Newsletters - Asset Value Investors

AGT

JPEL Private Equity • Newsletter July 2021

JPEL Private Equity (JPEL) announced the sale of its single-largest holding, Swania, to Henkel for $78 million, representing 70% of JPEL’s market cap. The sale came at a +19% uplift to carrying value. Following the sale of Swania, JPEL announced that it would return $85 million to shareholders via a mandatory redemption, equivalent to 52% of NAV.

AGT first invested in JPEL in September 2014, engaging with the Board and Manager to implement the optimal structure for the company’s planned realisation opportunity. In late 2016, the company announced that it would begin the process of winding down its portfolio and returning capital to shareholders. Since then, JPEL has returned almost $500 million to shareholders (including Swania), equating to 104% and 131% of the NAV and market price prevailing at the time. Over the seven-year lifetime of the investment, AGT has earned a 1.79x multiple on investment cost and a 16% IRR in USD terms (1.98x and 20% in GBP).

AGT

JPEL Private Equity • Newsletter September 2018

JPEL Private Equity announced a significant write-up (+59%) in
its largest position, US municipal waste business Mr. Bults Inc
(MBI), for its end-June NAV. It is unusual to see write-ups of
this magnitude unaccompanied by a sales process, and further
news in this regard could unlock a considerable amount of value
given (i) MBI accounts for 19% of NAV (ii) the proceeds would
be returned to shareholders under JPEL’s realisation policy, and
(iii) that JPEL trades on a 16% discount to our estimated NAV.
The net impact of revaluations across JPEL’s portfolio was a
+7% increase in NAV over the month.

AGT

JPEL Private Equity • Newsletter November 2017

Elsewhere in the portfolio, JPEL announced the sale of its 2nd largest
investment, outsourced clinical research provider Celerion. The sale came
at a +25% uplift to carrying value and converted 10% of NAV into cash; we
were unsurprised to see JPEL subsequently announce its third distribution
to shareholders amounting to 17% of NAV. We estimate the investment in
Celerion generated a 3.3x multiple on cost and an IRR of 49%. This follows
previous exits from the secondary direct portfolio (Accela, Datamars, and
Innovia) that have achieved IRRs of 35%, 51%, and 50% respectively.

AGT

JPEL Private Equity • Newsletter April 2017

A larger than expected redemption by JPEL Private Equity was announced in April. Following the sales of Innovia and Datamars, a dividend recapitalisation at Celerion, and distributions from one of its Australian fund holdings, JPEL Private Equity was able to pay out almost 19% of NAV to shareholders via a mandatory redemption at NAV. Trading activity for BTEM was limited in April. We continued to build a new position in a deeply discounted Japanese company, and funded this and other purchases by reducing our holdings in Jardine Strategic and Aker which have seen marked discount contraction.

AGT

JPEL Private Equity • Newsletter December 2016

December also saw JPEL Private Equity announce the sale of Innovia, the
company responsible for the new UK plastic five pound notes, to Canadian
firm CCL Industries. Innovia was a co-investment made in 2014 by JPEL
alongside lead sponsor Arle, and the impressive returns (3.2x MOIC/IRR of
50%) help validate the renewed investment programme begun by JPEL at
the beginning of 2014. The sale of Innovia came at a 100% uplift to carrying
value, boosting JPEL’s NAV by 3.6% and providing further cash that will
ultimately be returned to shareholders under the company’s run-off strategy.

AGT

JPEL Private Equity • Newsletter December 2016

JPEL Private Equity had a good 2016. Investments made in the last two
years are translating into impressive NAV growth, up 15% over 2016 in local
currency (USD). The combination of the improved performance and the
move into run-off led to the discount narrowing over the year from 25% to
17%. Further write-ups since year-end have seen an additional 7% increase
in share price at the time of writing. Riverstone Energy had a great year due
to both NAV growth and discount contraction (in from 28% to 15%), with the
first sale (Rock Oil) from its portfolio helping validate both carrying values
and the strategy.

AGT

JPEL Private Equity • Newsletter October 2016

JPEL Private Equity continued its march higher on the back of a narrowing
discount, which now sits at 21% having been as wide as almost 30% just a
couple of months ago. We view JPEL’s portfolio as being well-balanced
between mature legacy funds and more recent secondary direct
investments. The former generate prodigious cash-flows flows (34% of
opening value for the 2016 financial year) that will now be distributed to
shareholders under the new realisation policy. The latter are largely high
growth companies bought (and still carried) inexpensively – weighted
average YoY EBITDA growth for the six months to 30-Jun-16 for the eight
buyout investments in JPEL’s top ten holdings was recorded at 38%, yet
these same investments are carried at just 7.5x EV/EBITDA. These metrics
help explain JPEL’s 15% NAV growth over the last six months. JPEL’s AGM
in October saw the passing of a resolution permitting mandatory
redemptions at NAV – this will ensure the efficient return of capital to
shareholders under JPEL’s realisation policy. Having recommended the
appointment of Sean Hurst, an experienced closed-end fund investor, to the
Board of JPEL, we were pleased to see Sean elected to the board at the
AGM.

AGT

JPEL Private Equity • Newsletter April 2016

JPMorgan Private Equity announced the abandonment of its
proposed dual share class structure, instead putting forward
proposals that will see the whole portfolio move into realisation.
This follows discussions between the Board and large shareholders
including ourselves. We were pleased with the outcome,
considering the previous proposals to be sub-optimal given the
potential conflicts of interest inherent in the planned structure.

AGT

JPEL Private Equity • Newsletter December 2015

We added further to JP Morgan Private Equity on the basis that the
c. 25% discount fails to reflect the opportunity to switch into a
Redemption Share Class in Q1-16. The positions in Swire Pacific and
Symphony International were also topped up. We also reinitiated a
position in Hudson’s Bay, the Canadian listed retail owner with assets in
North America and Europe. We exited our position in May 2015 with
an IRR of 34% just before the acquisition of German retailer, Galeria
Kaufhof. Since then the share price has fallen by 36% as the retail
environment in the US turned sour. However, we still believe the
majority of the value is in the real estate assets and noise surrounding
short term retail numbers has given us an opportunity to buy very good
real estate assets at a 50% discount to our NAV valuation.

AGT

JPEL Private Equity • Newsletter October 2015

JPMorgan Private Equity’s discount had widened out in September along with
other Listed Private Equity vehicles, and reached as wide as 28% by the start of
October. We deemed this far too wide given the opportunity to switch into a
Redemption Share Class in early-16, and the strong growth of many of their new
direct co-investments. We added to our holding at the lows and were rewarded
as the share price climbed 11% on discount narrowing.

AGT

JPEL Private Equity • Newsletter Sep 2014

JP Morgan Private Equity is a London-listed private equity fund we have
held in the relatively recent past. We first bought into the company in
late-2013 and sold less than three months later for a +14% return upon
the announcement that the company would cease capital returns and
begin a programme of new investments. The company also announced
that a redemption share class would be offered to shareholders upon
the maturity of the Nov-2015 ZDPs. Eight months later, we have
bought back in at a price below that at which we sold. A third of the
max imum amount to be deployed has been invested in what are
effectively direct co-investments on attractive purchase multiples and
with a high degree of visibility. Strong cash flows from the mature
portfolio have allowed buybacks to resume, which mitigate the impact
on NAV of the high financing costs of the ZDPs. Given the 30%
discount on which we purchased our position, high NAV growth,
whilst very welcome, is not required for an attractive IRR.

AGT

JPEL Private Equity • Newsletter Feb 2014

The sale of JP Morgan Private Equity came sooner than we anticipated. We invested 3 months ago and had expected the
company to move towards a gradual realisation policy. The announcement this month of plans to start a new investment
programme will delay a full realization of the fund, and we took the opportunity of demand for the stock to exit our position with
a 90% + IRR.