24. June 2021

Investors Chronicle: Simon Thompson covers Augmentum in his latest piece

Simon Thompson covers Augmentum in his latest piece “Upgrading target prices” for Investors Chronicle.

“Augmentum cashed up for new investments

  • Record NAV per share.
  • Augmentum makes £22.8m investments post year-end.
  • Portfolio companies raised £185m equity during financial year.

Shares in Augmentum Fintech (AUGM:140p), the first publicly-listed fintech fund in the UK, rallied 24 per cent to an all-time high of 172p after I advised running profits (‘Exploiting share price dislocations’, 7 December 2020), having included Augmentum’s shares, at 102p, in my 2019 Bargain Shares Portfolio. The subsequent pull-back looks a buying opportunity to me and for investors backing Augmentum’s £40m latest fundraise (placing, open offer and subscription at 135.5p a share).

In the 2020/21 financial year, Augmentum booked £26.7m of unrealised gains, delivered 12.3 per cent higher NAV of 130.4p per share and an unrealised annualised IRR of 19 per cent. The fund’s largest holding, a 3.8 per cent stake in UK investment platform Interactive Investor (ii) has been revalued up by £10.1m to £32.6m, or 8.4 times cost. In 2020, ii delivered 46 per cent revenue growth (significantly ahead of budget) and 56 per cent higher pre-tax profit of £13.9m. Post the year-end, ii acquired investment platform Equinti for £48.5m which boosts assets under administration to £50bn and the customer base to 400,000.

Augmentum also booked £12m of cumulative unrealised gains from its other four largest holdings: Tide, an emerging force in the small- and medium-sized enterprises (SMEs) challenger banking sector that now has a 5 per cent market share and serves 320,000 SMEs; Onfido, a leading global provider of online identity verification that has attracted over 1,500 customers including online bank Revolut and cryptocurrency exchange Bitstamp; BullionVault, a company that offers private investors low-cost access to investment-grade bullion that doubled pre-tax profit to £10.7m in 2020, implying a read-through valuation multiple of 15 times profit on Augmentum’s holding; and Grover, the German technology rentals platform Grover that has just raised €60m in a Series B funding round. Augmentum has successfully exited investments, too, banking £10.5m proceeds from Dext (formerly Receipt Bank) which contributed £3m of realised gains.

New investments of interest include VOLT, a leading provider of resilient payment networks using open banking ‘rails’ as an alternative to traditional card ‘rails’; Epsor, a company that has developed a next generation workplace savings platform in France, providing facilities for both pension contributions and a tax advantaged bonus savings scheme; and Cushon, a company that is targeting a parallel workplace savings opportunity to Epsor but with focus on the UK market.

Priced on a modest premium to a conservative looking NAV, I feel that the prospects of the investment manager delivering another strong performance this year is being underrated. I estimate fair value around 160p. Buy.”

Read full article here (behind paywall)