It hasn’t taken long for private equity investment company Oakley Capital (OCI:188p) to start making the realisations I was anticipating when I last suggested buying the shares at 177p (‘Bargain Shares: Another chance to bag some bargains Part II’, 16 May 2018).
The company has sold its stake in Facile.it, Italy’s leading online comparison website, to realise cash proceeds of £52m, representing a 58 per cent premium to the carrying value of the investment in its 2017 accounts. Oakley originally invested in Facile in 2014, building on the sector experience gained through an earlier investment in Verivox, the Germany-based online price comparison website. Under Oakley's ownership, Facile expanded its market share in the automotive price comparison market, and established leading positions in broadband, energy and financial product verticals. Facile’s cash profits trebled under Oakley’s ownership, which explains why Oakley’s investment generated an impressive 51 per cent internal rate of return.
Moreover, with further realisations from disposals above book value likely, Oakley’s 23 per cent share price discount to my spot net asset value (NAV) estimate of 245p seems overly harsh. That discount is five percentage points deeper than rivals even though cash accounts for 30 per cent of Oakley’s NAV and assets in the portfolio are priced on 10 times cash profits to their enterprise value, a conservative valuation given that investee companies in the portfolio posted 25 per cent average cash profit growth last year. For good measure, three of Oakley’s directors have just splashed out £3m acquiring 1.65m shares in the company at 183.5p each.
| Bargain Shares Portfolio 2016 performance | |||||
| Company name | TIDM | Opening offer price (p) 5.02.16 | Latest bid price (p) 3.07.18 | Dividends (p) | Total return (%) |
| Bioquell (see note one) | BQE | 125 | 360 | 0 | 188.0% |
| Volvere | VLE | 419 | 900 | 0 | 114.8% |
| Bowleven (see note two) | BLVN | 18.935 | 39.95 | 0 | 94.5% |
| Gresham House | GHE | 312.5 | 438 | 0 | 43.1% |
| Oakley Capital | OCI | 146.5 | 184 | 9 | 31.7% |
| Juridica (see note three) | JIL | 36.1 | 14 | 32 | 27.4% |
| Gresham House Strategic | GHS | 796 | 980 | 15 | 25.0% |
| French Connection | FCCN | 45.7 | 51.5 | 0 | 12.7% |
| Mind + Machines (see note four) | MMX | 8 | 7.5 | 0 | 2.8% |
| Walker Crips | WCW | 44.9 | 34 | 2.43 | -18.9% |
| Average return | 52.1% | ||||
| Deutsche Bank FTSE All-share ETF index tracker (LSE:XASX) | 341 | 422.5 | 47.96 | 38.0% | |
| Notes: | |||||
| 1. Simon Thompson advised buying Bioquell's shares at 149p in February 2016. Bioquell bought back 50 per cent of its shares in issue at 200p each in June 2016 through a tender offer and Simon recommended buying back the shares in the market at 145p to give an average buy-in price of 125p (‘Bargain shares updates’, 22 Jun 2016). | |||||
| 2. Simon Thompson advised banking profits on half your holdings in Bowleven's shares at 33.75p, and running the balance ahead of drilling news at the Etinde prospect in Cameroon in the second quarter of 2018 (‘Hitting pay dirt', 9 Apr 2018). The total return reflects this share sale. | |||||
| 3. Simon Thompson advised buying Juridica's shares at 41.2p in February 2016. Juridica subsequently paid out a special dividend of 8p a share in June 2016 and Simon recommended buying shares in the market at 61p using the cash proceeds to take the average buy-in price to 36.1p (‘Brexit winners', 1 Aug 2016). Juridica then paid out a special dividend of 32p a share in September 2016 and total return reflects this distribution. Simon advised selling the holding at 14p ('Taking Q1 profits and running gains', 4 Apr 2017), hence the price quoted in the table. Please note that Juridica has since paid out a further special dividend of 8p a share and current bid price is 9.2p. | |||||
| 4. Simon Thompson advised buying Mind + Machines' shares at 8p in February 2016. Mind + Machines subsequently bought back 13.22 per cent of the shares in issue at 13p a share. The total return reflects this capital distribution. Simon then advised selling the holding at 7.5p which is the exit price stated in the table ('Strategic acquisitions', 9 May 2018). | |||||
| Source: London Stock Exchange share prices | |||||
So, having included Oakley’s shares at 146.5p in my 2016 Bargain Shares portfolio, and banked total dividends of 9p a share, I feel it’s well worth following the insiders’ lead. Buy.
■ Simon Thompson's new book Successful Stock Picking Strategies can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. It is being sold through no other source and is priced at £16.95 plus £2.95 postage and packaging. Full details of the content of the book is available on YPDBooks website.
Simon's second book Stock Picking for Profit has been reprinted and is available to purchase online at www.ypdbooks.com for £16.95, plus £2.95 postage and packaging, or by telephoning YPDBooks on 01904 431 213 to place an order. Simon has published an article outlining the content: 'Secrets to successful stock picking'
