HydrogenOne (HGEN) announced results for the year ended December 31 2022. NAV growth was strong, up 21.9% year on year, however, this was offset by a 33.6% drop in the share price. While the underlying health of the company has remained solid, the discount has continued to widen, falling to around 50% at the last close.
The widening of the company’s discount is a relatively recent phenomenon with shares trading as tight as 10% just prior to the end of last year. The board is not aware of company-specific factors that have led to the recent decline in the share price, while the portfolio continues to perform in line with expectations.
Discount aside, there have been plenty of positive developments throughout the year with investments in six private hydrogen assets the highlight. Seven of the company’s private investments, representing 89% of its invested portfolio by value, are also revenue-generating and valuations continue to seem very conservative with management referencing a forward revenue multiple of 6 times 2024 expected revenues, which is some 40% lower than listed hydrogen sector multiples.
Commenting on the results, chairman Simon Hogan noted;
“Our diversified portfolio approach has provided resilience and our investment case has been reinforced further by macro tailwinds and supportive regulatory regimes in the clean hydrogen sector, particularly in the EU and the USA. More than ever before, we remain confident that the Company is investing in a sector with a favourable outlook and a substantial growth potential. Macro events have refocused efforts on the need to reduce global reliance on fossil fuels, with the Company well positioned to continue investing in low-carbon growth, aimed at reducing harmful emissions, improving energy security and driving the energy transition.”
Regarding the outlook, he continued;
“Despite uncertainty caused by war in Ukraine and the energy crisis, our investment case has become more attractive as governments around the world advanced efforts to achieve energy security and reach net-zero commitments. Strong macro tailwinds continue to drive the hydrogen sector, with 6GW of green hydrogen under development globally, a four times increase in 2030 hydrogen targets in the EU and ground-breaking funding and tax credits in the United States. Our investment strategy is fully aligned with these goals.
“We have assembled a differentiated portfolio of the world’s leading clean hydrogen companies, spanning project developers, electrolyser, fuel cell, transport and distribution, and applications such as clean flight. Climate change mitigation remains at the core of our sustainability objective and we hope to continue to grow our impact as we drive investment in low carbon growth and reducing harmful emissions.
“Whilst market sentiment towards growth companies is outside of our control, we anticipate the continued solid performance of our portfolio, revenue growth and delivery of key milestones will be catalysts for appreciation in our share price.
“All of this underpins our targets to deliver 10-15% annual NAV growth over time, and I believe that our Investment Adviser, whose principals have over 60 years of combined specialist experience and track record, is well placed to deliver on these projected targets.
“On behalf of the Board, I would like to thank all of our shareholders for their support, as we continue to grow our unique portfolio of the world’s leading clean hydrogen investments, not available for equity investors elsewhere.”
HGEN : Plenty of upside for HydrogenOne