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Augmentum’s eye-watering investment gains

The first publicly listed fintech fund in the UK continues to deliver material valuation gains on its investment portfolio to warrant a share price premium to book value
September 25, 2019

Augmentum Fintech (AUGM:109p), the first publicly listed fintech fund in the UK, continues to justify my decision to include the shares, at 102.4p, in my market-beating 2019 Bargain Shares portfolio.

Having delivered an annualised internal rate of return (IRR) of 28 per cent since the March 2018 IPO, buoyed by gains on its two largest holdings – Zopa, the world’s first peer-to-peer consumer lending platform, and Interactive Investor, a leading UK investment platform – the company has just revealed an eye-catching valuation uplift on portfolio company Tide, an emerging force in the small- and medium sized enterprises (SMEs) challenger banking sector.

Augmentum’s investment in Tide comprised a number of convertible instruments that were converted into equity this week, implying a revised valuation of £14.2m for the holding and a total uplift of £4.2m compared with the carrying value of the investment (£4.975m as at 31 March 2019 combined with the £5m further investment Augmentum made in June 2019). The implied valuation uplift adds 3.6p a share to last reported NAV of 109.6p as at 31 March 2019.

It’s not the only one of Augmentum’s holdings that has potential to deliver material gains, either. For example, the company invested £2.5m in Monese  (monese.com), the UK-based fast-growing mobile-only current account provider; £1m in DueDil (duedil.com), a predictive company intelligence platform; and £5m in Habito (habito.com), the UK’s only online mortgage broking and lending platform. It’s worth noting, too, that Interactive Investor’s carrying value in Augmentum’s last accounts is based on a earnings multiple that represents a deep discount to listed peers AJ Bell (AJB) and Hargreaves Lansdown (HL.). I can see material upside here, too. Buy.

Simon Thompson's 2019 Bargain Shares portfolio performance
Company nameTIDMMarket value Opening offer price 1.02.19Bid price   24.09.19 DividendsPercentage change
TMT Investments (note one)TMT$163m250¢580¢20¢140.0%
Futura Medical FUM£71m14.85p34.5p0p132.3%
InlandINL£160m57.75p77p0.85p34.8%
RamsdensRFX£59m165p190p4.8p18.1%
Jersey Oil & GasJOG£49m205p226p0p10.2%
Bloomsbury PublishingBMY£181m229p243p6.75p9.1%
Augmentum FintechAUGM£125m102.4p107p0p4.5%
Litigation Capital ManagementLIT£86m77.5p78.8p0.28p2.0%
Mercia TechnologiesMERC£91m29.57p30.0p0p1.5%
DriverDRV£27m74p50p0.5p-31.8%
Average      32.1%
FTSE All-Share Total Return index6,8527,424 8.3%
FTSE Aim All-Share Total Return index1,023999 -2.4%
Note 1: Simon advised taking profits on TMT Investments at 580¢ a share on Monday, 9 September 2019 ('Takeovers, tender offers and taking profits', 9 September 2019).
Source: London Stock Exchange opening offer prices at 8am on 1 February 2019 and closing bid prices on 24 September 2019.

■ Simon Thompson's latest book Successful Stock Picking Strategies and his previous book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 to place an order. The books are being sold through no other source and are priced at £16.95 each plus postage and packaging of £3.25 [UK]. Postage and packaging is only £3.95 for purchases of both books.

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Simon Thompson has been named 2019 Small Cap Journalist of the year at the 2019 Small Cap Awards, a prestigious event celebrating the best and rewarding the finest professionals and companies that work within the AIM and NEX communities. It is attended by institutions, fund managers, brokers and advisors operating in the sub-£100m market cap quoted company sector.