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EUR130m
Research: Investment Companies
GVC Holdings is a leading e-gaming operator in both B2C and B2B markets with four main product verticals (sports, casino, poker and bingo). About 69% of revenues come from regulated and/or taxed markets. GVC acquired bwin.party digital entertainment (bwin) in February 2016 for €1.51bn.
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Heliad Equity Partners |
Key portfolio holdings drive results
Investment companies |
Scale research report - Update
14 September 2017 |
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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.
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Historical financials
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.
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Exhibit 2: Heliad’s share price and NAV performance |
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Source: Heliad Equity Partners corporate website, Edison Investment Research |
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Exhibit 2: Heliad’s share price and NAV performance |
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Source: Heliad Equity Partners corporate website, Edison Investment Research |
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As Caledonia Mining (CMCL) continues to implement its investment plan (IP), logistical issues governing ore handling volumes and access to higher-grade ore bodies have affected gold production during Q2 and H117. Underground works to ameliorate material handling bottlenecks have taken place with successful completion, inter alia an underground tramming loop. However, grades are lower due to restricted access to the higher-grade Eroica and Lima ore bodies situated on the other side of the Central Shaft development area to the main surface haulage route – the No. 4 haulage shaft. We have adjusted our valuation to reflect this and the H117 financial results, leading to a valuation of 933p for successful implementation and operation of the Blanket IP.