NB Private Equity Partners

1H’23 results summary: continued growth

03 Oct 2023 / Corporate research

We reviewed NBPE’s business model in our initiation, Co-investments generating superior performance. We noted the high-secular-growth and downside-resilient investee companies, the value added by partner GPs, the good co-investing cashflow and return profile and the value added by the manager, NB. The 26 September results confirmed all these trends. The key numbers were i) NAV p/sh $29.24 (£23.00) (Aug $27.93/ £22.04. ii) 4.8% NAV TR at 30 June 2023, iii) portfolio company weighted average LTM 14.9% revenue and 15.4% EBITDA growth, iv) EV/LTM EBITDA 15.4x, and v) debt/EBITDA 5.4x.

  • Further details: Strong operating performance: the continued strong EBITDA and revenue growth across the portfolio drove a 3.8% return from private investments, which was further underpinned by positive returns from quoted and FX. NBPE also announced the intent to repay ZDPs in Oct’24, and the draw down minimum utilisation of credit line ($90m) and invested in T-bills.
  • CMD 5 October: NBPE will provide a detailed analysis of the portfolio and its views on the private equity market (including ESG). In addition, case studies of underlying portfolio companies will be presented by two of the lead private equity firms, which NBPE has invested alongside. This will be followed by Q&A.
  • Valuation: The 27% discount is above that of direct peers (average 24%), and it (like peers) rose sharply in 2022, to well above historical levels. Adjusting for the legacy income-investments (7% of portfolio), NBPE’s discount rises to 33%. The NAV appears resilient and conservatively valued, making the discount absolutely and relatively anomalous.
  • Risks: Sentiment to costs, the cycle, residual positions in highly rated listed companies following IPOs in 2020-21, the duration of the discount and valuation are the key issues for NBPE, as they are across the whole listed sector. As we detail, below, they are sentiment issues, and do not reflect reality, as we see it. The benefits from the current strategy may not yet be fully appreciated.
  • Investment summary: With over 92% of the portfolio invested in direct equity, NBPE is the most focused listed vehicle in the low-cost, attractive co-investment subsector of the market-beating PE sector. The company and GP selection have proved resilient in downturns, and consistent, large premiums on exit should give investors comfort in the NAV. Its portfolio is diversified by name, sector, GP and geographically, but it has enough concentration for individual investments to add value. The discount is anomalous with long-term, market-beating returns.
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