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Large portion of IP Group PLC portfolio 'essentially trading at zero', says broker

Published: 09:39 03 Aug 2022 EDT

IP Group PLC -

The value of the entire IP Group PLC (LSE:IPO) that has not been revalued in the last six months is essentially being valued "at zero" by the market, according to Berneberg.

Half-year results from the FTSE 250 tech investment group showed a swing to a loss and that, as of 30 June, its net asset value (NAV) was £1,414mln or 136.7p per share.

Of this, net cash was £192mln, its quoted holdings at £269mln and private holdings revalued in the last six months were £380mln, which added up to roughly £840mln, 84p per share or around 60% of NAV.

Add to this a circa £30mln fair value gain or 3p per share since June on the group’s listed holdings, and that makes 87p, compared to the share price that last closed at 86.35p. 

Berenberg noted that the remaining portfolio that has not been revalued in the last six months is calculated at circa £570mln on IP Group’s books.

"With the group’s own valuation approaches commonly being conservative compared to the funding rounds that follow and a variety of key catalysts coming for key holdings, we think the shares offer significant value at a c40% discount to NAV," said Berenberg analyst Odysseas Manesioti in a note.  

While the public portfolio is "weak, as expected", driven by an investor rotation from growth to value as well as a broader biotech/life sciences sell-off, the analyst said the private portfolio is "performing exceptionally".

Valuations in the private portfolio have remained resilient, with only one of 12 funding rounds so far this year at a lower valuation, with key holdings First Light Fusion up £57mln and Featurespace up £13mln, partly offsetting adverse performance in the public portfolio.

The analyst also noted that cleantech is "taking over".

IP Group’s plan to increase its portfolio exposure in cleantech companies "seems to be progressing well", Manesioti said, highlighted by its progress and investments in its sector portfolio so far this year, with around £20mln invested and a £69mln fair value gain in the period.

"With First Light Fusion’s funding round approaching in H2 2022/H1 2023, and with ESG-related investment terms on IP Group’s recent loan issue, the group is well positioned to continue investing in this attractive space, making good use of its significant in-house expertise."

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