State of Play in Private Equity...

[SKYSHIP]

The Private Equity (PE) sector is the best performing corner of the Investment Trust sector, driven by both excellent portfolio returns and closing discounts. When in Dec'11 I started the PE thread on ADVFN (see link below), 35% discounts were commonplace - now the 17 PE trusts I track provide an average discount of just 15%.

After a prolonged period of positive returns, are we seeing a peak. Brokers Jefferies has turned cautious on listed private equity:

http://www.adventurousinvestor.com/804- ... ate-equity

Clearly the discount is not the only investment criteria with which to assess value in this sector. Past performance, geographical spread, yield are just 3 of the many other guiding factors; but in my book the discount is the over-riding factor. On that measure we may well have seen the best of the returns, though pricing anomalies do still occur and offer trading opportunities to the fleet of foot

Here is how the sector looks at the moment:

# Over-valued / SELL: 0%-10%:- BPM, FPEO, HGT, MTH (*1)

# Fully Valued: 10%-15%:- DNE, ICGT, PEY

# Fairly Valued / HOLD: 15%-20%:- CLDN, JPEL, PIN, SLPE

# Good Value / BUY: 20%-22%:- HVPE, NBPE (NB: Both offer the highest exposure to the US Market)

OTHERS (*2): LMS, LTA, MVI, OCI

NOTES:

*1 – Liquidation stock
*2 – Random discounts. Current Best Buy – LMS @ 52.5p

Stock charts & comments:
https://uk.advfn.com/cmn...thread.php3?id=26570589

[OLTB]

Thank you for the posting SKYSHIP - of those you list, I hold SLPE (Standard Life Private Equity) as my IT portfolio tracks the recommendations of John Baron and this is in his "Summer', or 'growth' portfolio. It's reassuring to see that this IT is in the list below as a fairly valued IT and since I first invested in this IT just over a year ago, the capital has grown by 4.34% (now ex-div), with a yield of approx 3.75%.

Cheers, OLTB.

[monabri]

The discount to NAV on LMS Capital is very high (-33%) and has been this way for 12m according to Hargreaves - it seems to be "marking time" and doesn't pay a dividend. So, no divi and possibly no capital gain. Fund size is £43m..bit small! I guess it is a good vehicle to provide Mr Sweet with a nice £1m pa "compensation" (retirement beckons ?) The EPS was significantly negative in the last few years so I guess this explains the stonking discount.



If one "plots out" the various funds (discount versus yield) the ones that stand out for me (my criteria : yield and discount to NAV) are DNE, SLPE and NBPE. (approx values).

DNE -11.3% NAV Yield 4.8%
SLPE -14.9% NAV Yield 3.7%
NBPE -19% NAV Yield 3.8%

(figures above taken from Hargreaves Lansdown - no verification checks on HL's numbers... DYOR).


From information available from SimplyWallStreet (SwS) - of these 3, I'd be tempted to plump for either SLPE and/or DNE.

SLPE potentially offers a reasonable yield and growth potential and hopefully a corresponding divi increase. The balance sheet is described as "flawless" with no debt. .

Dunedin - DNE - the balance sheet is described as "flawless". I like the 4.8% yield. The downside - negative growth over the next year but significant increase fcst over the following years. The divi is WELL covered (x6) and no debt. . I'd be tempted to go for DNE based on current jam today and potential more jam in a year or so. (note to self - add to watchlist)

My least favourite of the 3 would be NBPE - similar yield to SLPE but has what is described as a "mediocre balance sheet" (I avoid anything that says mediocre balance sheet) - hence the discount of -19%. The EPS is given in dollars so is there an added complication due to exchange rates?

I should indicate that I bought a small tranche of PEYS (sterling version of PEY) a while ago (8th June 18). The balance sheet is described as "flawless", I like the divi even though the cover is a bit thin and the main fund is based in Euro.


monabri

[monabri]

On reflection - I think I'd like to change my mind !!

DNE

Appears to be heavily biased towards UK (82%) - which I am trying to diversify away from.

DNE - Sectors
Automotive 4%
Construction and building materials 6%
Consumer products & services 4%
Financial services 15%
Healthcare 1%
Industrials 18%
Support services 49%
Technology, media & telecoms 3%

Support sectors - wot? (unfond memories of Interserve & Carillion).


SLPE (figures from SLPE interim report march 17)

A more diversified spread

19% NORTH AMERICA
15% SCANDINAVIA
14% FRANCE
13% BENELUX
13% GERMANY
13% UNITED KINGDOM
5% OTHER EUROPE
3% OTHER EX-EUROPE
2% SPAIN
2% ITALY
1% SWITZERLAND

SLPE - Sectors

Consumer Services 22%
Industrials 22%
Financials 14%
Health Care 13%
Consumer Goods 13%
Technology 10%
Secondary (? - not sure what that means!) 2%
Utilities 2%
basic materials 1%
Oil & gas 1%

It is worth spending time looking under the bonnet.


I better change my name to monabriPickering

[SKYSHIP]

Monabri - "My logstore" - I've got one of those too - guards wood, kindling and resident grass snake!

On more serious matters:

# LMS - this one is work in progress following corporate changes 2yrs ago. The wastrel Robert Rayne is still there as a dominant/dormant holder; but management now in the hands of Gresham House. Tony Sweet has now departed with an undeserved sweetener to get the deal done. The Interims in 2weeeks time will signify whether hidden value is re-emerging. I'm expecting an NAV of 80p for a 34.4% discount; if so then LMS is a value opportunity @ the offer price of 52.5p

# DNE - glad you had a rethink. Personally I'm no great fan of the Dunedin management group and their sky-high fees! Another case of over-valued management North of the border...

# NBPE - At the offer price of 1040p and Cable @ 1.32, the NAV = 1320p and the discount = 21.2%. Allied to the 3.5% yield NBPE is one of the few Buys in the sector

# MVI @ 146p is one to watch in view of the BCA share price. If another bid appears for that unique company, MVI will have a good jump as they are already offering a 28.4% discount & 5.7% yield

[monabri]

"my logstore" ...it was meant to translate as "my shelter" (no wonder I failed French)

I see that Marwyn MVI was trading at an even bigger discount in May (37%?) but the discount has been reducing. The charges seem " high" and there is a performance fee ( according to Hargreaves). But what I don't like is 48% held in one company (BCA) followed by 28% in a company I've not heard of (Zegona... the name is asking for trouble ...it's Zegona).
HL reckons that it is 100% UK too....but I'm not sure without further research . If 100% UK, see my comment previously about wanting to gain ex UK diversification).

[LittleDorrit]

In defence of your monicker, it's "abri à bûches" for lumberjacks.

In this space I'm continuing to run my overvalued winners - I currently can't see the impetus to close discounts on the second tier.

[77ss]

.....
SLPE (figures from SLPE interim report march 17)

A more diversified spread

19% NORTH AMERICA
15% SCANDINAVIA
14% FRANCE
13% BENELUX
13% GERMANY
13% UNITED KINGDOM
5% OTHER EUROPE
3% OTHER EX-EUROPE
2% SPAIN
2% ITALY
1% SWITZERLAND

SLPE - Sectors

Consumer Services 22%
Industrials 22%
Financials 14%
Health Care 13%
Consumer Goods 13%
Technology 10%
Secondary (? - not sure what that means!) 2%
Utilities 2%
basic materials 1%
Oil & gas 1%

It is worth spending time looking under the bonnet......

Those interested in SLPE may like to look at the recent Edison report:

https://www.edisoninvestmentresearch.co ... 1550&LANG=

[formoverfunction]

I hold HGT, PEY (&PEYS) and IPO, I wasn't going to make a specific comment on those, but I thought I'd share this recent press realase from London & Partners on the state of investment in the capital.

It's very encouraging for seed investors, venture capital and private equity.

The pipeline looks strong for UK based investments. I hope this isn't "off topic", it just strikes me that todays seed and venture funding is tomorrow's private equity market.

http://www.londonandpartners.com/media- ... -investors

I believe '18 also looks like a bumper year for comany formations. Promising stuff if you have a long term view.

[formoverfunction]

"I should indicate that I bought a small tranche of PEYS (sterling version of PEY) a while ago (8th June 18). The balance sheet is described as "flawless", I like the divi even though the cover is a bit thin and the main fund is based in Euro."

- also bought PEYS in June, before I'd held PEY.

Would you mind me asking where the "flawless" came from? I don't disagree, I'd just like to read the research if you can remember where it came from.

[UncleEbenezer]

That article uses VC funding as a measure of the tech sector.

Over on the VCTs board, we have a different view. There is a lot of VC money sloshing around, attracted largely by tax breaks. Part of that is tightening of the pension rules making VC a refuge for money that would once have been sheltered in a pension. Add that to recent severe tightening of the rules for VC tax breaks, and you have more money chasing fewer eligible opportunities. C.f. London housing!

And speaking as someone with (to date) thirtysomething years career in the tech sector, my impression is that while there are good startups in London, the suggestion that it's so far ahead of other places is nonsense.

[monabri]

"I should indicate that I bought a small tranche of PEYS (sterling version of PEY) a while ago (8th June 18). The balance sheet is described as "flawless", I like the divi even though the cover is a bit thin and the main fund is based in Euro."

- also bought PEYS in June, before I'd held PEY.

Would you mind me asking where the "flawless" came from? I don't disagree, I'd just like to read the research if you can remember where it came from.

The "flawless" is from the SimplyWallStreet review based on 6 checks - this is their summary

"SL Private Equity has a total score of 6/6, see the detailed checks below".

1 Are short term assets greater than short term liabilities?
2 Are short term assets greater than long term liabilities?
3 Has the debt to equity ratio increased in the past 5 years?
4 Is the debt to equity ratio over 40%?
5 Is the debt covered by operating cash flow?
6 Are earnings greater than 5x the interest on debt (if company pays interest at all)?

Ditto for PEY(S).

[formoverfunction]

The "flawless" is from the SimplyWallStreet review based on 6 checks - this is their summary

Thanks, I don't use the site myself, but I do end up there sometimes when reading articles.

[formoverfunction]

"Over on the VCTs board, we have a different view"

I don't think I've had a look at the VCT board yet, so I'll take a look.

I do hold a few VCT's, but generally only buy during market corrections. In the past found that gave a decent long term income play.

I had a 20 years run in tecnology, which allowed me to retire at 40, part retire anyway.

May see you over there sometime.

[monabri]

One "minor" issue with SLPE for an income hunter is that the next XD is Jan 19 followed by mid-June 19 - their distributions being twice per year.

[tramrider]

One "minor" issue with SLPE for an income hunter is that the next XD is Jan 19 followed by mid-June 19 - their distributions being twice per year.

I think that the SLPE dividend distributions changed at the start of 2018 from half-yearly to quarterly, with 2 quarterlies so far. The Edison report says "The board intends to pay four quarterly dividends of 3.1p for FY18, equating to a prospective 3.8% yield."

Tramrider

[monabri]

Thanks Tramrider. (The Hargreaves Lansdowne website I was using hasn't been updated to reflect the change to quarterly dividends).

[mickeypops]

Any input or commentary on Apax Global Alpha in this review of Private Equity trusts?

[SKYSHIP]

re APAX - no - not followed fortunately as they've been a bit of a poor performer, with the added complication of the $/Eur exchange rate to consider.

At a 20% discount to the end March NAV there may be hope of a turn round from the ski-slope drift down; but wouldn't count on it.

Look elsewhere would be my advice!

[SKYSHIP]

A nice dividend update from NBPE:

https://uk.advfn.com/stock-market/londo ... v/77891846

Sp progressing to 1055-1060p; but still one of the best value on a 20% discount and 3.7% yield.