Tmt Investments Share Discussion Threads

[sev22] 29/3/2023 12:20

Exploit the huge discount at this venture capital company.

Its portfolio of high-growth, internet-based companies has suffered but makes it a great recovery play.

March 28, 2023
By Simon Thompson

*AV declines from $283mn to $201.7mn (641¢) in 2022
*2022 pre-tax loss of $81.4mn completely reverses $86.7mn profit in 2021
*$9.6mn of investments made across nine new and existing companies in 2022
*$11.4mn of cash reserves (27 March 2023)

Annual results from TMT Investments (TMT:282¢), a venture capital company with a portfolio of high-growth, internet-based companies, reflect last year’s technology sector rout, which impacted valuations of privately held start-ups.

The group booked almost $80mn of losses on investments including a 33 per cent write-down to $69.7mn on its 1.26 per cent stake in international taxi and food delivery company Bolt. The shareholding had previously been valued at $103.3mn (£84mn) following a €628mn (£555mn) fundraising round in January 2022, led by Fidelity and Sequoia, that placed a €7.4bn ($6.8bn) valuation on the fast-growing company.

However, valuations of listed rivals Uber Technologies (US:UBER) and Lyft (US:LYFT) got hammered last year so TMT’s valuation committee adopted a more prudent approach to the carrying value of the group’s largest investment. That said, Uber’s stock price has rallied 24 per cent since TMT’s financial year-end, valuing Bolt’s larger rival at $61.6bn, suggesting that a chunk of the hefty write-down could be reversed in TMT’s accounts for the first half of 2023.

The 64 per cent decline from $63.1mn to $22.9mn in TMT’s 11.2 per cent stake in Nasdaq-quoted cloud storage group Backblaze (US:BLZE) was the other main reason for the portfolio reversal. TMT’s shareholding is worth $18.6mn at current prices, albeit the likely gain on Uber since the start of 2023 will more than compensate for this year’s paper loss on Backblaze.

Prudent approach to new investments.

Importantly, TMT has taken a sensible approach to new investments, making nine in total last year across nine portfolio companies. Although the top five holdings account for $124.3mn (64 per cent) of the year-end portfolio valuation, a further 50 holdings are worth $71mn, thus offering diversification which mitigates investment risk. Around 45 per cent of the portfolio is invested in early-stage and mid-stage companies, segments of the venture capital market that have held up remarkably well, and highlighting defensive characteristics in the current uncertain climate. Also, investments are conservatively valued at cost or the read-through valuation of the last funding round for its investee companies.

Anomalous valuation worth exploiting.

I selected TMT around the current price as one of my 2023 Bargain Shares, the decision primarily based on the fact that the shares are trading on a 55 per cent discount to net asset value (NAV) even though there is scope for a reversal of some of last year’s impairments. That’s a derisory rating for a group that has delivered an impressive internal rate of return (IRR) of 22.8 per cent over the past five years.

I also feel that many of TMT’s holdings are conservatively valued, a view supported by funding rounds for several investee companies that led to positive revaluations, as I highlighted in last month’s feature. Any improvement in investor risk appetite for technology investments is likely to drive a material re-rating to reward bottom fishers.

BUY.

[skyship] 06/3/2023 16:17

No, or at least AJBell doesn't. I averaged down at 3.00, so pleased to see them bounce off that level.

[waterfall city] 03/3/2023 09:32

Does your broker profit useing a spread converting Stirling's to dollars?

[skyship] 01/3/2023 09:38

The ST Tip premium will have soon unravelled; so an opportunity to buy at c3.00 may be approaching...

[andrbea] 10/2/2023 14:00

TMT mentioned, about two-thirds down the link

[andrbea] 10/2/2023 10:45

on LSE today

Tipped last night by Simon Thompson (IC) as part of his 2023 bargain shares portfolio.

[andrbea] 05/9/2022 15:25

up 14%, several buys in last 30 mins.

[andrbea] 18/8/2022 13:09

another 8% (and ... is trading on a massive 50 per cent discount)

[sev22] 25/3/2022 08:00

TMT’s over 50 per cent share price discount to NAV makes this an absolute bargain!

[widescreen07] 23/2/2022 16:36

Thanks for posting the piece in Investors Chronicle, very helpful. A lot of embedded value in TMT and a strong mid-long term play. Many of the recent companies TMT has invested are doing very well, though takes some time to track them all as there are so many now 50+

[sev22] 17/2/2022 15:12

TMT Investments are an investor in LegionFarm.

SAN FRANCISCO, CALIFORNIA, Feb. 15, 2022 (GLOBE NEWSWIRE) -- LegionFarm, a Y-Combinator-backed startup based out of San Francisco announced that on February 12th, 2022 it would be hosting the first ever professional fight in the Metaverse; starring MMA Legends Khabib Nurmagomedov and Max Holloway in the main event. The renowned fighters came together in the Creed: Rise to Glory multiplayer VR Boxing game while Martial Arts Legend, Daniel Cormier, acted as commentator at the event; streamed live on Twitch.

[sev22] 08/2/2022 10:32

UK’s Fintech Sector Attracts $37.3 Billion Worth of Investments in 2021:

[andrbea] 31/1/2022 10:49

a bounce at last .... was the fall due to their Russian roots (a backlash against the war worries)? Strong Nasdaq (Friday) now means recovery mode for tech investments?

[sev22] 14/1/2022 08:44

TMT Investments are highlighted in the last two paragraphs:

Peer-to-peer property lender eyes March launch (13th January 2022).

A pan-European property-only P2P lending platform is about to launch in the UK. Is the risk-reward promise too good to be true?

EstateGuru poised for March launch, FCA permit pending.

Platform says annual returns to date exceed 11 per cent.

So far, 2022 has started where 2021 ended: with inflation at multi-year highs and yields from corporate credit and bond funds stubbornly low. Faced with this outlook, many UK investors will have resolved to search for assets that can beat inflation without adding exposure to equities.

Soon they will have a new option to weigh. EstateGuru, a “marketplace” for commercial property-backed loans, is set to formally launch in the UK when it opens an office in Manchester in March.

To some, the peer-to-peer (P2P) lender’s promise will look too good to be true. Since it was founded in 2014, the pan-European platform claims to have generated an average annualised return of 11.25 per cent for its 112,000 users, with just 0.01 per cent of loans made to date written off.

A “fast and flexible” approach to underwriting also means lending is growing at a rapid rate. As of this week, the group has funded €500m-worth (£417m) of loans and plans to hit €5bn by 2025.

Credit is extended to commercial borrowers, typically for under a year, and split across bridge, project development and business finance products. Unlike other P2P platforms, EstateGuru financing is also asset-backed; residential property is offered as collateral in around half of all loans, with the rest split between land and buildings under construction and commercial real estate.

The average loan-to-value is also reassuring at just under 60 per cent, meaning a property would need to lose at least 40 per cent of its value before lenders start to lose their principal.

EstateGuru plans to offer both investor accounts and the opportunity to borrow through the site on its UK launch. For the first time, both groups will also be able to borrow from or lend to the platform’s existing European network of investors and projects.

A spokesperson said re-authorisation from the Financial Conduct Authority (FCA) is expected this quarter. While the group was first granted permission to operate by the regulator in October 2019, its licence was frozen last August as the pandemic put its original launch plans on hold. Despite this, several thousand UK-based investors – including high-net-worth individuals – have been able to fund projects in Europe.

Peer-to-peer lenders work by matching borrowers with retail investors and collecting arrangement fees or a cut of interest paid by borrowers. P2P platforms grew rapidly after the global financial crisis, as they offered higher rates to savers and better terms to borrowers than high-street banks.

The arrival of EstateGuru follows a chequered history for P2P firms in the UK. Despite participating heavily in the government-backed coronavirus support lending, Funding Circle (FCH) has struggled to turn a profit since its 2018 initial public offering, and it shares currently trade more than three-quarters below their debut price.

Other issues with P2P lenders’ models have included the ability to price credit risk while meeting targeted investor returns. Zopa, one of the best-known names in the sector, launched in 2005, but has since closed new peer-to-peer investing accounts in favour of traditional banking products to fund its loans on a more stable footing. The group could list in London later this year.

Similarly, one of the major challenges facing EstateGuru as it grows is the need to balance credit risk with investors’ desire for high returns in a market already well-supplied and understood by finance.

Historically, over two-fifths of EstateGuru loans have been made in Estonia, the small Baltic state where the group is headquartered, and which in recent years has gained prominence as a hub for fintech businesses. Wise (WISE), the London-based cross-border payments firm that joined the FTSE 100 last year, was founded by Estonian businessmen Kristo Käärmann and Taavet Hinrikus.

EstateGuru now has a presence across the Baltic states, as well as inSweden, Finland and Spain. A large proportion of loans are now originated in Germany after the group opened an office in the EU’s largest economy last year. Further expansion is also slated for the Netherlands, Italy and France.

Ross Gandy, the platform’s managing director for the UK, is confident of replicating the success in Germany, and has a target to fund £70m of loans – initially ranging in size from £50,000 to £3m – in the first year of operation. The UK office is also lining up a £300m credit line from several major banks to underwrite loan funds that can be marketed to institutional and high-net-worth investors.

Asked how the group plans to compete with incumbent lenders, Gandy points to EstateGuru’s existing infrastructure and funding knowhow, as well as speedy and light upfront credit checks, as differentiators. “Yes, it’s a very saturated [property finance] market in the UK,” he acknowledges. “But the fact we’re a fintech is a major selling point; we’re digitised, and our underwriting is a lot slicker and more simplified.”

For investors, the kitemark of FCA approval will be key. So, too, will be EstateGuru’s ability to maintain double- or high-single-digit returns.

Evidence that the group’s own funding and expansion strategy are stable are other considerations. Although EstateGuru is a private company, disclosures show it was profitable in 2020, and has since secured additional financing through the Seedrs crowdfunding platform and a €5.8m follow-on Series A funding round in which Aim-traded venture capital firm TMT Investments (TMT) participated.

At the time, TMT co-founder Artyom Inyutin lauded the company for “attracting money to real estate and at the same time making it possible to invest investors’ funds at a profit”. That solution takes on fresh significance with this push into a nation of property-obsessed (and yield-hungry) investors.