Nb Private Equity Partners Share Discussion Threads

[skyship] 31/7/2022 13:57

Most of the PE trusts have had a good rally over the past month:

# ICGT @ 1160p. NAV Disc. = 31.4%
# HVPE @ 2380p. NAV Disc. = 39.9%
# NBPE @ 1565p. NAV Disc. = 33.3%
# PIN @ 259p. NAV Disc. = 44.0%

Clearly PIN has missed out and looks the best value of the bunch. It has seen considerable selling pressure recently; but that seems to be drying up, so a further recovery looks likely - a good trade for a continued bounce.


free stock charts from uk.advfn.com

[ali47fish] 31/7/2022 12:58

i thought the reaction of the share price to the last update was positive even tough the volatility seems persistent but i am interested in long term and how knowledgeable investors here are psositioning? would appreciate comments

[spectoacc] 20/7/2022 08:24

DLG is very much not a FTSE100 co - FTSE 250, & about 140th overall.

Agree on debt point - Enterprise Value.

[skyship] 20/7/2022 08:15

Also - all FTSE 100 companies carry debt. The extent of gearing always has to be considered; but it not a red line - business thrives on borrowed money!

[deadly] 19/7/2022 22:41

All portfolios are risky at present, even solid FTSE 100 companies like ADM, DLG etc. are perceived as bad risks at timeslike these. Don't see that NBPE at a huge discount is more risky.

[nexusltd] 19/7/2022 16:51

@ ali47fish. NBPE scenario.
1. Drawn out market turbulence, say two years, so few underlying investments are realised.
2) Zeros repaid by Q3 2024,
3) Bank credit line pulled or reduced.

Where does NBPE get the cash to meet investment commitments made to the underlying investments. If cash is not forthcoming the companies will not meet their growth forecasts or worse, go bust. NBPE may have sell at a disadvantageous price to a competitor.

Your call as to how much risk you are comfortable with in your portfolio.

[spectoacc] 19/7/2022 16:33

Yes fair comment - many buyouts (particularly the big ones) occur at the top, presumably when the buying co's paper is also at its most valuable (even if it's debt, not equity, being used).

But that should apply much less to PE purchases - wonder if it does?

I guess on the mean reversion point - didn't NBPE do +45% on NAV last year? Some would say that's the sign of a brilliantly managed and successful co. But is it the sign of a bubble due to reverse?

[nexusltd] 19/7/2022 16:29

You make valid points.

Regarding PEIT valuation. Indeed individual names can go bust and the trackers do have survivorship bias. The more conservative PEITs tend to have small or zero allocations to venture, & buyouts are fairly robust and heavily mentored. A few names may go bust; but what %? I make no claim that a model could be accurate to better than 1-2%. Is there a better choice of trackers then EQQQ & DIA to use in such a model?

Regarding markets etc. Remember that in the short term sentiment is a huge part of stock pricing. If you examine the record of company takeovers you will observe that most happen near the top or at the top of market P/E valuations; that is when directors feel most confident. Hence the paucity of market transactions at present as evidenced by US bank quarterly reports in the last week. PEITs are comparatively long term investors.

Regarding NBPE gearing. I just wanted to remind the community of a stock specific risk factor in this name.

[ali47fish] 19/7/2022 16:24

this discussion is either too erudite or vacuous -i need o know basically if this is a good investment even if i stay put

[spectoacc] 19/7/2022 15:51

Not unreasonable, but your problem there is that indicies by their very structure don't go to zero. Stocks within them can and do, but the index populates with the next co coming up. A broad survivorship bias that even a widely invested PE IT doesn't have.

Also that listed includes the very successful and profitable - from MSFT to Apple, Alphabet to Amazon (just, sometimes). When PE says "profitable" it nearly always means EBITDA - Earnings Before The Important Bits.

Not saying NBPE & others not possibly reasonably priced here - just that we've had a massive decade-long bubble & are now suffering the mean reversion, and am unconvinced we're even halfway through it (& barely started it on PE NAVs).

Gearing - good point, particularly if this does all drag on a few years, as the 99/00 bust did. Saw an article recently saying the "$X trillions of dry powder" of PE was basically nonsense, as shown by the drying up of listed co takeovers. There's still a few, but with £ down 14% this year, and many stocks halved or more, where's the mass purchase of UK PLC?.

[nexusltd] 19/7/2022 15:45

Regarding NBPE. Remember that it is geared with zero's maturing on 30 September 2022 and 30 October 2024 amounting to USD162mn. When they are repaid the $371 million of
cash and undrawn credit line cash reserved for calls and future investments will be somewhat depleted.

Regarding discount forecasts on PE. Why not estimate value of a PEIT with info we have to hand; such as a composite index of 60% EQQQ & 40% DIA? Some of the underlying holdings are in any case valued against comparable quoted names. We are generally told what % of the portfolio has been valued at a given date, building a valuation forecasting model ought to be straight forward.

[spectoacc] 19/7/2022 08:57

We don't, but significantly lower than here is a given. Agree it makes determining necessary discount very tricky.

"12-18 months behind" said one analyst - tho have been quite a few funding rounds lately like Klarna's fall from $36bn to $6bn. NBPE at least aren't in that comedy category.

Wonder how far away we are from Unicorns going under, not being able to raise cash at all. Hilarious seeing the likes of Liz Truss saying the UK needs more Unicorns. It needs fewer, they're capital sink holes. The food delivery apps and cars-by-post co's are just the latest.

[flyer61] 19/7/2022 08:54

The monthly NAV estimate does not incorporate any Q2 private valuation information; Q2 valuation information will be incorporated AS RECEIVED in future monthly NAV updates.

and this is why the discount will remain. We just don't know where these non listed entities valuations will fall to in a recession....

[deadly] 19/7/2022 08:26

Strong progress despite the market:

-- NAV per share of $28.86 (GBP23.76)

-- 2% decrease in the month driven by changes in valuations of quoted
holdings

-- Declaration of 2H dividend of $0.47 per share, in-line with the February
2022 dividend; an annualised yield of 3.3% on NAV and 5.5% on the share
price

-- $11 million of proceeds received during the month and $371 million of
cash and undrawn credit line available

[ali47fish] 20/6/2022 17:21

Quilter Plc add c 15pc form nothing- is this correct and if so how significant is this

[donald pond] 15/6/2022 08:25

But I saw a McKinsey chart showing PE was twice as large as listed markets in 2016. I suspect the disparity is even bigger now. Which begs the question: why IPO ever? PE has the money and expertise to help companies expand without the oversight and compliance burden of public marketsAnd I can't help concluding that IPOs are for companies that PE no longer want to back.

[donald pond] 15/6/2022 08:22

I just wrote a tweet thread on this. https://twitter.com/donaldpond6/status/1536971869307514880?s=21&t=LrEopyuE4Mw8eVpYOcFbfA

[spectoacc] 15/6/2022 08:05

@donald - OCI is a class apart (ex Time Out!) but some truth to "..Good companies stay private..". Or at least, they list much later, when growth is often behind them.

[spectoacc] 15/6/2022 07:57

If multiples compress in the market, they should compress in unlisted holdings!

Perhaps NBPE's get-out is that this only takes unlisted valuations to 31st March - has been a lot of water (blood) under the bridge in the market since then.

But that would mean waiting for the next update..

[skyship] 15/6/2022 07:46

Specto - come on! You know very well that is just how markets work.

A 20% fall in markets doesn't necessarily affect the valuation of sound companies; in the same way that a 20% fall in a REIT doesn't reflect or presage a 20% fall in underlying property valuations!

So, all entirely believable; and the Market is just pricing PE trusts incorrectly in the short term.

ali - it is clearly the share price that is absurd, not the RNS...