A quick update today on two of my favorite funds plus a new stock worth watching.
First off comes news today that Digital 9 Infrastructure has raised another £175m, taking it to I think around £500m or so in market value. The placing price was 105p with Net proceeds from the raise “used to fund the company’s pipeline, which includes a number of US, UK and northern European data centres, UK terrestrial fibre platforms, and a UK wireless infrastructure business, alongside further opportunities within the expansion of subsea fibre systems” according to a research note this morning from Liberum’s alternatives team. “The manager has identified £600m of opportunities that could be completed on in the next 12 months, comprising:
- £200m that are capable of completion within the next three months
- £400m which have a completion timeframe of 3-12 months
“Since acquisition, Aqua Comms has performed well, resulting in DGI9’s 6p per share annual dividend being fully cash covered.”
My take is that we could see the premium move out to 15% ( or a share price of 115p) as this extra cash is invested – and assuming no further fundraising. Note – I have shares in D9.
Also we have Oakley Capital Investments which announced yesterday I think a big investment in a business called ICP Education. This is an “independent group of UK children’s nurseries. Fund IV will invest alongside the management team of ICP Education. Oakley Capital Investments’ indirect contribution via Fund IV will be c.£27m. Following the transaction, OCI will have liquid resources of £180m” according to Liberum fund analysts again. “ICP Education is one of the largest nursery operators in the UK. It serves 6,000 children at 44 nurseries across England, predominantly in London and the South East. A third of its nurseries are rated Ofsted Outstanding and 98% rated Outstanding or Good. Enrolments were negatively impacted due to lockdowns, but the business has recovered to pre-Covid levels in recent months. According to Companies House, revenue grew by 67% to £28.4m in the year to March 2020.”
Oakley has been making some big bets on education and I think this deal makes sense. According to Liberum “The UK nursery market is estimated at £6.7bn and the sector is highly fragmented, offering the potential to scale the business, which should enable ICP Education to build on its strong market position. The business has many of the traits Oakley looks for when acquiring a business, with its industry-leading operational capabilities and attractive growth profile.” The same pattern seems to be playing – very profitably – in fragmented veterinary practise space here in the UK.
Just to remind readers, this fund is still trading at very toppy 19% discount. My view is that this discount should be materially lower at say around 10 to 12% – if that were to happen we’d see a useful uptick in the share price.
Lastly, I think it’s worth readers having a good look at eToro. This is now quoted on the US market via a SPAC vehicle called Fintech Acquisition Corporation V, ticker FTCV. If I’m reading the feeds correctly this raised $250m back in December last year and is now worth around $400m on a share price bobbing above $12.50.
There’s a whole new generation of younger investors warming up to the new Robin Hood world, many of them outside the US. eToro has an excellent brand in this space – along with Trading 212 – and is steadily expanding both product categories (stock dealing plus a debit card) and geographies (growing in the US and Asia, where around 17% of its funded customers are based).
The online broker started in the spread betting space but moved first into copy trades (a smart idea), then into crypto and finally into mainstream broking and financial services. Its Israeli team is well regarded in the business, especially by marketing pointy heads.
Usefully eToro have also released some Q1 2021 numbers which point to solid growth.
– Funded accounts 1.5m Q1 2021 up from 1 million end 2020
214% increase in the number of new registrations on the platform compared to the same period in 2020
– 20.6m users in Q1 up from 17.6m in 2020
– 3.1 million new registered users in the first quarter of 2021. This compares to 5.2 million new registered users for the full year of 2020.
– number of trades on the platform topped 210 million in Q1, with growth driven predominantly by retail demand for stocks.
– eToro plans to launch the eToro Money app and debit card in the U.K. and E.U. in 2021. The app will connect directly to users’ eToro investment accounts and enable instant deposits and withdrawals, as well as additional money services.
If you go online you can see some recent financial numbers; The presentation is here : https://marketing.etorostatic.com/cache1/pdf/eToro_Investor_Update_-_June_2021.pdf
I would highlight some of the following:
- 2020 total commissions $602m
- 2020 net loss $82m with net trading income of $550m
- Net income $82m and adjusted EBITDA $99m
Assuming a market cap of just under £$400m, eToro doesn’t seem massively overpriced for a business generating these numbers, especially one that is so successful at both building new fintech products as well as direct to consumer marketing. If eToro can really make the US and Asia work, then I think the shares are seriously undervalued. And I say that as someone who has made decent returns on investing in the likes of Plus500 (another Israeli broker) and CMC.
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