On 15 April, Electra Private Equity (ELTA) announced the disposal of Sentinel – one of the company’s three remaining operating businesses – for £22.2m (58.1p per share), £11.3m higher than the asset’s carrying value on the balance sheet as at 30 September 2021. ELTA has been following a realisation strategy since October 2016, when it had a market cap of c £1.7bn, and has since returned c £2bn to shareholders. Since our 16 December 2020 initiation note, the shares have appreciated from a 22% discount to NAV to currently trading at a 4.1% premium.
Written by
Electra Private Equity |
The realisation strategy – step by step |
Investment trusts |
16 April 2021 |
Analysts
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On 15 April, Electra Private Equity (ELTA) announced the disposal of Sentinel – one of the company’s three remaining operating businesses – for £22.2m (58.1p per share), £11.3m higher than the asset’s carrying value on the balance sheet as at 30 September 2021. ELTA has been following a realisation strategy since October 2016, when it had a market cap of c £1.7bn, and has since returned c £2bn to shareholders. Since our 16 December 2020 initiation note, the shares have appreciated from a 22% discount to NAV to currently trading at a 4.1% premium.
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ELTA’s NAV upside potential (from base case*) |
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Source: ELTA, Edison Investment Research, at 9 December 2020. Note: *Based on ELTA’s management estimates. The base case is the current NAV at 30 September 2020. Also please see our initiation note on ELTA. |
Key takeaways
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Sentinel’s proceeds of £22.2m were in line with our upside of c £20m, built on applying peer and sector multiples to management’s pro forma business scenarios (see chart above and our initiation note).
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ELTA management believes that TGI Fridays’ business with 87 sites (32 currently operating for outside dining and the rest due to open according to government guidance) is well positioned to emerge from lockdown strongly, with a strong pipeline of additional sites due to open in 2021 and beyond.
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Hotter Q121 EBITDA is up £0.9m on Q120, despite its shops being closed throughout the quarter, on track to deliver more than £6–7m EBITDA for FY21.
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With cash increased to £23.5m (17% of NAV) from £1.3m (1% of NAV) at end September 2020, ELTA is on track with its realisation programme (see Exhibit 1 on page 2).
ELTA’s NAV reconciliation at 15 April 2021
Exhibit 1: NAV reconciliation with two key investments: TGI Fridays and Hotter Shoes (post Sentinel’s disposal)
Investment |
Sector |
Projected % of UK revenue* for 2021 |
Year of investment |
Purchase price (£m) |
Unrealised value (£m) |
Value (% of NAV) |
Cum. value (% of NAV) |
TGI Fridays |
Consumer discretionary |
100 |
2015 |
99 |
106.6 |
79% |
79% |
Hotter |
Consumer discretionary |
90 |
2014 |
84 |
5.8 |
4% |
83% |
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112.4 |
83% |
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Other portfolio core assets |
3.9 |
3% |
86% |
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Other portfolio non-core assets |
1.4 |
1% |
87% |
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Total portfolio |
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183 |
117.7 |
0.9 |
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Liquid assets |
5.6 |
4% |
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Cash |
23.5 |
17% |
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Other non-core assets & liabilities |
(0.2) |
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Net asset value (NAV) |
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135.3 |
100% |
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Source: Electra Private Equity as at 30 September 2020, Edison Investment Research at 15 April 2021. Note: *Company projections.
A further update will be provided by the company on 21 May with publication of ELTA's interim results for the period to 31 March.
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Research: TMT
In Q121 Esker reported record revenue (+10% y-o-y) and 45% growth in bookings. Management has slightly increased its outlook for revenue growth in FY21 and more explicitly guided on profitability. We maintain our conservative forecasts, which are at the lower end of guidance.