Bargain Shares: Exploit valuation anomalies

  • NAV per share up 19% to 92.6p since January 1, 2021
  • Net cash of £ 9.7m represents 19% of the portfolio valuation of £ 50.9m following the buyout of Proactis
  • Corporation Financière Européenne SA increases its stake in CIP from 18.2 to 29.1 percent since June 30, 2021

CIP Merchant CaptainI (CIP: 56p), a Guernsey-based private investment firm that takes a private equity investment approach, is starting to deliver the exceptional investment performance I expected when I included stocks, at 57p , in my market. beat 2020 bargain equity portfolio.

The net asset value (NAV) per share rose 14% to 88.85 pence in the first half of 2021, double the return of the FTSE All-Share index, and has since reached 92.6 pence. Top performers include a £ 9.1million stake in CareTech (CTH: 643p), a heavily asset-backed social service provider and my favorite, which shows a 76% gain on paper. Shares in a Milan-based digital marketing company Alkemy SpA (It: ALK) have more than tripled in value since the start of the year, meaning CIP’s £ 6.5million stake represents 60% of profits.

The investment firm also posts a good 41% paper gain on its £ 3.1million stake in EKF diagnosis (EKF: 83p), a £ 378million market-capitalization point-of-service company that is trading ahead of expectations and is expected to increase pre-tax profits by more than a quarter this year, supported by the activities of contract manufacturing.

CIP also benefited from merger and acquisition (M&A) activity, realizing a 2.3x cash return on its £ 0.9million investment in Proactis, a supplier of e-procurement solutions that was acquired by private equity. Cash proceeds of £ 2.1million increased CIP’s cash flow to £ 9.7million (17.6pa share), accounting for nearly a fifth of the company’s latest net asset value of £ 50.9million (92.6p).

Curiously, the main shareholder Corporation Financière Européenne SA increased its stake in CIP from 18.2 to 29.1 percent over the summer, after making an opportunistic takeover bid in January. The current 40 percent discount of the share price to the net asset value not only takes into account the dramatic improvement in CIP’s investment performance this year, but also the possibility of merger activity and acquisition. To buy.

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