October 2023 Monthly

PIN held a Capital Markets afternoon on 13 September with the embedded theme throughout the session of “focus on adding value”. The presentations included i) “creating value in mid-market buyouts”, ii) manager-led secondaries, iii) value add through a co-investment lens, iv) ESG: Investing responsibly for the long term, and v) reviews of the global PE environment and PIN’s results. Additionally, there was a fireside chat entitled “Let’s talk about financing”. The review of value added thus comprehensively covered that by investee companies, PE managers, Pantheon and  PIN itself. The up to £200m buyback programme has commenced, adding 0.7% to NAV FY to end-August and a new £150m tender offer.

• Tender offer: As part of the £200m programme on 25 September, PIN announced a tender offer, by way of reverse auction, for up to £150m. Price levels for the tender offer will range from 280p to 315p, in 2.5p increments. The tender closes on 17 October 2023. The announcement re-confirms PIN’s statement that this was an investment decision, taking the opportunity the current discount offers.
• August factsheet: August saw a 1.4% NAV per share rise (mainly forex 1.2%), a large net cash inflow (£31.6m), £546m of available finance and 3.9x financing cover. Outstanding commitments fell to £803m (from £806m). The five-year NAV return is 12.3% annualised (MSCI World benchmark 9.4%).
• Valuation: PIN shares trade at a 35% discount to NAV, despite their long-term outperformance. We believe the “real” NAV is likely to be above the book value, given the consistent and material uplifts to carrying value achieved on exits. Steady buybacks have been made. PIN is run for capital growth.
• 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 (PIN has permanent capital and proven exit uplifts), and iii) that sentiment to the sustained discount could be an issue. Short term, there can be FX volatility.
• Investment summary: PIN is in an attractive market, and can pick the best part of that market. Its manager and deal selection, and portfolio structuring, add value. The latest factsheet reports 11.9% annualised NAV growth since inception in 1987. Corporate governance is strong, and the NAV is conservatively valued. There are risks around the cycle, and illiquid and unquoted underlying assets. The results, the buyback programme and multiple and large-scale director buying, have seen the shares outperform peers since the results, but the discount to NAV appears anomalous with risk-adjusted returns, including global diversity.