March 2023 Monthly

In its FY’22 trading update, OCI reported i) net asset value (NAV) per share of 662p and NAV of £1,167m, ii) total NAV return per share of 24% (+128p), iii) investments of £269m and share of proceeds of £244m, iv) year-end cash and available debt of £210m, v) outstanding commitments of £929m (not all of which will be drawn over the next five years), and vi) the buyback and cancellation of 2.2m shares . Of the realised and unrealised portfolio value uplift in the year, 65% was driven by EBITDA growth, and 35% as a result of multiple expansion, driven primarily by exits. The largest contributions came from IU Group (strong growth in enrolments), Contabo (sale) and Primavera (strategic combination with Cegid).

• Proceeds and realisations: Realisations totalled £234m from five exits at an average 5x gross money multiple and premium to carrying value of ca.70%. Refinancings added £10m. New investments totalled £214m, with follow-on investments of £55m. 2.2m shares were bought back at an average of 407p.
• Results due 9 March: The results announcement will flesh out the details from the trading statement. In particular, we are looking for i) strong investee companies’ operating performance, in an uncertain macro environment, showing the value added by Oakley, ii) low debt gearing, and iii) well-managed liquidity.
• Valuation: Against the December NAV, OCI trades at a 31% discount, despite its strong absolute, peer and market-beating relative performance. OCI has delivered consistently, with especially robust performance through COVID-19, demonstrating its downside resilience. OCI yields 1.0%.
• 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 proved repeatedly. 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 by investing in funds managed by Oakley Capital, benefiting from 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. There is potential upside from the one-off closing of the discount, but also relatively quickly gained by ongoing NAV growth.