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ICGT’s latest results showed an annual NAV per share total return of 27.9%. In the latest quarter, its 17 full exits were executed at an average of 23% uplift to carrying value (and at a 2.7x multiple to cost), which, in our view, proves a conservative approach to valuation. Looking forward, ICGT’s business, with a proven track record of sustained returns across cycles, through its “defensive growth” thesis, and which has delivered just two, very modest, down quarters in over five years, appears likely to be especially appealing to investors. Re-investment in downturns has historically provided some of the best returns, and the current macro environment has seen announcements on new co-investment and commitment deals.

  • Market news flow: Inter alia, results from HGT (share price +8% on day) and OCI gave confidence in current NAVs and a resilient outlook. We note uplifts on exits, strong revenue/EBITDA beats against listed companies, low PEG ratios and robust valuation verifications, all of which are also relevant to ICGT.
  • Share buying: In late August/early September, there were three notifications of key personnel buying shares, of 2,277, 2,382 and 2,803 shares, respectively. Although these purchases are not huge, they are indicative of the confidence that the staff has in the future of the company and its share price.
  • Valuation: NAV valuations are conservative (uplifts on realisations averaging 35% long term), the ratings are undemanding and the carry value against cost is modest. The 44% discount to NAV is anomalous, we believe, with defensive market-beating returns, and is greater than the pre-COVID-19 levels. The 2022 yield is now 2.3%.
  • Risks: PE’s post-expense returns are consistently market-beating, but this is an above-average cost model. Even though actual experience has been of continued NAV outperformance in economic downturns, sentiment is likely to be adverse. We believe ICGT’s permanent capital structure is right for unquoted and illiquid assets.
  • Investment summary: ICGT consistently generates superior returns, by adding value in an attractive market. ICGT’s focus on identifying companies with defensive characteristics means it is well-positioned to deliver resilient growth. It leverages ICG family synergies. Valuations/governance appear conservative. Risks are primarily sentiment-driven on costs and cyclicality, as well as the underlying assets’ liquidity. It seems anomalous that a business with a consistent record of outperformance is trading at a 44% discount to (April 2022) NAV.
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