 2022 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectives

Auctus on Friday - 01/07/2022

AUCTUS PUBLICATIONS ________________________________________ Arrow Exploration (AXL LN)C; Target price of £0.45 per share: Another well delivers flow rate above expectations – The RCS-1 well was flow tested at oil rates of up 1,872 bbl/d (936 bbl/d net to Arrow) of 30 API crude from the C7B sands. The zone was tested for 33 hours at an average oil rate of 1,076 bbl/d (538 bbl/d net to Arrow) with no formation water. Production will start next week at ~1,000 bbl/d (500 bbl/d net) in order to mini

2H22 – Good NAV Growth & Attractive Opportunities

Augmentum Fintech has delivered a strong finish to FY22, with NAV per share up 19% YoY and +9% HoH to 155.2p, driven by both investments and positive fair value changes across the majority of its portfolio companies. The 23% IRR since IPO is above the Group’s 20% Internal Target Return, demonstrating overall attractive investment performance. Post-period end The Group has invested £4.0m in new portfolio company Kenbi and the £43m proceeds from the sale of its stake in ii strengthens AUGM’s cash

Cenkos: Marlowe Plc -- Record organic growth

Marlowe delivered an impressive set of FY22A results, with underlying organic revenue growth of 9%, Adj EBITDA margins up 240bps to 18.6%, and Adj EBITDA of £54.4m (ahead of our £50.7m forecast). We make minor updates to our FY23E forecasts (Adj Diluted EPS increases 1% to 49.6p) and release new FY24E forecasts. Given the strength of Marlowe's business model, its defensive nature (non-discretionary products and services; 85%+ recurring revenue), the group's continued positive momentum (including

Hybridan Small Cap Feast 30/06/2022

Dish of the day Joiners: Visum Technologies has joined the AQSE Growth Market. The Company's business is to own and operate an "on-ride" video and photographic camera system that it sells and/or licenses to customers (being theme parks, ride manufacturers, souvenir imaging providers, and other leisure operators). Leavers: No Leavers Today. What’s cooking in the IPO kitchen? Immediate acquisitions (IME.L) is to re-join AIM via a Reverse Takeover of Fiinu Holdings Limited. Once complete the Compan

Palace Capital* - Strategy sharpened, 5% buyback commences

Further to its strategic review, Palace Capital intends to focus on becoming an ESG driven, regional office market specialist. To that end the company has announced a new £46.5m property disposal programme including its entire industrial property portfolio with the proceeds to be reinvested into the office sector. Palace Capital has also announced a buyback for up to 5% of its shares and continues to review its cost base. The outcome of the strategic review is to sharpen the focus on themes mana

Copyright Royalty Board III Decision

The final decision on CRB III (see below) on streaming revenues is positive for Songwriters, Music publishing and Hipgnosis (SONG). The decision will result in addition revenues being paid to SONG over the coming periods. We view the ruling as positive and evidence of a continuing shift in the understanding of the value of a Songwriter’s contribution to a hit record and the willingness of industry stakeholders to recognise it. YTD SONG has de-rated significantly and currently trades on a 23.8% d

Cenkos: Professional Services -- The week that was

Stocks in focus this week are Personal Group, Johnson Service Group, Capita and Mears