Shares in private equity investment company Oakley Capital (OCI:198p) hit an all-time post interim results and justifiably so after the company’s net asset value (NAV) per share increased by 6.6 per cent to 259p, buoyed by realisations and a strong operational performance from the companies in its portfolio.
Disposals of stakes in Italy’s leading online comparison website Facile.it, Germany-based online price comparison website Verivox, and internet dating site Parship Elite completed at a combined 39 per cent premium to end 2017 valuations, adding 14p a share to NAV.
Post the period end, Oakley sold its holding in Damovo, a leading European communications company, at a 12 per cent premium to carrying value. Oakley was attracted to these business models in the first place because of their strong underlying structural market growth, asset-light business models that produce strong cash conversion, and the ability to accelerate performance through effective management.
Other examples of portfolio companies exhibiting similar traits are European real estate websites Casa.it in Italy and atHome.lu in Luxembourg, and Plesk, a software platform that operates on more than 350,000 servers globally, supporting in excess of 10m websites and 18m email boxes.
| Bargain Shares Portfolio 2016 performance | |||||
| Company name | TIDM | Opening offer price (p) 05.02.16 | Latest bid price (p) 17.09.18 | Dividends (p) | Total return (%) |
| Bioquell (see note one) | BQE | 125 | 540 | 0 | 332.0% |
| Volvere | VLE | 419 | 890 | 0 | 112.4% |
| Bowleven (see note two) | BLVN | 18.935 | 29.5 | 0 | 66.9% |
| Gresham House | GHE | 312.5 | 470 | 0 | 52.0% |
| Oakley Capital | OCI | 146.5 | 197 | 9 | 40.6% |
| Gresham House Strategic | GHS | 796 | 1010 | 32.25 | 30.9% |
| Juridica (see note three) | JIL | 36.1 | 14 | 32 | 27.4% |
| French Connection | FCCN | 45.7 | 48.2 | 0 | 5.5% |
| Mind + Machines (see note four) | MMX | 8 | 7.5 | 0 | 2.8% |
| Walker Crips | WCW | 44.9 | 36 | 3.72 | -11.5% |
| Average return | 65.9% | ||||
| Deutsche Bank FTSE All-share ETF index tracker (LSE:XASX) | 341 | 410.5 | 47.96 | 34.4% | |
| Notes: | |||||
| 1. Simon Thompson advised buying Bioquell's shares at 149p in February 2016. Bioquell bought back 50 per cent of 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 June 2016). | |||||
| 2. Simon Thompson advised banking profits on half your holdings in Bowleven 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 August 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 April 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 4.1p. | |||||
| 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 advised selling the entire holding at 7.5p which is the exit price stated in the table ('Strategic acquisitions', 9 May 2018). | |||||
Source: London Stock Exchange share prices | |||||
Oakley’s portfolio is clearly in good shape as year-on-year cash profits of its investee companies have increased by almost 30 per cent. They are not being overvalued either as they are being valued on an average enterprise value to cash profit multiple of 11.6 times, suggesting future exits are likely to produce further valuations gains.
So, having included Oakley’s shares at 146.5p in my 2016 Bargain Shares portfolio, and banked dividends of 9p a share excluding the interim payout of 2.25p (ex-dividend of 27 September), I feel a 23 per cent share price discount to spot NAV is harsh for a company that has delivered a 159 per cent increase in NAV since its IPO in August 2007. 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. 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. Details of the content of both books can be viewed on www.ypdbooks.com.
