Heliad Equity Partners — Enpal and Razor closing new funding rounds

Heliad (XETRA: A7A)

Last close As at 18/05/2024

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Research: Investment Companies

Heliad Equity Partners — Enpal and Razor closing new funding rounds

Heliad Equity Partners (HEP) reported a 3.6% decrease in net asset value (NAV) over the four-month period ending January 2023, bringing the NAV decrease since end 2021 to 45.4%. flatexDEGIRO (FTK) was the main valuation driver and remains HEP’s largest asset (38% of the portfolio). Meanwhile, HEP’s private portfolio saw successful funding rounds at Enpal and Razor Group in recent months. HEP recently issued 1.6m new shares, raising €7m in new capital to facilitate further investments. Given that the share issue was carried out at a 43.6% discount to end-January 2023 NAV, we calculate that it will result in a c 5% NAV per share dilution.

Milosz Papst

Written by

Milosz Papst

Director, Financials

Investment Companies

Peer group comparison

HEP’s NAV performance is below peer average over the last one-, three and five-year periods due to the recent significant decrease in FTK’s valuation, which also affects the long-term results. HEP’s ongoing charges ratio is higher than peers and it does not intend to pay dividends for now, contrary to venture capital trusts (VCTs), which normally distribute dividends on a regular basis.

HEP currently trades at a 44% discount to NAV, wider than the peer group average of 25%. However, we note that VCTs tend to trade at a much narrower discount than some of the other peers (with HEP having the narrowest discount among them, see Exhibit 4). For illustrative purpose, if we applied the current average peer discount to HEP’s NAV at end January 2023 (adjusted for the subsequent movement in FTK’s share price and completion of the share issue), we would arrive at a fair value per share of €5.54.

Exhibit 4: Peer group comparison at 10 March 2023* in sterling terms

 

Market cap (£m)

NAV TR
1-year

NAV TR
3-year

NAV TR
5-year

Discount
(ex-par)

Ongoing
charge (%)

Perf. fee

Net gearing

Dividend
yield (%)

Heliad Equity Partners

49

(42.3)

10.8

(34.5)

44.5

3.8

Yes

119

0.0

Albion Enterprise VCT

113

(3.1)

21.2

53.4

(4.2)

2.5

Yes

100

5.4

Kings Arms Yard VCT

103

1.5

24.4

38.8

(3.5)

2.4

Yes

100

11.3

Northern 2 VCT

102

(4.5)

24.3

33.4

(11.7)

2.2

Yes

100

6.2

FinLab

50

(40.9)

-26.4

(8.9)

(41.7)

3.1

No

100

0.0

British Smaller Companies VCT2

102

9.5

51.3

70.6

(8.2)

2.0

Yes

100

14.4

ProVen Growth and Income VCT

154

(8.8)

8.5

12.2

(4.2)

2.4

Yes

100

10.4

Augmentum Fintech

166

4.9

38.1

N/A

(40.1)

1.7

Yes

100

0.0

Vostok Emerging Finance

137

(40.5)

10.3

40.7

(52.9)

1.3

Yes

100

0.0

Molten Ventures

467

(5.6)

45.8

(16.1)

(62.8)

2.3

Yes

100

0.0

Average (excl. HEP)

155

-9.7

22.0

28.0

(25.5)

2.2

N/A

100

5.3

HEP’s rank in sector

10

10

7

9

1

10

N/A

10

6

Source: Morningstar, Edison Investment Research. Note: TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets (100 = ungeared). *12-month performance based on latest available ex-par NAV: end January 2023 for HEP, end-December 2022 for Albion Enterprise VCT, Kings Arms Yard VCT, Northern 2 VCT, FinLab, British Smaller Companies VCT2, ProVen Growth and Income VCT and Vostok Emerging Finance; end September 2022 for Augmentum Fintech and Molten Ventures.

Scenario analysis

We believe that forecasting the results of an investment company like HEP is very difficult (if not impossible), as these depend on a number of parameters relating to its existing investments, such as holding period, realised multiple of invested capital (MOIC) and prospective new investment activity. Moreover, HEP’s future earnings will also depend on FTK’s share price performance and realisation path. Having said that, we have updated our scenario analysis, which we included in our initiation note published in July 2022 (see Exhibit 5).

Exhibit 5: HEP’s prospective NAV TR under different scenarios*

FY21

FY22e

FY23e

FY24e

FY25e

FY26e

FY27e

Average MOIC at 2.5x, FTKs share price at average sell-side target price

EPS (diluted, €)

1.67

(7.02)

1.08

0.59

0.83

1.03

1.35

IFRS NAV per share (€)

14.15

7.13

7.92

8.51

9.34

10.37

11.72

NAV TR

 

(50%)

11%

7%

10%

11%

13%

Average MOIC at 3.0x, FTK’s share price at average sell-side target price

EPS (diluted, €)

1.67

(7.02)

1.27

0.91

1.28

1.65

2.19

IFRS NAV per share (€)

14.15

7.13

8.28

9.19

10.47

12.11

14.31

NAV TR

 

(50%)

16%

11%

14%

16%

18%

Average MOIC at 2.0x, FTK’s share price flat

EPS (diluted, €)

1.67

(7.02)

0.66

0.10

0.27

0.39

0.52

IFRS NAV per share (€)

14.15

7.13

7.34

7.44

7.71

8.10

8.62

NAV TR

 

(50%)

3%

1%

4%

5%

6%

Source: HEP, Edison Investment Research. Note: *All scenarios assume share issue completed in full.

General disclaimer and copyright

This report has been commissioned by Heliad Equity Partners and prepared and issued by Edison, in consideration of a fee payable by Heliad Equity Partners. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Heliad Equity Partners and prepared and issued by Edison, in consideration of a fee payable by Heliad Equity Partners. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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