NB Private Equity Partners (NBPE)

30/09/2022

Results analysis from Kepler Trust Intelligence

Declines in the value of NBPE's quoted holdings drove a fall in NAV of -8.1% on a total return basis to $1.3 billion ($28.67 per share) as at 30/06/2022, which compares to the MSCI World Index ($) return of -20.3%. Against this, and including the negative impact of foreign exchange movements on non-US$ investments, the valuations of NBPE's private companies, as a whole, were broadly unchanged. In constant currencies, these companies delivered a return of 2.7% over the first half.

Kepler View

During the first half of the year it is unsurprising that investment activity was muted, with the NB Private Equity Partners (NBPE) team investing in one opportunity (a $26 million investment in True Potential, a leading UK based wealth manager). That said, the team continue to see realisations from investments, with $114 million of announced transactions at an average 26% uplift to value three quarters prior to an exit announcement (to 31/08/2022).

Of more relevance in our view is the underlying earnings of the portfolio. The managers report that during the first half of the year their "private companies grew weighted average LTM revenue and EBITDA by 27% and 20%, respectively. Energy is not a significant input cost across the portfolio, and while we have seen some margin pressure in certain parts of the portfolio, we believe the portfolio is well positioned to navigate the current environment and deliver value over the long term". Reflecting this, valuations have fallen only slightly through Q2 2022.

NBPE is currently 106% invested, which means the team is not under pressure to invest over the short term. The board state in the interims that they recognise the importance of income to shareholders, and so have maintained the dividend, despite the decline in NAV over the first half.

NBPE's discount has widened significantly this year, as have investment trusts generally, and the listed private equity sector. JPMorgan Cazenove estimate that NBPE's discount (adjusting the latest NAV for subsequent FX moves and share price changes of the c 12% of NAV exposed to quoted holdings) is c. 39%. One might reasonably expect that if the world tips into recession, then earnings growth will be impacted. However, NB point out that the private equity managers who NBPE invests alongside are high quality private equity managers with the skills and expertise to navigate challenging environments. They are also experienced at quickly getting onto the front foot to help investee companies benefit from competitors' weakness.

NBPE is holding a capital markets event on Thursday 6 October 2022 at 2pm.

Participants may register for the event here

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