Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Partners Group Private Equity Ltd (LSE:PEY, Financial) reported a positive NAV total return of 3.1% year-to-date as of September 2024.
- The company's share price total return for the period was 5.9%, reflecting an expansion in the company's discount to NAV.
- The liquidity position remains healthy with a fully undrawn EUR140 million revolving credit facility and EUR5.4 million in cash and cash equivalents.
- The portfolio is diversified across global developed markets and resilient industries, providing exposure to a variety of sectors and regions.
- The company has achieved double-digit annual returns for both share price and NAV total return over the last decade, showcasing long-term value creation.
Negative Points
- The share price is trading at a 26% discount to NAV, which is a significant gap that may concern investors.
- The company has not generated enough free cash flow to conduct share buybacks, despite the current discount to NAV.
- There is a 180-day lockup period for the KinderCare IPO, meaning no immediate liquidity was generated for Partners Group Private Equity Ltd (LSE:PEY).
- The impact of rising interest rates has offset positive earnings growth for pre-2020 assets, limiting their contribution to overall portfolio returns.
- The company faces challenges in accurately distinguishing between organic growth and growth from M&A activities, complicating performance analysis.
Q & A Highlights
Q: How will the second dividend be funded, and will the revolving credit facility be used?
A: Federica Cazzaniga, Senior Portfolio Manager, explained that PGPE has sufficient liquidity in cash to cover most of the dividend payments. They might use the credit facility for a few million euros, but expect it to be fully repaid by the end of the year, maintaining a net positive liquidity position.
Q: When can we expect share buybacks given the current realization and discount expansion?
A: Andreea Mateescu, Senior Corporate Development Manager, stated that while there is a robust capital allocation policy in place, currently there is not enough free cash flow to conduct share buybacks. However, this may change as more realizations occur in the portfolio.
Q: Is Partners Group still under a lockup rule for KinderCare?
A: Federica Cazzaniga confirmed that the IPO did not result in additional liquidity for PGPE and a 180-day lockup period applies to the IPO.
Q: Can you comment on the underwriting policy rate and its aggressiveness?
A: Cyrill Wipfli, Investment Manager Representative, explained that their approach involves stress-testing assets across various scenarios, not just relying on a base case. They seek assets that perform well in multiple scenarios, ensuring solid investments.
Q: How do you see foreign exchange (FX) moves impacting performance?
A: Cyrill Wipfli noted that the portfolio's exposure is 50% euro, 38% dollar, and 5% Swiss francs. The US dollar weakened against the euro in the second and third quarters, negatively impacting the euro portfolio. However, the US dollar's recovery in October is expected to positively influence performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
