Key portfolio holdings drive results

Heliad Equity Partners 14 September 2017 Update
Download PDF

Heliad Equity Partners

Key portfolio holdings drive results

Investment companies

Scale research report - Update

14 September 2017

Price

€7.05

Market cap

€70m

Share price graph

Share details

Code

HPBK

Listing

Deutsche Börse Scale

Shares in issue

9.87m

NAV/share as at 30 June 2017

€9.16

Business description

Heliad Equity Partners is a Germany-based investment company focused on listed and unlisted smaller companies in German-speaking countries. Investments typically comprise growth and venture stage technology companies operating disruptive business models or addressing structural issues.

Bull

Invests in markets likely to experience strong growth in major economies.

The backing of major shareholders is firm and has provided capital for new investments.

The share price is a discount to the value of its holdings in listed companies, net of liabilities.

Bear

Portfolio concentration: the largest investment comprises over 50% of the portfolio.

2.5% management fee paid to a company owned by the main shareholder.

Early-stage investments are inherently higher risk.

Analyst

Gavin Wood

+44 (0) 20 3681 2503

Heliad Equity Partners benefited from the stock price appreciation of its major listed portfolio holdings (most notably FinTech and MagForce), posting a considerable increase in PBT to €10.9m from a pre-tax loss of €24.8m in H116. Importantly, this includes a considerable proportion of realised gross capital gains of €7.8m (above €2.5m in H116), translating into an improved cash position (net cash of €0.5m compared with net debt of €2.1m in FY16). Consequently, net asset value improved by 8.7% vs FY16 to €9.16 and the stock is now trading at a 23% discount to its NAV.

Solid H117 growth on the back of capital gains

Heliad reported an EPS of €1.13 in H117 vs. -€2.58 in H116, assisted by revaluation gains (€10.8m vs. €0.1m in H116), lower depreciation of financial assets (€0.6m vs. €22.1m in H116) and net realised capital gains (€2.2m vs. -€0.2m in H116) driven by partial disposals of listed portfolio holdings (FinTech Group, DEAG, Max21 and MagForce). Results were further supported by lower other operating expense (down 48.9% y-o-y to €1.8m with costs of management and liability declining by 33.7%).

Positive NAV drivers in H117

Heliad’s NAV per share increased to €9.16, which is an 8.7% increase from end-2016 levels. This was largely driven by share price appreciation of listed equity investments, such as FinTech Group (+24.3% in H117) and MagForce (+46.9%). FinTech Group reported strong FY16 net profit of €12.3m ahead of analyst expectations and raised its net income guidance for 2017 to €16.8m from €15.1m previously. MagForce’s share price was driven by the steady progress in its NanoTherm nanoparticle-based therapy for cancer.

Valuation: Discount to NAV persists

After appreciating by c 23% ytd, Heliad’s current share price stands at €7.05 and represents a 23% discount to last reported NAV per share. Importantly, shares of listed portfolio holdings appreciated further by 10-20% from end-June levels (with the exception of Max21’s shares, which declined slightly by 2%) along with the continued global equity market rally, suggesting that the discount to current NAV may be higher currently.

Historical financials

Year
end

Net revenue
(€m)

PBT
(€m)

EPS
(€)

P/E
(x)

NAV/share
(€)

P/NAV
(x)

12/13

26.7

11.6

1.1

6.2

6.4

1.1

12/14

23.8

18.5

1.9

3.8

8.5

0.8

12/15

29.2

23.0

2.4

3.0

10.9

0.6

12/16

(16.6)

(22.2)

(2.3)

N/A

8.4

0.8

Source: Heliad Equity Partners accounts

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

Financials: H117 results released

Heliad reported a considerable year-on-year improvement in results in H117, with EBT reaching €10.9m vs a loss of €24.8m in H116. This was mostly driven by revaluation gains of €10.8m (compared with just €0.1m in H116) and significantly lower depreciation of financial assets (€0.6m vs €22.1m in H116). Income from the sale of financial assets (representing realised positive capital gains) increased by 217.8% y-o-y, fuelled by holding reductions in FinTech Group (now holding a 10-20% stake as at end-June), DEAG Deutsche Entertainment (currently <5% stake), MAX21 Beteiligungs (<5%) and MagForce (<5%).

The solid performance was largely the result of the share price appreciation of listed equity investments, particularly FinTech Group (+24.3% in H117) and MagForce (+46.9%). Importantly, Heliad’s private investments showed positive operational and financial development in H117 as well.

Other operating expenses declined by 48.9% y-o-y amid the absence of expenses from currency conversions (H116: €1.5m) and a 33.7% y-o-y fall in costs of management and liability to €1.2m. Net income improved to €10.8m from a loss of €24.5m in H116, implying EPS of €1.13 (H116: loss of €2.58).

Heliad’s share price at end-June stood at €6.75, representing a 26.3% discount to the end-June NAV per share of €9.16, which increased 8.7% from €8.43 at end-2016. FinTech Group and MagForce shares appreciated further and the year-to-date performance now stands at c 40% and c 72%, respectively (as at 11 September). After the reporting date, Magforce announced that it received a loan of up to €35m from the European Investment Bank for the EU rollout of its NanoTherm devices. Currently, Heliad’s shares trade at a 23% discount to last reported NAV. The equity ratio reached 97.1% compared to 95.4% at end-2016.

Operating cash flow was a negative €2.9m, similar to last year (H116: €2.8m). Investment cash flow was positive at €5.0m, as outflows related to short-term cash investments (€3.6m) and investments in financial assets (€3.1m) were more than offset by proceeds from disposals (€11.6m). On the financial cash flow’s side, payments of dividends (€1.4m) and repayments of borrowings (€0.4m) were offset by proceeds from recent capital increase (€2.0m). As a result, Heliad’s cash balance improved to €2.4m from €0.1m at the end of 2016. Simultaneously, debt declined to €1.8m from €2.2m in FY16, translating into net cash of €0.5m (FY16: net debt of €2.1m).

Exhibit 1: Results highlights

€000s

H117

H116

Y-o-y (%)

Income from the sale of financial assets

7,825

2,462

217.8

Other operating income

3

311

(99.0)

Gains from revaluation

10,849

78

N/M

Securities

10,106

0

-

Investments

743

78

852.6

Retirement of financial assets

(5,636)

(2,626)

114.6

Income from investments

63

44

43.2

Depreciation of financial assets

(604)

(22,072)

(97.3)

Financial revenue

207

432

(52.1)

Financial expenses

(37)

0

N/A

Other operating expenses

(1,778)

(3,479)

(48.9)

Costs of management and liability

(1,186)

(1,788)

(33.7)

Expenses for options

(142)

0

N/A

Expenses from currency conversions

0

(1,466)

N/M

Creation of provisions

(115)

(59)

94.9

Remaining other operating expenses

(335)

(166)

101.8

Depreciation on intangible assets

(2)

0

N/A

EBT

10,891

(24,849)

N/M

Income taxes

(100)

315

N/M

Net result for the period

10,791

(24,535)

N/M

EPS (€)

1.13

(2.58)

N/M

Source: Heliad Equity Partners accounts

Valuation

Heliad assesses its own portfolio value and calculated an NAV per share of €9.16 at 30 June 2017, meaning the shares trade at a 23% discount, well above the discount for the LPX Europe Index of c 7%. This may be for a number of reasons, including the concentration of investments and low free float. Nevertheless, the discount narrowed recently following good performance of major portfolio holdings.

Exhibit 2: Heliad’s share price and NAV performance

Source: Heliad Equity Partners corporate website, Edison Investment Research

Exhibit 2: Heliad’s share price and NAV performance

Source: Heliad Equity Partners corporate website, Edison Investment Research

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors.

Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Share this with friends and colleagues