Oakley Capital Investments (OCI), the listed company which invests in Oakley Capital private equity funds, has received backing from analysts this morning as it announced it would issue no more equity at a discount.
Although OCI's net asset value (NAV) increased by £34.2m in the first half of this year to £472.6m, its NAV per share remained flat as the company issued more treasury shares at a discount to the NAV.
But in its half-year results released today, the firm said it would not be doing this again. Analysts took this as a sign of improved governance at the company, and responded positively.
“The performance of the existing portfolio, the improved governance initiatives, the management alignment and the implicit value of the shares make OCI an attractive investment opportunity currently trading at a 28.8 per cent discount to the June 2017 NAV,” said Liberum analyst Myrto Charamis.
OCI's shares have traditionally traded at a discount to the fund's net asset value, as is the case for many listed private equity firms.
But broker Numis today noted that the discounts of many investment companies in the private equity sector have narrowed, and added that OCI “stands out in terms of value”.
“OCI’s record on corporate governance (notably dilutive share issuance), as well as its confusing portfolio disclosure, has made us wary of recommending the fund in the past,” said Numis analysts.
“We believe that these are concerns are now being addressed as portfolio disclosure is much improved, Steven Tredget has been appointed in a dedicated investor relations role for the fund, and the board has committed not to issue shares on a dilutive basis in future.”
Numis added it was “notable” that Oakley Capital partners have recently been buying shares in OCI, and now hold around 1.5 per cent of the company. The broker said it would be revising its estimates for Oakley taking into account its year-to-date performance and relatively high level of investment activity.
The firm has completed five investments in the year to date, as the fair value of the underlying portfolio companies grew by 11 per cent.
“Double digit sales and profit growth continue to drive fund performance,” said Peter Dubens, Oakley Capital's managing partner.
We retain our ability to generate high quality opportunities, investing €277m in five transactions so far this year.
Aim-listed Time Out is OCI's largest current investment, and its other major holdings include education group Inspired, sporting equipment business North Sails and telecoms provider Daisy.