Oakley Capital Investments Share Discussion Threads

[danny500] 25/8/2023 18:03

Its dated the 18th Aug, chill out.

Thanks for posting Dave

[ali47fish] 25/8/2023 17:51

Dave-i saw this post a few days ago so why is it posted with today's date as if it is new news?

[davebowler] 25/8/2023 14:51

18 August 2023
Steven Tredget says private investors are replacing wealth firms on its shareholder register, although he notes individual wealth managers have snapped up its shares on a wide discount.
Oakley Capital Investments (OCI ) says interest in his trust from retail investors has grown exponentially since the onset of the Covid-19 pandemic.

Steven Tredget, a partner at Oakley Capital responsible for the investment company that invests in its funds, told Citywire that in 2020, 3% of OCI’s share register was retail investors. That number has now grown five-fold to 15%.

Tredget, a partner at OCI’s manager Oakley Capital, noted that this money was replacing investment from wealth managers who are often restricted from holding investment trusts an closed-end funds.

‘There’s greater interest from private investors going into private equity (PE) for the first time,’ he said.

‘We’ve also noticed wealth managers, who are prohibited from buying our trust for their clients, are buying the trust in their personal portfolios.’

The £812m trust currently trades at a 31% discount to its net asset value (NAV) – a level which is not unusual for private equity trusts in the current uncertain environment. Numis Securities recently said that OCI’s price represented ‘exceptional value’.

According to the Association of Investment Companies, 14 out of 17 private equity investment companies traded at double-digit discounts in June.

Wealth managers were historically major buyers of listed private equity funds but have cooled on the sector since many funds ran into trouble during the financial crisis. More recently, consolidation among wealth managers has also made it harder for all but the largest trusts to find a place in the centralised portfolios of these bigger firms.

‘Icing on the cake’
Like other private equity managers, Tredget believes current pricing is ‘inefficient’.

‘We’ve had earnings growth in our companies. The discount is a complete red herring, and a distortion of the situation,’ he said.

‘There’s a lack of trust in PE company valuations, and there’s a low expectation of future returns. But the discount provides an icing on the cake for investors.’

He added that more than 60% of the consumer-facing, media and education companies in the portfolio have ‘had some kind of pricing event within the past 12 months’.

In its interim results OCI, which acts as an effective shop window to private equity manager Oakley Capital, revealed that it had invested $100m (£79m) in an artificial intelligence (AI) venture fund launched by its parent company.

The update for the first half of 2023 also revealed that its £1.1bn portfolio had generated an underlying investment return of 0.5% with 2.5p per share of dividends included.

Those fairly modest returns should be viewed in the context of a 158% total return for shareholders in the five years to 17 August. That is triple the 49% gain for the MSCI World index, according to Morningstar data.

‘The modest increase in asset value reflects the company’s cautious approach to trading outlook and valuation multiples, and the fact that half of the NAV was not subject to change in the period,’ OCI said in a trading update.

‘This results from approximately 50% of the asset value being held in cash, or underlying investments that were valued based upon a transaction within the last 12 months.’

‘It’s hard to explain listed PE’
Tredget added that wealth managers have a ‘hard time’ buying investment trusts more generally.

‘It’s hard to explain listed PE to investors, especially with the discount factor,’ he said.

‘There’s this view that PE is elitist and inaccessible, and the perception of vultures of old. The likes of Woodford and Chrysalis (CHRY ) have also impacted the industry.’

Tredget does not, however, believe that a share buyback policy is the best way to close OCI’s discount.

‘We only do a buyback when we think it’s the best way to deploy capital,’ he said.

He did acknowledge that it is often a good way for a trust to signify its confidence in its net asset value.

[biggest bill] 18/8/2023 15:15

Here is the same article without the need to sign in.

[steve3sandal] 17/8/2023 16:11

Business to Consumer. As opposed to Business to Business.

[makinbuks] 17/8/2023 09:40

Yes , noticed that and hold HGT too. Could be encouraging for OCI's Southern European businesses although they are BTC whereas HGT's are back office business systems. Its the penetration of BTC to UK levels that I question as a thesis

[donald pond] 17/8/2023 08:32

HGT RNS today interesting. Sold a Spain and Italy focused software services business to an Abu Dhabi/Google JV at a 65% write up to NAV.

[makinbuks] 11/8/2023 09:53

Totally agree. Well, I would take slight issue with saying Time Out hasn't really worked. It was successful up to IPO and managed as well as could be expected through COVID and is now recovering. But in essence, yes if NS and TMO could be exited you would see a re rating of OCI and I wholeheartedly agree with your assessment of their strengths and capabilities

Another slight hesitation I have is the platforms in Southern Europe where their thesis is that market penetration is a lot less than in the North and so they will the best growth. I just have my doubts that there is such a strong cultural read across

[donald pond] 11/8/2023 09:11

Very helpful makinbucksMy view is that OCI has only recently found its niche and that while Peter Dubbens is excellent, he can make poor investments. The Alexa Chung fashion brand was a disaster and Time Out and North Sails haven't really worked, though neither are bad businesses. But they are capital intensive real world businesses. It feels like Oakley have worked out that the best returns are in building digital led platforms in areas ripe for disruption. The dental labs acquisition looks great business. The capital needed to provide state of the art services means there's a great opportunity to quickly build a global leader in a highly lucrative but fragmented market that nobody else is looking at.

[makinbuks] 10/8/2023 11:58

Yes, alas I think we know the story but in case some don't, I agree the base business is market leading, but the thesis that could be exploited through marketing branded apparel faltered. Initially the shortcomings were thought to be transitory so debt was added to bridge the difficult period. Now that COVID has cleared we can see where it stands and its going to take some very clever engineering to get our money back

We shouldn't let one failure cloud what is a fantastic company but it is a big issue. I asked Steven Tredget online earlier this year about the debt. His response was that a good job had been done refinancing Time Out and there was only £5m left there which would go this year and he hoped a similar exercise could be done on North Sails. No news of either since then. I have also heard Tredget say in the past that in future OCI would not make direct investments or loans as one of several discount reduction measures they were taking

[donald pond] 10/8/2023 11:44

Yes, in the last update I saw (a research piece from Quoted Data) it amounted to an NAV of £180m. Only IU Group was bigger.
If they could sell that it would be great. It just isn't really in their sweet spot any more, being their only US investment as far as I can tell. But it is a high quality brand, making sails for the US Americas cup team etc. Just needs to find a buyer

[makinbuks] 10/8/2023 11:06

God yes I'm sure they'd be rid of North Sails in a trice if it were possible. Still a substantial % of NAV including the debt

[donald pond] 10/8/2023 11:01

Yes, in a niche, rather overlooked area which I suspect is ripe for consolidation and the Oakley touch. I doubt dental lab owners are the most dynamic group, and there should be a real opportunity to add value.
I also think the Fastcase acquisition may be very astute. It folds in nicely with vLex, and the one thing law firms constantly need is the best access to research. So everything looks good in the Oakley world. I had in mind that they would be looking to sell North Sails at some point too, but presumably waiting for market conditions to be just right

[makinbuks] 10/8/2023 10:45

Looks like this ticks all the Oakley boxes

[davebowler] 10/8/2023 09:10

Liberum-
Private Equity

Oakley Capital Investments

Buy and build potential in fragmented dental laboratories market
Analyst: Shonil Chande

Mkt Cap £793m | Share price 446.5p | Prem/(disc) -32.7% | Div yield 1.0%

Event

Oakley Capital Investments is expected to make an indirect contribution of £35m to Fund V’s acquisition of Flemming Dental, Excent, and Artinorway Group (subject to regulatory approval). The companies are being carved-out from European Dental Group (EDG) and are expected to form one of Europe’s largest dental laboratory groups.

Services provided by the combined company include the design and manufacture of dental prostheses (crowns, bridges and dentures) and orthodontics (braces, retainers and aligners). C.5,000 clinics across c.70 dental laboratories are currently serviced across Europe.

OCI’s indirect contribution will represent c.8% of its net available resources, as at 26 July 2023, comprising a net cash balance £248m and an undrawn RCF of £175m.

Liberum view

The European dental laboratories market features many of the traits the Oakley funds have typically sought, including a large and growing addressable market, good potential for recurring business, and fragmentation. The relative fragmentation of the laboratories market, compared to dental groups, for example, means it is well-suited to the Oakley buy-and-build approach.

[biggest bill] 10/8/2023 08:45

I'm happy to see that Oakley is starting to use some of its cash resources on new investments. It's been a very quiet period recently for new investments. I presume that there is a pipeline of new opportunities that Oakley is currently evaluating. There is certainly plenty of money available which I would like to see being used rather than sitting in a bank account.

[davebowler] 09/8/2023 09:00

Oakley Capital Investments (OCI), the shop window to private equity manager Oakley Capital, has invested $100m (£79m) in an artificial intelligence (AI) venture fund launched by its parent company.

In a recent half-year trading update, the £783m Bermuda investment company said it had invested in Oakley Touring Venture launched earlier this year to give shareholders exposure to a ‘strategy established to invest in proven next-generation enterprise software companies powered by generative AI’.

The Oakley Capital website states the fund will bring together ‘a diverse and highly technical team who have previously worked together to build three global venture investing franchises, including Qualcomm and M12, Microsoft’s venture fund’.

As a technology and media-focused fund of funds, OCI is largely invested in Oakley Capital funds but also holds a number of direct investments, the most well-known of which is UK-listed Time Out (TMO), an events and listings group that branched out into live markets, offering food and cultural experiences from the host city.

In total, OCI now has £893m committed to Oakley funds that is expected to be drawn over the next five years. It also has £248m of cash, having taken some big profits recently on its stake in online university IU Group. It can also draw on £175m to call in a credit facility over the next two years.

The announcement came in an update showing a quiet half year for the private equity investor which has generated a 146% total return for shareholders over the past five years but, in common with most of its sector, has seen its stock fall to a wide 34% discount to net asset value (NAV). Numis Securities believed this represented ‘exceptional value’.

In the six months to 30 June, the £1.1bn portfolio generated a total underlying investment return of just 0.5% with 2.5p per share of dividends included. The total return to a NAV of 663p per share included 17p per share of valuation gains, although these were largely offset by 15p per share of currency losses as the euro strengthened against the pound.

‘The modest increase in asset value reflects the company’s cautious approach to trading outlook and valuation multiples, and the fact that half of the NAV was not subject to change in the period,’ Oakley said. ‘This results from approximately 50% of the asset value being held in cash, or underlying investments that were valued based upon a transaction within the last 12 months.’

During the half year, Oakley funds also acquired Fastcase, a legal intelligence business which has been combined with Oakley portfolio company vLex, an AI-powered legal research platform. There was also an investment in ‘premium schools group Thomas’s London Day Schools’ and a bolt-on acquisition to Affinitas Education, a single-site school in Spain.

Overall, OCI said its funds portfolio continues to deliver ‘robust trading performance’ in a challenging macroeconomic environment and believed it will continue to benefit as companies and consumers continue to shift their businesses and spending online.

[ali47fish] 08/8/2023 18:10

what about the launch of AI fund? re - rns

[1968jon] 01/8/2023 13:54

Interesting to see someone bidding 445 for 100,000 in the auctions today.

[biggest bill] 28/7/2023 15:53

The directors still seem keen on oci shares with yet another director buy.

[ali47fish] 27/7/2023 10:20

dave it sounds to me this is a good entry point to add- please comment further

[davebowler] 27/7/2023 09:49

Liberum-
Note: NAV growth outlook remains bright
Analyst: Shonil Chande

Mkt Cap £799m | Share price 449.5p | Prem/(disc) -32.2% | Div yield 0.4%

Event

The IU Group realisation was the most significant event in OCI’s H1 2023, with £240m in look-through proceeds representing a 76% IRR to OCI. The transaction delivered the largest capital gain to an Oakley fund. While this is still a challenging market for realisations, the underlying portfolio is growing well, benefitting from a focus on digital disruptors exposed to megatrends. There is good potential to benefit from generative AI trends as well. The key driver of NAV growth will continue to be EBITDA growth and while the 32% discount to NAV is attractive, the strongest justification for owning the shares has been NAV growth. On this measure, a five-year NAV TR CAGR of 22% leads all AIC investment companies.