Oakley Capital Investments Share Discussion Threads

[1968jon] 06/10/2023 10:03

donald and CWA1. Had you seen the daft offer last night and paid £3.92 for the 2,226 shares and slotted them immediately in the auction this morning at £4.29, you would have made a lovely turn of £823. I used to do that on a desk (not my only reason for being there!!), where equally I would also occasionally sell stock at the daft price someone had bid in the auction. If you are not going to be watching every auction in market-maker stocks, you could probably program a machine to always be bid 10%ish below for a few and offered 10%ish above in a few but you would need direct access to the auction. No broker that I know would do it for you. Don't get me wrong, I'd love to "earn" £800 while sleeping but it is likely to only ever be infrequent and not a living! Still funny though and I love that some brokers mark the stock between the closing spread and some at the bum print - with all the hilarity that then ensues!

[cwa1] 06/10/2023 08:42

It was. Wish it had been me ;-)

[donald pond] 06/10/2023 08:37

Someone bought them at that price though. Bargain

[cwa1] 06/10/2023 08:05

Back to normal this morning as expected

[steve3sandal] 05/10/2023 19:30

No knowledge but I’d guess it’s an aberration which will correct itself in the morning. Trades all day at 420something and no official news.

[ali47fish] 05/10/2023 19:07

can someone with knowledge comment on the fall of the share price today please

[cwa1] 05/10/2023 18:31

Bit of a anomalous uncrossing there 😁

[crita 2] 05/10/2023 18:22

You can say that again.

[cwa1] 05/10/2023 16:49

Bit of an anomalous uncrossing there

[makinbuks] 28/9/2023 10:47

ST is getting ahead of himself talking about NAV estimates. OCI don’t distribute realised profits to shareholders, they reinvest in new opportunities, so the discount shouldn’t be affected by the maturity of their holdings because that is a transitory position. Concentrate instead on the EBITA growth of the investments and the multiple applied to them in arriving at the NAV, together with a view on the oversized exposure to debt in one company. If you’re comfortable with that then come on in. The discount may well narrow but only when the market view of PE changes with the business cycle

[dope007] 28/9/2023 10:29

Made a first purchase here. Discount to a rising NAV is too large to ignore

[biggest bill] 25/9/2023 12:18

Here are more details of the article from Investors Chronicle.


A bargain private equity stock on a 32% discount.
It is priced below book value even though its investments are delivering robust growth
• £240mn cash inflow from education sector disposal
• Net asset value (NAV) flat at £1.17bn (663p)
• Net cash of £248mn
• 32 per cent share price discount to NAV
The astute investment team at Oakley Capital Investments (OCI:450p) has realised the largest capital gain in the private equity investment company's history.
The disposal of its stake in IU Group, the largest and fastest growing university in Germany, realised £240mn in look-through proceeds and delivered an eye-watering 76 per cent internal rate of return (IRR) on Oakley’s investment. The company has reinvested £66mn into IU Group to benefit from the next phase of its growth and made £16mn of other new investments in the education sector, too. These include a £14mn investment in Thomas Day Schools, a top-rated group of co-educational independent schools in England, and a £2mn investment to fund a bolt-on acquisition for investee company Affinitas Education, an operator of 12 schools in Spain.
The education sector is likely to be an important driver of Oakley’s future returns. That’s because only 4 per cent of the 11,000 bilingual international schools have been consolidated to date in what is a huge $3.5tn market. Oakley’s other education-themed exposures include Prep Bright Stars, a UK nursery company, and Schülerhilfe, a tutoring business in Austria and Germany.
The investment in IU Group had already been revalued up 85 per cent in last year's accounts, so didn't impact NAV in the interim accounts. However, the hefty cash flow on the realisation explains why Oakley held net cash of £248mn at the half-year-end, a sum representing a fifth of NAV of £1,17bn (663p). The relatively flat first-half NAV performance partly reflects the fact that foreign currency headwinds held back NAV by 15p a share, a sum that was offset a 2.6 per cent NAV uplift from portfolio gains. Also, cash and transactions in the past 12 months account for half of book value, so those investments were not revalued. That's a conservative approach given the underlying growth rates they are delivering.
Structural drivers of NAV growth
Oakley’s ability to back the right type of company across three core market segments – technology, education and digital consumer – and shrewdly make exits to bank handsome gains should not be underestimated. The average portfolio company delivered 21 per cent growth in cash profit year on year and house broker Liberum Capital notes that several companies are well positioned to benefit from digital megatrends.
For instance, business software and cloud-based management solutions group Cegid was combined with Iberia-focused Grupo Primavera in 2022 and offers exposure to the data supercycle. Also, majority of Oakley’s investments have defensive characteristics, benefit from strong structural market growth, asset-light business models and high cash conversion rates.
In addition, more than two-thirds of portfolio companies operate a subscription-based model or recurring revenue business model. It means that they are less exposed to short-term falls in customer demand, a point worth noting in the prevailing economic environment as Oakley’s investee companies are likely to continue delivering profit growth to positively impact valuations.
 
Unwarranted share price discount
These dynamics help explain why Liberum is predicting a £202mn unrealised portfolio gain in this year’s annual accounts to deliver 16 per cent growth in NAV to £1.35bn (767p).
On this basis, the shares are rated on a 41 per cent discount to year-end NAV estimates, implying a nine percentage point widening of the current share price discount and one that is already six percentage points wider than the average of Oakley’s direct equity peer group. The level of discount is unwarranted given Oakley’s impressive track record. In fact, Oakley has delivered 22 per cent annualised growth in NAV on a total return basis over the past five years and outperformed all AIC investment companies, too.
So, having included the shares, at 146.5p, in my 2016 Bargain Shares Portfolio, and banked 31.5p a share of dividends, the potential for further valuation uplifts warrants a narrowing of the hefty discount to NAV. Buy.

[davebowler] 22/9/2023 09:17

IC's Simon Thompson -

... Oakley’s shares are currently rated at a 41% discount to year-end NAV estimates, which is 9 percentage points wider than the current share price discount and 6 percentage points wider than the average of Oakley’s direct equity peer group 1. However, this level of discount is unwarranted given Oakley’s impressive track record. In fact, Oakley has delivered 22% annualised growth in NAV on a total return basis over the past five years and outperformed all AIC investment companies.
Buy

[paulbutcher1999] 19/9/2023 07:30

The interesting question to my mind is what level of premium the shares warrant given their long standing solid outperformance.

[davebowler] 16/9/2023 11:10

North Sails was discussed and nothing untoward mentioned, and apparel branded with North Sails is now a feature.

[jellypbean] 14/9/2023 16:31

Same in the 2008 crash. Everyone panicked that they wouldn't be able to make their commitments and they went onto big discounts. Most of them managed fine.

[donald pond] 14/9/2023 11:55

I do wonder whether the listed PE model may be a little broken. Managing the obligation to make sizeable future commitments at a time of elevated interest rates is a real challenge. As you say, holding cash is a real drag, but doing it via debt adds a huge cost. I suspect the better approach is to try to focus more on direct investments, as PIN is doing, so you can be a little more opportunistic.
OCI seem like they are doing well. I didn't watch the call, any mention of North Sails?

[elsa7878] 14/9/2023 11:54

North Sails.....a disproportionate % of NAV and barely profitable. Where's the exit on this one. As a world leader who's the natural buyer for it? Therein lies the crux of the discount conundrum.

[makinbuks] 14/9/2023 11:47

What's to like? Biggest NAV gains from Idealista and Time Out somewhat answer my previously expressed concerns about these businesses. The 21% EBITA growth is extremely impressive (at APAX for example the reduction was several percentage points and much lower as an absolute) 4X leverage is indeed conservative by PE standards.

What's less to like?
The fact that almost the whole NAV gain was wiped out by currency movement illustrates that this has to go on the "reasons behind the discount" list. With so much cash on the BS might they consider hedging? Debateable, beware what happened at PIN.

All that cash is going to provide quite a drag on NAV performance in the immediate future.

The average multiple now at 16.9X is getting punchy and has consistently risen in recent reports. OK its still not in HGT territory.

I assume the average EBITA growth number is a simple average whereas it ideally should be weighted. Bear in mind something like 15% is in loans unaffected by such metrics on top of our cash

Overall still possibly my favourite investment

[davebowler] 14/9/2023 09:33

Half-year results reinforce our view that there is value in the shares
Analyst: Joachim Klement

Mkt Cap £802m | Share price 451.5p | Prem/(disc) -31.9% | Div yield 1.0%

Event

The company published its half-year results for the six months ending 30 June 2023. The NAV of 663p (up 3p or 0.5% since end 2022) has been previously announced as well as the total income from disposals of £240m and the total investments of £96m in the period.

The portfolio companies continue to perform well despite the difficult market environment. EBITDA growth was 21% year-on-year, virtually the same as the 22% YoY achieved a year ago. The average valuation multiple of the portfolio investments increased to 16.9x (FY22: 15.9x) reflecting the shift towards the higher rated technology sector.

The biggest contributions to the change in NAV came from Idealista (+4p) and TimeOut (+2p), but NAV uplifts were diminished by adverse FX movements (-15p). The chart below shows the ten largest movements in portfolio company valuations on a look-through basis.



As at period end, the company had total outstanding commitments of £893m with net cash increasing by 126% in the period to £248m. Post-period end, OCI renewed and expanded its revolving credit facility, raising total committed lending to £175 million for a two-year term. As at 13 September 2023, the facility was undrawn.

The company also declared a dividend of 2.25p (unchanged) for the period. The dividend will be paid on 20 October 2023 to shareholders on the register on 21 September 2023.

Liberum view

In response to the trading update on 26 July we published an update to our outlook for the company (NAV growth outlook remains bright (8 pgs)). We continue to be BUYers of the company with a target price of 653p. Since our update, the share price has increased by 1.6% and over the last 12 months, total shareholder returns were the second highest among direct private equity funds. As of 12 September, 12-month total return of 12% beats the 8% return for the peer group. Yet, in recent weeks, discounts to NAV have narrowed more for the peer group than for the company so that the relative valuation of Oakley has become more attractive. The weighted average discount of direct PE funds (ex-3i is currently 25% vs. 32% for Oakley. We consider this discount as particularly attractive given the company’s track record, the quality of the portfolio, and the strong underlying EBITDA growth that has been immune from the weaker economic growth environment in H1 2023.

[smartmoney100] 14/9/2023 08:21

ali47fish yes :

[donald pond] 14/9/2023 08:21

Yes, half yearly results. All on track as previously disclosed

[ali47fish] 14/9/2023 08:15

isnt there an update today?

[donald pond] 05/9/2023 08:21

There's been a pattern of chunky director buys after recent announcements. I've topped up to get them before the board does