- Annual pre-tax loss of $15.7mn
- Portfolio has since surged in value
- 66 per cent share price discount to spot NAV
Annual results from Aim investment company Tekcapital’s (TEK:10.75p) reveal a $14.2mn write-down caused by mark-to-market losses on holdings in two listed companies: Aim-traded respiratory medical device company Belluscura (BELL: 15.5p) and Innovative Eyewear (US:LUCY), the first company to deliver prescription glasses with Bluetooth technology. The markdowns reduced net asset value (NAV) by 17 per cent to $47.9mn after factoring in $5mn of equity raises.
However, the portfolio has since rocketed in value following the IPO of investee company MicroSalt (SALT:129p), a company that produces low-sodium salt (‘MicroSalt IPO highlights the value in Tekcapital’, 1 February 2024). MicroSalt’s share price has trebled since IPO, which means that Tekcapital’s 77.3 per cent stake is now worth $54.8mn (£43mn). Moreover, Tekcapital has recovered all last year’s fair value losses, and its latest portfolio valuation of $75mn (£59mn) comfortably exceeds the $55mn valuation in the 2022 accounts, too. Spot NAV is three times its market capitalisation of £21.3mn.
Earlier this month, MicroSalt was granted an important patent that strengthens its position in the low-sodium market as it looks to secure orders with multinational companies testing the product. The company appears to have a winning formula and one that should turn a business with a relatively fixed cost base profitable in due course, assuming management can secure deals with large fast-moving consumer goods (FMCG) customers. Tekcapital’s undervaluation is anomalous. Buy.
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