Indeed, a pre-close trading statement for the financial year to end January 2016 included several positive trading updates from the leading investee companies which account for the majority of its portfolio by value. This suggests yet another rise in the company’s net asset value per share following a 9.3 per cent rise in its equity portfolio at the half-year stage which sent its net asset value per share surging from 205p to 225p. This means that at the current price the shares are rated on a deep 30 per cent discount to book value.
In my opinion, such a deep discount is completely unwarranted for a number of reasons. Firstly, the company was sitting on £3.6m of net cash on its balance sheet at the end of January 2016 after factoring in commitments to its existing portfolio, and that cash pile is set to get a major boost this summer. That’s because the company sold 80 per cent of its shareholding in privately owned global insurance broker Hyperion Insurance in July 2013, but retained a 1.6 per cent equity stake, worth £7.3m, subject to a call option from General Atlantic. It's a racing certainty that the option will be exercised by its July 2016 expiry date given that last year's merger of Hyperion with RK Harrison has been hugely value accretive.