NB Private Equity Partners (NBPE)

26/04/2023

Results analysis from Kepler Trust Intelligence

NB Private Equity Partners (NBPE) has released its 2022 Annual Financial Report and 31/03/2023 Monthly NAV Update. Over the 12 months to 31/12/2022, NBPE saw a -7.5% NAV total return, with the decline driven by changes in quoted holdings and FX. The private investment portfolio rose by 4.4% over 2022 on a constant currency basis, a result of a strong underlying operating performance from companies in the portfolio, with average 14% LTM revenue growth and 12% LTM EBITDA growth over 2022.

NBPE benefitted from $143 million of announced realisations during 2022. In the first three months of 2023, there have been $27 million of announced realisations, including a realisation of one public stock position, the partial sale of one portfolio company, and continued realisations from the legacy Income portfolio. This leaves NBPE well positioned to take advantage of investment opportunities, with $308 million of cash and undrawn credit line available.

At the current price, the shares trade at a discount to the 31/03/2023 NAV of 31%. The board have stated that in their view the current discount materially undervalues NBPE's portfolio, balance sheet strength and prospects.

The Chairman, William Maltby, states that "NBPE is well positioned to deliver long-term value for shareholders". He believes the company's strong financial position and its investment model enables NBPE to be highly selective about where and when it invests. He observes that the managers with whom NBPE co-invests have a number of tools at their disposal to unlock and drive long-term value … away from the glare of the public markets. Importantly, as owners, private equity managers are also able to adapt quickly to change, a great strength in the current environment.

Kepler View

2022 was a challenging year for most listed equity markets. However, NB Private Equity Partners' (NBPE) private equity portfolio has continued to deliver strong revenue and earnings growth, which has underpinned their valuations somewhat despite valuation multiples reducing ("which declined by over two turns").

With $1.4 billion invested across 93 private companies, NBPE's portfolio is well diversified by company, manager and sector. Activity has slowed over 2022, with NBPE completing only two new investments (totalling $41m in 2022), and the Chairman states that the board do not expect the pace of new investments to pick up materially in the near term for NBPE. NBPE's co-investment model means that it does not have to commit to investments a long way in advance, and so if the pace of realisation activity does not pick up, this does not present any problems for the trust.

The board have re-affirmed their commitment to the dividend policy. The historic dividend of $0.94 per share is equivalent to a dividend yield of c. 5% at the current share price and exchange rates. The discount to NAV is at historically wide levels. Certainly there are uncertainties on the horizon, but the portfolio is well diversified, and as the Chairman states, private equity backed companies are generally well equipped to deal with just this sort of uncertainty. Private equity is a long term investment asset class, but in ascribing such a wide discount to NAV, perhaps the stock market is focussing too much on the short term? The board adjusting the buyback arrangements with its broker may see more activity in this regard, which could provide support to the discount at the current level.

CLICK HERE TO READ THE FULL REPORT 

Visit Kepler Trust Intelligence for more high quality independent investment trust research.

Important information

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm's internal rules. A copy of the firm's Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.