Molten Ventures — NAV reset reflects falls in public markets

Molten Ventures (AIM: GROW)

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Last close As at 03/02/2023

GBP3.95

43.20 (12.28%)

Market capitalisation

GBP538m

Research: Financials

Molten Ventures — NAV reset reflects falls in public markets

In its trading update, Molten Ventures announced that its H123 NAV per share is expected to fall to not less than 830p (H122: 887p), 12% below the FY22 NAV/share of 937p. This corresponds to a 17% fall in gross portfolio value (GPV) on a constant currency basis, a net fall of 12% after reflecting exchange rate gains. In turn, GPV is expected to be not less than £1.45bn (FY22: £1.53bn). The falls in valuation were cushioned by the vast majority (c 90%) of Molten’s holdings being structured as preference shares. The portfolio remains resilient, with average core portfolio revenues growing at more than 70% and well-funded, with over 75% of the core portfolio having more than 18 months’ cash runway. Molten invested £112m in H123, but management expects the rate of investment to slow materially in H223, with FY23 targeted investment of c £150m, implying c £38m of investment in H223. Cash realisations in H123 came to c £13m (H122: £67m), including UiPath and Minit (via Earlybird). Period-end plc cash stood at £28m (FY22: £78m) with £23m of listed assets. The group also has a new £150m debt facility, providing the cash needed to see it through the downturn. Molten trades at 0.44x NAV, below its peers on an average of 0.59x NAV.

Richard Williamson

Written by

Richard Williamson

Director, TMT

Financials

Molten Ventures

NAV reset reflects falls in public markets

H123 trading update

Listed venture capital

4 November 2022

Price

366p

Market cap

£560m

Plc cash (£m) at 30 September 2022

28

Shares in issue

153m

Free float

93%

Code

GROW

Primary exchange

LSE

Secondary exchange

Euronext Dublin

Share price performance

Business description

Molten Ventures is a London-based venture capital (VC) firm that invests in the European technology sector. It has a portfolio of c 70 investee companies and includes a range of funds (seed, EIS and VCT) within the group, as well as its flagship balance sheet VC fund.

Analysts

Richard Williamson

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5700

Molten Ventures is a research client of Edison Investment Research Limited

In its trading update, Molten Ventures announced that its H123 NAV per share is expected to fall to not less than 830p (H122: 887p), 12% below the FY22 NAV/share of 937p. This corresponds to a 17% fall in gross portfolio value (GPV) on a constant currency basis, a net fall of 12% after reflecting exchange rate gains. In turn, GPV is expected to be not less than £1.45bn (FY22: £1.53bn). The falls in valuation were cushioned by the vast majority (c 90%) of Molten’s holdings being structured as preference shares. The portfolio remains resilient, with average core portfolio revenues growing at more than 70% and well-funded, with over 75% of the core portfolio having more than 18 months’ cash runway. Molten invested £112m in H123, but management expects the rate of investment to slow materially in H223, with FY23 targeted investment of c £150m, implying c £38m of investment in H223. Cash realisations in H123 came to c £13m (H122: £67m), including UiPath and Minit (via Earlybird). Period-end plc cash stood at £28m (FY22: £78m) with £23m of listed assets. The group also has a new £150m debt facility, providing the cash needed to see it through the downturn. Molten trades at 0.44x NAV, below its peers on an average of 0.59x NAV.

Period
end

Plc cash*
(£m)

Gross portfolio
value (£m)

NAV
(£m)

NAV/share
(p)

P/NAV
(x)

03/21

160.7

984

1,033

743

0.49

09/21

156.2

1,350

1,357

887

0.41

03/22

78.1

1,532

1,434

937

0.39

09/22**

28.0

1,450

1,270

830

0.44

Note: *Includes restricted cash but not funds held on behalf of EIS/VCT investors. **Unaudited figures – interim results due on 21 November 2022.

Molten’s £112m of investments in H123 included £56m in primary investment (principally meeting commitments made in the previous year), with a more recent focus on follow-on rounds to the existing portfolio (£31m in follow-on capital). We assume that the remainder has been committed to Earlybird and the fund-of-funds strategy.

We have also published an ETV interview with Martin Davies, Molten’s CEO, providing additional colour on the trading update. In the interview, Martin emphasises Molten’s conservative approach to valuation, with a resilient, diverse portfolio that is not overly exposed to consumer discretionary spending. Rather, the portfolio is built around companies focused on providing technology to enterprises, improving efficiency and cost management. The portfolio also includes investments in deep tech and space technologies, whose valuations tend to be more resilient as they are based on the achievement of milestones rather than on public market comparables.

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