January 2022 Monthly

OCI begins 2022 with strong momentum. Its interim results were strong, with i) a total NAV return of 26% for the 12 months ended 30 June 2021 (11% for the six months), ii) average annual portfolio company EBITDA growth of 35% (20% FY20), 12.3x EV/EBITDA (11.8x FY20) and 3.5x net debt/EBITDA (3.9x FY20), iii) £95m investment and £51m realisations in six months, and iv) cash of £172m. Performance since then will reflect the 19p uplift to NAV from the sale of TechInsights, announced on 15 December, as well as the follow-on investment in that company and a new investment in Seedtag. OCI’s next NAV update is due at the end of January.

• Entrepreneurial network: Embedded in Oakley’s DNA are the sustainable competitive advantages from its expanding, entrepreneur network. These partners have invested c.€200m in Oakley Funds, and they help source acquisitions and then help grow the businesses.
• Outlook: Most of Oakley’s value creation is driven by investee company EBITDA growth. We expect further ongoing growth from this source in 2022. OCI exits are continuing at above book values (TechInsights was at a 134% premium to carrying value), supporting further OCI NAV growth.
• Valuation: Against the end-June NAV, OCI trades at a 9% discount, despite its absolute (five-year CAGR 17% total NAV return to June 2021) and relative performance. Its above-peer discount is based off the June NAV, while peers are based off more recent (higher) valuations. OCI yields 1.1%.
• Risks: While OCI’s costs are slightly above-average, post-expense returns are still market-beating. Sentiment towards economic cycles may be adverse, even though downside protection has been repeatedly proved. OCI’s portfolio is concentrated, and we believe its permanent capital is right for private assets.
• Investment summary: OCI provides investors with liquid access to the attractive PE market, enhanced by Oakley’s incremental origination and active management skills. Oakley Funds focus on mid-market, tech-enabled European companies that operate in the technology, consumer and education sectors. Accounting and governance appear conservative. There are risks – primarily sentiment-driven – around costs and cyclicality, as well as the liquidity and valuation of the underlying private assets. We believe buying long-term, compounding growth is the key attraction, with any further closing of the discount to NAV an added bonus. The current 9% discount is less than one-year’s average recent NAV total return.