Oakley Capital Investments

OCI, trading on a historically wide discount, is approaching an important NAV update/capital markets event...

Add to watchlist Request a meeting Download View key data

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Oakley Capital Investments. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Oakley Capital Investments

Oakley Capital Investments (OCI) differs from other trusts in the AIC’s listed private-equity sector, as its investment adviser Oakley Capital typically aims to be the first institutional investor in the entrepreneurial businesses it backs, giving OCI’s portfolio a very different feel.

OCI has historically seen strong performance delivered from a portfolio focussed on the technology, education and consumer sectors. A number of profitable realisations made recently meant that OCI went into the market sell-off with net cash on the balance sheet of c. £250m, or 36% of estimated net assets. This fortunate position leaves OCI with a lot of liquidity as Oakley looks to invest funds during a period of significant opportunity.

Notwithstanding OCI’s strong cash position, the COVID-19 crisis left the shares trading on a very wide discount to NAV. Based on Numis’s adjusted 31 December NAV, the current discount is 37%. As an expression of how wide the discount is, balance-sheet cash equates to 58% of the current share price.

Within the portfolio there will be winners, and likely also losers, from the economic slowdown. We expect more colour at the upcoming virtual capital markets event (30 July – click here to register). At the end of March, Oakley Capital noted that 70% of portfolio companies operate a subscription-based or recurring-revenue business model, and 65% of portfolio companies either deliver products or services digitally, or have the ability to shift to digital delivery in a short time frame. As such, despite the uncertainty, many of the companies within the OCI portfolio may have benefitted from recent events, or are set to be in a position to bounce back strongly.

Kepler View

OCI has suffered a significant de-rating. The next potential catalyst for a reversal will come with the half-year NAV to June, due to be announced at the end of July. Adjusting for cash on the balance sheet, investors today are buying OCI’s investment portfolio on a discount of 57% to the 31 December 2019 valuation. We believe this represents a value opportunity – even if one takes a relatively pessimistic view on valuations post-COVID.

Longer term, Oakley’s track record is strong. For investors who want a focussed private-equity portfolio, OCI has delivered excellent returns – especially over the last three years, which we illustrate in Performance. At the same time, the shares trade on a significantly wider discount than those of peers. Should the strong relative performance continue, one might imagine that it will only be a matter of time before the discount differential is meaningfully reduced.

As we discuss in the Portfolio section, several of OCI’s companies are likely to have benefitted from the lockdown, although some were undoubtedly negatively affected. OCI’s virtual capital markets day (30 July – click here to register) should give more colour. We note that the OCI portfolio has the potential to provide resilience during the disruption.

In summary, OCI has the best liquidity position of the entire sector, yet trades on one of the widest discounts. We view this as an interesting value opportunity.

bull bear
Strong long-term NAV growth, driven by portfolio-company performance Concentrated portfolio returns can be materially impacted by
Cash representing 58% of current share price (and 36% of estimated NAV) means manager has a lot of flexibility Private companies offer limited liquidity, and returns can be lumpy
Shares trade on a 37% discount to NAV, with several potential catalysts on the horizon Private-equity funds charge relatively high fees
William Heathcoat Amory
William Heathcoat Amory is a co-founding partner of Kepler Partners LLP and leads the Kepler investment trust research team. William has 18 years of experience as an investment company analyst. Prior to co-founding Kepler Partners in 2008, he was part of the Extel number 1 rated research team at JPMorgan Cazenove.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.



Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase. We do not share your personal information and your answers are not linked to your identity for marketing purposes.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.