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A quick smorgasbord of comments on funds and businesses on my watchlist.
First up we have Syncona which seems passed a crucial milestone with one of its biggest investments being taken over. It’s been reported that Nightstar Therapeutics has reached an agreement to be acquired by Biogen at a price of $25.50 per share. Nightstar is a retinal gene therapy company, developing one-time treatments for rare inherited retinal diseases and was the third largest investment in Syncona’s portfolio at 31 December 2018, representing 9.2% of NAV. The offer values Nightstar at $877m. Fund analysts at Liberum report that the transaction will generate £255m of proceeds for Syncona and is expected to complete in Q2 2019. This is 114% above the December carrying value. The sale will add 20.2p per share to NAV (10.4% increase to NAV). Syncona founded Nightstar six years ago and the sale price represents a 4.5x multiple on the original £56m investment (72% IRR). Not unsurprisingly Syncona’s shares have started ticking up again but I find this a useful validation of the implied premium to NAV.
Ticking with funds I like to keep a watchful eye on Artemis Alpha, which has traded at fairly chronic discounts recently – investors have been singularly unimpressed by the fund managers foray into private businesses. I can’t say I blame them and warned about public market investors dallying in private investments many moons ago in an Investment Week column. But Artemis has now refocused and we shouldn’t forget that its managers are some of the best in the business – a few smart investments could easily reverse the nasty 15% discount.
A useful marker on this comes from the portfolio which is now much cleaned up and looks more than half decent. I’ve pasted in the core sector holdings graphic below from a recent brokers report.
Not too sure about Rocket and Fitbit (though I love their tech) but I do think UK asset managers represent great value, as does Tesco and Sports Direct. In fact, I’ve noticed lots of cross over in this portfolio with the Aurora fund which trades at a premium – Dignity, Tesco, Sports Direct, EasyJet, GsK. One to watch, especially if UK stocks get a boost post Brexit (!?).
One stock in the Artemis portfolio that clearly won’t have done well in the last few weeks is Plus500. I’ve mused before on this international spreadbetter – my hunch is that it is now dirt cheap but of course there’s no way of knowing if the torrent of bad news is finished, or whether there are more gremlins in the system. But for now, all I’d observe is that the shares seem to have found a support level around 800p.
Lastly, on the retail bonds front, I’ve picked up on the comments below from Mark Glowrey who is now at City and Continental. He’s been watching the retail bonds from Lendinvest, which I also think are cheap – both the bonds continue to trade at subpar.
According to Glowrey “the newsflow from the secured property lender remains upbeat, with the company growing its BTL offering and bringing in new funding lines last year from Nomura and Magnetar (to join Citigroup, Macquarie and others). Quarterly portfolio updates on the two secured bonds show steady progress. But trading is subdued in the securities, notably the shorter-dated LENDIN 5.25% 2022, offered on a 97 handle to give a YTM of over 6%.”
My sense is that the loans in the Lendinvest portfolios are shorter term (Under 1-year duration) with deep LTVs and low central London exposure. So, although I am far from bullish about real estate as a sector, my sense is that the downside exposure is fairly controlled