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Bargain Shares: TMT Investment’s offer worth backing

A subscription offer from a venture capital company that invests in high-growth, internet-based companies is worth taking up, but you will have to act quickly.
Bargain Shares: TMT Investment’s offer worth backing
  • US$18.5m placing and US$1.5m subscription offer at 850¢.
  • Depositphotos and PandaDoc transactions result in 30 per cent plus revaluation uplifts. 
  • TMT’s management and shareholders forming part of Concert Party subscribe for 598,799 shares in offer.

TMT Investments (TMT:895¢), a venture capital company that invests in high-growth, internet-based companies, is raising US$18.5m through a conditional placing and US$1.5m through a  PrimaryBid.com subscription offer at 850¢ a share. The announcement was made as the market closed on Friday, 1 October and the PrimaryBid offer is open until 12pm today. It’s worth buying into.

In the first six months of 2021, TMT reported a 23 per cent rise in net asset value (NAV) from $177.9m to $218.6m (749¢ a share), buoyed by gains on two its largest holdings: global ride-hailing and food delivery company Bolt ($30m valuation uplift to $66.2m on TMT’s 1.42 per cent stake), and proposal automation and contract management software provider PandaDoc ($10.4m uplift to $14m on TMT’s 1.32 per cent). TMT has subsequently sold 11 per cent of its interest in Pandadoc for US$2m, implying a fair value uplift of 30 per cent.

The company has also signed a conditional agreement to dispose of its entire holding in Depositphotos, a leading stock photo and video marketplace, for US$14.3m in cash. This represents a revaluation uplift of US$3.5m (or 32.2 per cent) compared the 30 June 2021 valuation. These two transactions increase TMT’s proforma NAV per share to 775¢. Since the half year-end, the company has also made a further 12 investments worth $13m, and currently has net cash of US$11.2m (38¢).

The placing and subscription offer not only widens the shareholder base, but will enable TMT’s investment managers to take advantage of an attractive pipeline of further investments. The offer is effectively pitched at a 9.6 per cent premium to proforma NAV, a price point that reflects investment managers impressive track record, having generated an eye-catching NAV-based internal rate of return (IRR) of 34.2 per cent over the past five years, and increased NAV per share 675 per cent since IPO in December 2010.

TMT’s shares have risen from 318¢ to 870¢ on an offer-to-bid basis since I turned buyer again 16 months ago (‘On the hunt for recovery buys’, 6 July 2020), and are currently offered in the market at 895¢, in line with the level of my last buy recommendation ('Bargain Shares: On the technology beat’, 24 August 2021). I advise taking up the PrimaryBid offer before the 12pm deadline today and continue to rate the shares a buy.

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