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Event | Do you know the value of your business? It’s time you do!

ICGT reported another strong half-year to July 2022, with an NAV per share total return of 10.9% and sterling portfolio returns of 12.4% (local currency 7.4%). Total proceeds and new investments were strong, at £107m and £144m, respectively. At this stage of the cycle, disciplined net investment is expected, capitalising on attractive opportunities, especially in secondaries. ICGT saw a 25% uplift on exits, despite the challenging market conditions. Investment is focused on businesses with good risk-adjusted returns and defensive growth characteristics. The board is optimising shareholder returns with a progressive dividend policy and a share buyback programme.

  • Defensive growth, long-term-value: ICGT’s strategic approach has given investors market-beating returns and just two down quarters out of 26 since the manager was appointed. In both good and bad years, the model has consistently proved that it can deliver resilient returns, driven by underlying company EBITDA growth.
  • Underlying company metrics: The top 30 companies showed LTM revenue and EBITDA growth of 27.5% and 26.3%, respectively. Average EV/EBITDA was 14.5x (31 Jan’22: 14.6x), with a PEG of just 0.55x. Net debt/EBITDA was 4.3x (31 Jan’22: 4.3x). Enhanced disclosure helpfully showed dispersion around these metrics.
  • Valuation: ICGT’s NAV valuations are conservative (realisation uplifts 1H’23: 25%). The ratings are undemanding, and the ongoing carry value against cost is modest. The 42% discount to NAV is anomalous, we believe, with defensive, market-beating returns, and is above the levels seen pre-COVID-19. The 2023E yield is 2.8%.
  • 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 has consistently generated superior returns, by adding value in an attractive market, having a strategic focus on defensive growth and exploiting ICG synergies. Valuations appear conservative, and governance is strong. ICGT focuses on delivering resilient risk-adjusted returns. The risks are primarily sentiment-driven on costs and cyclicality, and on the underlying assets’ liquidity. It seems anomalous to have a consistent record of outperformance and to trade at a 42% discount to NAV.
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