August 2021 Monthly

PIP’s results to end-May are due on 5 August. The NAV was disclosed in the May factsheet (one-year NAV performance of 19.6%, share price +31.7%). The results will tell us more about the way in which the business is run. We highlight its conservative balance sheet, with commitments nearly covered by cash and existing credit lines (unlike many peers, who are more reliant on realisations). Additionally, we will get some details on calls and distributions, and on the positive portfolio cashflow in every month except one (again, unlike many peers). We will also get an update on portfolio mix statistics. The 25% discount to NAV is above pre-pandemic levels, despite a strong performance.

• June report: The End-Jun’21 report noted a 2.1% NAV appreciation, driven primarily by Forex gains. 94% of valuations were still as at March. PE assets were £1,752m, available resources were cash (£200m) and facilities ($270m, €102m), with a total of £482m, against undrawn commitments of £526m. The five-year TSR is 110%.
• Recent peer news: PIN’s results may be expected to have a positive tone, given the market backdrop. Recent news flow remains strong: i) 3i’s 1QFY’22 NAV total return was 12.2%; ii) ICGT saw a 1.4% uplift to NAV on disposal in July; iii) NBPE reported 32% growth in its dividend; and iv) OCI sold ACE Education (ca.27% IRR).
• Valuation: PIP’s shares trade at a 25% discount to NAV, despite their long-term outperformance. We believe the “real” NAV is likely to be above the book value on the accounting date, as the company consistently reports uplifts on realisation. PIP re-invests returns for superior capital growth and pays no dividend.
• Risks: We note i) sentiment to the economic cycle (NAV rose every year in the 1990s’ recession and in FY’20), ii) adverse sentiment to illiquid and unquoted investments (PIP has permanent capital and proven exit uplifts), and iii) sentiment to the sustained discount could be an issue. Short term, there can be FX volatility.
• Investment summary: PIP is in an attractive market, can pick the best part of that market, and has competitive operational advantages. Its manager selection and portfolio structuring have added value. This has delivered a 13.5% p.a. NAV total return over the past five years. Corporate governance is strong, and the NAV is conservatively valued. Investors get liquid access to the whole PE market. There are risks around the cycle, and illiquid and unquoted underlying assets, but these, against the historical returns, make the current discount to NAV an anomaly.