Oakley Capital Investments (OCI), a top-performing listed private equity fund, will be easier for investors to buy after the company announced its imminent move to the London Stock Exchange’s official list.
The £924m company, which invests solely in the private equity funds of Oakley Capital, has been listed on the LSE’s specialist funds segment for some time, a category that restricts its availability on retail share-dealing websites.
The move to the official list on Friday should remove any obstacles on online platforms and make it eligible to join the FTSE 250 index next month. There it is likely to attract new buyers, raising hope that increased investor demand could start to narrow the 24% discount, or gap, between the share price and the value of its investments.
The investment company has previously flagged up its wish to join the LSE’s main market and today described the relisting as one of its “initiatives to enhance its marketability, increases investors’ access to its shares and continue to deliver strong shareholder returns.”
The company made a 7% underlying total return in the first half of the year from its £1.3bn of investments in the unquoted European technology, consumer, education and business services providers backed by its fund manager.
A trading update said the largest contributor to that gain was Oakley’s exit from legaltech platform vLex in a $1bn transaction priced at a “significant uplift” to its carrying value at 31 March, from which OCI made £30m.
OCI was pleased with the result which comes at a time when private equity investors are struggling to find buyers, saying it demonstrated the “quality and demand for Oakley’s portfolio companies”.
Other contributors came across the portfolio including Bright Stars, a UK early learning centre operator; TechInsights, a semi-conductor analyst; Phenna, a testing group and North Sea Sails, the sail maker and yachting fashion retailer, whose gains were all driven by profits growth.
However, a decline in the share price of Time Out (TMO), the media and entertainment business that Oakley held on to when it floated nine years ago, detracted from returns.
The overall gain lifted net asset value (NAV) per share by 49p to 742p.
The shares, up 2% to 550p today, lagged the portfolio with a 2.7% return in the first half. That reflects the wide discount which the company is tackling by diverting money from dividends to share buybacks. So far it has spent £21.4m of a £50m budget purchasing its cheap shares. Share buybacks add modestly to NAV and can narrow the discount, by removing unwanted stock from the market.
The modest first half performance still leaves OCI shares as the second-best performer behind 3i Group (III) in the Private Equity sector with a five-year 162% total shareholder return. Yesterday we highlighted it as one of several listed private equity funds looking good value following this month’s bid for Apax Global Alpha (APAX).
Laying the foundations for future growth, OCI put another £54m into Oakley funds, comprising of investments in Infravadis, a German underground infrastructure specialist; JBMC, a financial services management consultant in Italy; and Bridewell, a UK cyberservices provider merging with another OCI investment, I-TRACING. An additional investment in G3, a strategic adviser, is expected to complete in the second half of the year.
Our view
QuotedData’s head of investment company research James Carthew said: “Finally, the news from Oakley Capital Investments that we have been waiting for. The shift to a main market listing will make it much easier for retail investors to back what has been one of the best-performing listed private equity trusts over the past decade. We think it should trade on the same sort of rating as HgCapital Trust (HGT), which would imply moving from a 23.7% discount to a 3.3% discount. That may take time, but a major impediment to a re-rating has been removed.”
