ICG Enterprise Trust (ICG) Price: £11.66

Market cap: £783 million

A 40.5% discount to NAV (net asset value) on ICG Enterprise Trust (ICGT) looks a compelling value opportunity for investors seeking exposure to a private equity portfolio with a history of delivering resilient sales and earnings growth.

While the nature of the unquoted investments made by the trust means some discount is almost inevitable, the current level seems overly severe considering ICG Enterprise’s long-term record of generating attractive returns.

Shares sees potential for a re-rating now that interest rates have peaked, credit markets are easing and with 2024 expected to see a pick-up in mergers and acquisitions (M&A). Historically, periods of higher private equity transaction volumes have helped support valuations and driven NAV growth for a trust which is also returning capital to shareholders through dividends and buybacks.

Managed by Intermediate Capital Group’s (ICP) Colm Walsh and Oliver Gardey, the FTSE 250 trust invests in profitable, cash-generative private companies in the US and Europe with the aim of generating long-term defensive growth.

An investor in unquoted companies directly and through specialist funds, ICG Enterprise is differentiated from peers in being the only UK-listed private equity investor focused exclusively on buyouts in developed markets, since the managers believe they offer the best risk/reward profile for shareholders over the medium to long term.

A bias towards mid-market and large deals which are viewed as more defensive than smaller deals reduces risk, as does the emphasis on defensive growth companies in sectors with non-cyclical growth drivers such as technology and software in particular, together with healthcare, businesses services and education. The focus is very much on firms with strong market positions, pricing power and structurally high margins.

2023 was a quiet year for M&A activity in general, but the quality of ICG Enterprise’s portfolio meant the trust’s realisation rate stood up well against its peers, and the trust, which has the balance sheet firepower for further deals, continues to execute on new investments to fuel future NAV growth.

For the third quarter ended 31 October 2023, the portfolio generated positive cash flow and generated an NAV per share total return of 3.3%, along with 12 full exits at an uplift of 33.7% to their carrying value. ICG Enterprise has said it plans to pay total dividends of ‘at least’ 32p per share for the year to January 2024, up from 30p in full year 2023.

The portfolio offers exposure to an array of successful companies ranging from fire protection systems supplier Minimax to pet products purveyor PetSmart, ice cream maker and distributor Froneri, premium campsites-to-holiday parks play European Camping Group, not to mention business management software firm Visma. Reflecting the complexity of managing a portfolio like this ongoing charges are relatively high at 1.48%. 

‹ Previous2024-02-15Next ›