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Currency in GBP
Last close As at 26/05/2023
GBP2.71
▲ −0.20 (−0.07%)
Market capitalisation
GBP415m
Research: Financials
Molten Ventures released its FY23 trading update (to end-March 2023), with its NAV per share down c 17% in FY23 to c 775p. That said, it posted only a minor 2% decline in its gross portfolio fair value in H223 (excluding foreign exchange impact), which indicates some stabilisation after the 17% decline in H123. Molten’s ‘Core’ portfolio (c 62% of total portfolio) saw a robust 40% value-weighted revenue growth in the calendar year to end-December 2022 (though below the expected 60-65%, partly due to greater focus on cash preservation). The company expects continued high top-line growth of its ‘Core’ holdings in 2023 at over 65%. Management highlighted that its ‘Core’ holdings remain well funded, with over 80% of them having a cash runway of more than 18 months.
Molten Ventures |
Initial signs of stabilisation in H223 |
FY23 trading update |
Listed venture capital |
02 May 2023 |
Share price performance
Business description
Analysts
Molten Ventures is a research client of Edison Investment Research Limited |
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Molten Ventures released its FY23 trading update (to end-March 2023), with its NAV per share down c 17% in FY23 to c 775p. That said, it posted only a minor 2% decline in its gross portfolio fair value in H223 (excluding foreign exchange impact), which indicates some stabilisation after the 17% decline in H123. Molten’s ‘Core’ portfolio (c 62% of total portfolio) saw a robust 40% value-weighted revenue growth in the calendar year to end-December 2022 (though below the expected 60-65%, partly due to greater focus on cash preservation). The company expects continued high top-line growth of its ‘Core’ holdings in 2023 at over 65%. Management highlighted that its ‘Core’ holdings remain well funded, with over 80% of them having a cash runway of more than 18 months.
Period |
Plc cash* |
Gross portfolio |
NAV |
NAV/share |
Discount/premium |
09/21 |
156.2 |
1,350.2 |
1,357.4 |
887 |
12 |
03/22 |
78.1 |
1,531.5 |
1,433.8 |
929 |
(16) |
09/22 |
28.5 |
1,448.9 |
1,279.9 |
837 |
(64) |
03/23*** |
23 |
1,370 |
1,200.0 |
775 |
(65) |
Note: *Includes restricted cash but not funds held on behalf of EIS/VCT investors. **Calculated based on share price at respective period-end. ***Unaudited preliminary figures.
Fair value fall cushioned by liquidation preferences
The 2% fall in fair value in H223 represents a £23m markdown, as £81m uplifts were offset by £104m reductions, with £63m of the latter coming from ‘Core’ holdings (mostly two assets) and £41m from the ‘Emerging’ portfolio. We note that the pressure on valuations (enterprise values of Molten’s ‘Core’ holdings were down 37% in FY23) was partly cushioned by liquidation preferences, as 97% of the company’s ‘Core’ investments are structured as preferred shares. Molten’s current portfolio valuations are underpinned by the £1bn of capital raised across 28 rounds during FY23, of which 90% had valuations higher than or in line with the previous funding round.
Continued emphasis on cash preservation
Molten invested £138m in FY23 (vs the targeted £150m), mostly in H123 (£112m) with higher focus on capital preservation in H223. Meanwhile, realisations amounted to £48m in FY23, of which c £35m in H223 (ahead of H223 investments). Management sees signs of stabilisation in the venture capital tech markets, therefore expecting fundraising and dealmaking to pick up at some stage over its current fiscal year to end-March 2024. Molten’s CEO anticipates further realisations in the year though the timing is uncertain. It therefore prioritises cash preservation in FY24 and expects a funding requirement within its portfolio at c £20m. The company had £23m cash and £60m in undrawn revolving credit facility at end-March 2023 (its EIS/VCT funds had £58m available for investments), as well as c £10m in listed holdings. We also note that its operating costs net of fee income were c 0.1% of period-end NAV, ie visibly below the targeted 1%.
Valuation
Molten’s shares currently trade at a wide 64% discount to its end-March 2023 NAV per share. A potential rebound in deal activity and risk appetite across global private markets would likely constitute a catalyst for narrowing the discount.
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Research: Metals & Mining
Agnico Eagle Mines (AEM) started the year with strong quarterly production of 813koz at an US$832/oz total cash cost and a US$1,125/oz all-in sustaining cost (AISC). A number of records were achieved, including in cash flow and safety. This marks the final quarter incorporating 50% of production from Canadian Malartic. From 30 March, this will increase to 100%, following AEM’s acquisition of Yamana’s Canadian assets, which will add c 80–90koz in attributable production per quarter. Guidance for FY23 remains unchanged at 3.24–3.44Moz at a cash cost of US$840–890/oz and AISC of US$1,140–1,190/oz. An unchanged quarterly dividend of US$0.40/share was declared.
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