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3i sees more of the Action

The group has increased its stake in the retailer as one of its funds matures
November 15, 2019

Rising competition for investments in private equity and a deteriorating macroeconomic picture are not slowing down 3i Group (III). The private equity and infrastructure investor saw growing earnings in 91 per cent of its top 20 investments by value during the six months to September, up from 88 per cent last year. 

IC TIP: Hold at 1,073p

However, the gross investment return was flat on the same period last year due to a slowdown in trading across a number of its industrial holdings, particularly those with exposure to the automotive sector.

As the group’s EuroFund V (EFV) reaches maturity, the group has been forced to consider what to do with its star investment – Dutch retailer Action. The investment has produced a gross internal rate of return of 75 per cent over the eight years since the group first bought in, and so the EFV fund will sell its stake to three other 3i-managed entities for €745m (£637m) – a price criticised by some analysts as being too low. The wider group also plans to increase its net investment to around 50 per cent, from a current level of 45.3 per cent.

Broker Numis forecasts adjusted net asset value of 915p a share at the March 2020 year-end, rising to 1,020p the same time the following year. 

3I (III)    
ORD PRICE:1,073pMARKET VALUE:£10.4bn
TOUCH:1,072.5-1,073p12-MONTH HIGH:1,189pLOW: 755p
DIVIDEND YIELD:3.5%PE RATIO:8
PREMIUM TO NAV: 23%NET CASH:£50m
Half-year to 30 SepNet asset value (p)*Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201877671373.815.0
201987376078.417.5
% change+13+7+6+17
Ex-div:12 Dec   
Payment:08 Jan   
*Adjusted NAV