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ICGT’s latest update, 1Q to 30 April 2021, was very positive, stating i) its highest-ever quarterly realisation proceeds, ii) 12 full exits, at a 42% uplift to carrying value, and iii) a portfolio return on a local currency basis of 3.4%, despite a partial correction in the listed Chewy share price. It also reported a substantial pipeline. In June, there was further confirmation of favourable conditions, with the realisation of U-POL generating an estimated 19.8p per share uplift in NAV (1.4%). It was the 13th-largest holding and sold at a 128% uplift to carrying value (again confirming that ICGT’s approach to valuation is conservative). The 21% discount to NAV appears anomalous with the outlook.

  • Buybacks: Directors and management bought ICGT shares last month. In late July, ICGT also bought back 250k shares at a price of 1,070p. The cash consideration is around half the average annual buybacks seen pre pandemic (FY’16-20), when the discount, on average, was slightly below the current level.
  • PE news flow confirms favourable trading: Steady positive news flow across UK-listed PE businesses continues, confirming strong deal flow, the value added by PE to investee companies and uplifts on exits. ICGT will give its own six-month update (period to end-July) in October when we expect confirmation of these trends.
  • Valuation: Valuations are conservative (medium-term uplifts on realisations averaging 35% 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 21% discount to NAV is above pre-COVID-19 levels.
  • Risks: PE is an above-average cost model, but post-expense returns are market-beating. Even though actual experience has been of 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 21% discount to NAV.
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