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Five key takeaways from ICGT’s interim results to July were: i) NAV return -1% (1Q -4.1%, 2Q +3.2%) well ahead of the FTSE All-Share’s -17.8%; ii) 15% average past 12 months’ (LTM) earnings growth in top 30 underlying companies (47% portfolio), again well ahead of the -24% LTM FTSE All-Share EBITDA growth; iii) continued realisations (£39m) at uplifts to carrying values and secondary sales (£55m) with more post period-end, and the latter helping to rebalance the portfolio; iv) £197m of available liquidity to fund uncalled commitments and new investments; and v) a strong, good-quality pipeline, especially for high-conviction investments.

  • Latest Hardman & Co note: Our 8 September note, Defensive growth: explaining downside resilience, explored ICGT’s resilience to a downturn in more detail, explaining why PE is resilient and then deep diving into what ICGT has done to further reduce risk. We also highlighted ICGT’s ESG credentials.
  • Hardman & Co webinar: The key highlights (in addition to the results) from ICGT’s 16 October webinar were i) how the defensive growth strategy is implemented in practice, and ii) the differentiation offered from having a mix of concentrated high-conviction investments with diversified funds.
  • Valuation: Valuations are conservative (medium-term uplifts on realisations averaging 30%+ to the latest book value). Ratings are undemanding, and the carry value against cost is modest. This gives confidence that the accounting date NAV is realistic. The 24% discount to NAV is c.2x average 2016-19 levels.
  • Risks: PE is an above-average cost model, but post-expense returns are market-beating. Even though actual experience has been continued NAV outperformance in economic downturns, sentiment is likely to be adverse. ICGT’s permanent capital structure is right for unquoted and illiquid assets.
  • Investment summary: ICGT has consistently generated superior returns, by adding value in an attractive market, with a defensive growth investment policy, and exploiting synergies from being part of the ICG family. The valuations and governance appear conservative. It has an appropriate balance between risks and opportunities. Risks are primarily sentiment-driven on costs and cyclicality, as well as the underlying assets’ liquidity. It seems anomalous that a business with a consistent record of outperformance is trading at a 24% discount to NAV.
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