TIDMOCI
Oakley Capital Investments Limited
27 January 2022
Oakley Capital Investments (OCI)
27/01/2022
Flash update from Kepler Trust Intelligence
Oakley Capital Investments' (OCI) NAV at 31 December 2021 was
538p. This represents an increase of 21% since 30 June 2021, and
brings the total NAV return for 2021 as a whole to 35%.
OCI has a relatively concentrated underlying portfolio of growth
companies in three sectors: technology, education and consumer. The
largest contributions to returns over the past six months were from
IU Group (12.3% of NAV at 30/06/2021) which continued to see strong
growth in student enrolments during the period, and TechInsights
(3.2% of NAV at 31/06/2021), whose sale has been agreed at a c.
125% premium to the June book value.
The wider portfolio enjoyed strong earnings growth, benefitting
from accelerating long-term trends such as the increasing adoption
of digital solutions by businesses and consumers, and growing
demand for quality, accessible education. During the year, 76% of
the increase in the portfolio's value (including realisations) was
driven by EBITDA growth and 24% by multiple expansion. Underlying
activity has been strong, with cash proceeds received during the
year of c. GBP121m and investments made of GBP137m. OCI had cash on
the balance sheet of GBP163 million at 31 December 2021,
representing 17% of NAV, and no debt. Total outstanding commitments
at the year-end were GBP740 million when including the initial
commitment to Fund V announced post year-end.
Kepler View
The NAV announcement represents a very strong second half for
OCI. A NAV total return of 35% over 2021 compares to the FTSE World
Index return of 18.9%, representing a hefty level of
outperformance. Over the year, OCI's discount has narrowed, such
that total shareholder returns over 2021 were 48%. OCI aims to be
the first institutional investor in a company, and aside from
supporting management to grow revenue and earnings rapidly, the
team also aim to "professionalise" these businesses, making them
ideal subsequent targets for other private equity investors. The
recent deal to sell (and reinvest in) TechInsights to CVC Growth
Funds, provides evidence that this strategy is working.
OCI has a significant cash balance (17% of NAV at 31/12/2021).
Outstanding commitments (at the year end) of GBP740m may look
optically high. However a good proportion of historic outstanding
commitments are unlikely to be called. In our view the EUR400m
commitment to Oakley's Fund V shows the board's confidence in
future cash flows from realisations (average maturity of the
current portfolio being between 3.5 - 4 years) and investment
activity. It is also worth noting that the Fund V commitment is
expected to be deployed over the next five years.
We think Oakley's focus and expertise in specific sectors, its
proven ability to source investments (platform or bolt-on) through
its proprietary network of entrepreneurs and its discipline in
terms of pricing and valuations means OCI is highly differentiated
from peers. Going forward, OCI will make quarterly NAV
announcements, which we view as a good step forward in helping
investors better understand the NAV trajectory, and over time
potentially this could be helpful in achieving a narrower discount.
We expect more detail on the underlying portfolio when OCI reports
its annual results on Thursday 10 March 2022.
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