Fair value gains for Molten Ventures

The interim results for Molten Ventures (GROW), formerly Draper Esprit, showed that the investment company timed its pivot away from value to growth assets towards the end of last year with reasonable sagacity – the increase in revenues was driven entirely by the rise in fair value of the fund’s technology investments, which are primarily held in private companies. It also proved to be the right conditions to crystalise some profits and the fund realised a total of £67.5m in cash exits during the half.

Much of the recent commentary on technology companies is that the support is starting to fall away from second tier listed tech companies in the US, but chief executive Martin Davis said that this would not prompt a change in investment direction and Molten would maintain its pivot towards private growth companies. “Many of our companies’ revenues are driven by technology adoption and there is typically a 12-month time lag after an investment decision is made,” he said. However, the company will be selling down the stakes it holds in its listed companies, such as Trustpilot.

Mr Davis said the bigger risk was a broader rotation in the economy if interest rates rise, with a related increase in the cost of capital. Molten will maintain at least a 12-month runway of cash reserves, he said.

Broker Numis forecasts forward price/earnings for 2021 and 2022 of 4 and 5, respectively. The crossover to a 3 per cent premium to net asset value is still relatively small by the standards of the sector but it might be time to cash in. Hold.

Last IC view: Buy, 828p, 14 Jun 2021