3i shares hit four-year high
3i Group’s shares closed at a four-year high on Wednesday as investors continue to buy into the company’s turnaround plan. The rise came on the same day that Europe's main listed private equity index reached to its highest level since 2007.
Shares in 3i closed the day at 370.9p, their highest level since 2009 at the peak of the credit crisis.
Some analysts pinned the recent
gains in 3i’s share price on hopes next week’s first-quarter results
will be better than the market expects. The company is also holding its
Annual General Meeting on July 18.
The strong performance of 3i’s share has buoyed the listed private sector to a near six-year high.
The LPX Europe index, which tracks
European listed private equity firms, rose to 473 on Wednesday, its
highest level since December 2007. This marked a rise of 246% rise since
March 2009, double the rise seen in the MSCI Europe over the same
period.
3i’s strong share price performance
follows a turbulent period for the group. Last year the company
appointed a new chief executive, Simon Borrows, but also saw activist investors build up shareholdings.
Laxey Partners, for example, bought 3i shares in 2012 and requested 3i sell off companies, make no new investments until the discount to net asset value was eliminated and return cash to shareholders. And this year Sherborne Partners built up a sizable position in 3i, although it is still unclear as to what its intentions are.
Laxey Partners, for example, bought 3i shares in 2012 and requested 3i sell off companies, make no new investments until the discount to net asset value was eliminated and return cash to shareholders. And this year Sherborne Partners built up a sizable position in 3i, although it is still unclear as to what its intentions are.
3i’s strong share price performance
comes as the listed private equity sector shows signs of shaking off its
post credit crisis woes.
According to the Association of
Investment Companies, the average discount of shares to net asset value
among listed private equity firms reached 13.8% at the end of February
2013 – the narrowest level since the credit crisis. The average listed
fund’s share price has jumped 25% over one year and 72% over three
years, the AIC said.
The share price discount to NAV
level is important as it demonstrates the market’s confidence in the
sector’s own portfolio valuations.
Alex Barr, manager at Aberdeen
Private Equity, said: “It’s a good time to invest in private equity.
With plentiful availability of debt from many sources, and statistics
suggesting that the worst of the macro environment may be behind us,
particularly in North America, it’s a good opportunity to buy well run
quality companies.”
He added: “The key for private
equity investment managers will be avoiding the pitfalls and making sure
that they do not over pay for, and importantly over leverage, assets.”
Yesterday, feeder fund Oakley
Capital Investments reported an 11% increase in net asset value, which
has helped it reduce its discount to NAV by 1.5%.
In a pre-close trading update for
the six months to June 2013, Aim-listed Oakley Capital Investments said
its unaudited net asset value stood at between £1.93 and £1.95, an 11%
increase over the last 12 months.
However, that means shares in Oakley
Capital Investments – which invests in Oakley Capital Private Equity,
the private equity fund backed by Peter Dubens – are still trading at a
discount of almost 23% to net asset value.
The narrowing of discount to net
asset value comes as Oakley Capital Private Equity said it exited four
of its portfolio investments – Emesa, Daisy Data Solutions, Headland
Media and Host Europe – achieving a gross money multiple on its cost of
investment of 2.6 times and an internal rate of return of 43 percent,
and returned £109m to the company.
Oakley Capital Private Equity’s current investments include the Time Out Group, Intergenia and Monument Securities Limited.
