Results analysis from Kepler Trust Intelligence

NB Private Equity Partners Limited

25 September 2024

 

NB Private Equity Partners (NBPE)

25/09/2024

Results analysis from Kepler Trust Intelligence

NB Private Equity Partners (NBPE) has released its interim results for the six months to 30/06/2024. The net asset value (NAV) per share was $28.87 (£22.05), which translates to a NAV total return of 1.0% over the six-month period. This was driven by an increase of 4.3% in the value of the private companies that NBPE owns, on a constant currency basis (i.e. removing currency fluctuations), partially offset by continued volatility in NBPE's quoted holdings, and foreign exchange headwinds.

Operating performance of NBPE's companies continues to be positive, with the aggregate weighted average revenue growth of 11% and EDITDA growth of 16% over the last 12 months.

Investment activity was robust during the period, with $72 million invested in new and follow-on investments. Despite a subdued private equity exit environment, NBPE received cash proceeds of $126 million. This includes transactions that were announced in 2023 but closed in 2024.

NBPE's liquidity position remains strong; its $386 million of cash, liquid investments and undrawn credit line leaving it well positioned to take advantage of investment opportunities.

A dividend of $0.47 for the first half of 2024 was paid in February, with a further semi-annual dividend paid in August, after the company's interim reporting period.

Paul Daggett, managing director at Neuberger Berman, said: "We are pleased with the positive operating performance of our portfolio companies which we believe reflects the high-quality nature of the underlying assets."

Kepler View

Realisation activity started to increase in the second half of 2023 and has continued into 2024, which has helped NB Private Equity Partners (NBPE) step up the pace of investment.

NBPE has a number of competing options for its cash, including funding of new investments, the dividend and buybacks. Any option must further consider the maturity of the 2024 ZDPs in October, which the board have announced their intention to repay.

The good news is that NBPE has a strong balance sheet, which is a corollary of the manager having a high degree of control over the timing of new investments.

In our view, buybacks will continue to be opportunistic and tactical and the dividend will remain the main way capital will be returned to shareholders.

Realisation may arguably be the most visible value driver for private equity portfolios, but it is far from being the only driver.

While the board acknowledges that opportunities for exits remain constrained, some of the headwinds that have caused this are subsiding. NBPE's underlying companies continue to deliver strong revenue and EBITDA growth and are increasingly mature, suggesting that there are plenty of companies within the portfolio with the potential to benefit from liquidity events.

Investors who are taking a long-term view may see the current discount to NAV of around 26% as a potentially attractive entry point.

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