Three investment vehicles in the private equity sector offering reduced prices
Hitting Rock Bottom, Or Hidden Gems?
Investment trusts trading at a sizable discount to net asset value (NAV) can be a treasure trove or a red flag. After years of consistent discounts, it becomes clear who's who. Among the casualties was Home REIT, Digital 9 Infrastructure, and ThomasLloyd Energy, now virtually worthless. On the contrary, Hipgnosis' shares halved in price before Blackstone swooped in to buy them out at a premium.
Chrysalis' share price has nearly doubled in the last two years, but at 98p it still trades at a 33% discount to NAV and 63% below its 2021 peak. One might think Schroders Global Innovation Trust, with a 45% discount, has more upside, but it continues to plummet while Chrysalis reports positive developments in two of its largest holdings, Klarna and Starling Bank.
Cordiant Digital Infrastructure, floated in early 2021, fell to a low of 61p in 2023. Despite a bounce to 92p, it's trading on a 26% discount. Cordiant was slow to invest the £760 million raised at flotation. They describe digital infrastructure as the "plumbing of the internet," an essential third-largest infrastructure asset class following energy and roads. Their strategy involves buying, building, and growing mid-sized, cash-flowing platforms in the UK, EEA, and North America, with a focus on net returns over 9%.
Interim results revealed a 5.2% rise in NAV, driven by a 9.3% increase in portfolio-company sales and 15.2% in cash flow. Debt is worth 4.2 times cash flow, but most of it is fixed, and Cordiant boasts plenty of spare borrowing facilities. The chairman, Stephen Marshall, recently acquired more shares.
Augmentum Fintech, with a 40% discount despite an annual return of 16%, has invested in transformative private fintech businesses. Their portfolio is well diversified, but the key five account for over half the net assets. Despite challenging market conditions, they've realized a total of £93 million from five exits, with an average uplift of 30%.
Seraphim Space Investment Trust, with a 40% discount to NAV, has raised £240 million in equity. Although the NAV has fallen 6% since flotation, most of it is due to currency movements that have since been reversed. The portfolio's fair value is now 103% of the cost, meaning investors haven't suffered any write-offs yet. Seraphim is reporting positive progress in the underlying firms, with five of the top ten investments making headlines.
These three trusts show promise, with the potential for share-price appreciation as the discount to NAV narrows while they may grow substantially in the long term. They may bear comparison with HgCapital Trust, which trades at a small premium to NAV and has returned 130% in five years, without any discount narrowing.
BackgroundCordiant Digital Infrastructure Limited is a specialized digital infrastructure owner and operator, focusing on data centres, fibre-optic networks, telecommunication towers, and broadcast towers across Europe and North America. They follow a "Buy, Build & Grow" model to acquire and develop strategic assets, providing stable, often index-linked income, alongside growth opportunities. Cordiant's portfolio is diversified and generates stable income streams.
Sources:1. https://www.cordiantinfrastructure.com/2. Cordiant Digital Infrastructure (LSE: CORD) Investor Presentation, March 20233. Cordiant Capital Inc. Press Release, "Cordiant Capital's European digital infrastructure company, CRA, expands DAB+ network," March 15, 20234. Cordiant Capital Inc. Press Release, "CRΛ Announces Boosteroid Partnership and Expansion of Data Centre Projects," March 15, 20235. FactSet, as of March 20, 2023.
- In the realm of personal finance, investing in Cordiant Digital Infrastructure could be a promising move, considering its focus on digital infrastructure, a rapidly growing sector.
- The science and technology sector intersect with Cordiant Digital Infrastructure's business model, as they invest in essential digital infrastructure, akin to the 'plumbing of the internet'.
- Space-and-astronomy enthusiasts might find an intriguing opportunity in Seraphim Space Investment Trust, given its focus on space investment companies, demonstrating a blend of finance and technology in a unique and growing market.
