# Oakley Capital Investments: 1H’21 35% EBITDA growth drives 26% NAV return

- Link: https://www.directorstalkinterviews.com/oakley-capital-investments-1h%e2%80%9921-35-ebitda-growth-drives-26-nav-return/4121022465
- Published: 2021-09-14T12:06:35+01:00
- Author: Amilia Stone

**Oakley Capital Investments Limited** (LON:OCI) results were strong, with i) an
annual total NAV return of 26% (11% in six months), ii) average annual portfolio
company EBITDA growth of 35% (20% FY’20), 12.3x EV/EBITDA (FY’20 11.8x) and 3.5x
net debt/EBITDA (FY’20 3.9x), iii) £95m investment and £51m realisations in six 
months, and iv) year-end cash of £172m. This performance, and OCI’s 17% five-year
CAGR NAV total return, is driven by i) high-growth companies/sector champions with
structural tailwinds and often digital disruption benefits, ii) repeatable and proprietary
sourcing, and post-acquisition support from its unique entrepreneur network, iii)
75% recurring/subscription revenue streams, and iv) M&A-led value creation.

 * **Entrepreneurial network:** Embedded in Oakley Capital Investments’ DNA are 
   the sustainable, growing, competitive advantages from its 14-year-old, 20-strong,
   entrepreneur network, the businesses of which Oakley has supported in the past.
   These partners have invested €170m in Oakley Funds, and they help find/manage
   acquisitions.
 * **Growth businesses:** Oakley’s value creation comes primarily from growing its
   investee companies’ EBITDAs (average 35% p.a.), achieved by i) being in growth
   sectors, ii) having tech-enabled and digitised models (70%), iii) having the 
   skill set to transform business models, and iv) recurring revenue streams to 
   protect downside.
 * **Valuation:** Against the end-December NAV, OCI trades at a 21% discount, despite
   its absolute (five-year CAGR 17% total NAV return to June 2021) and relative 
   performance. Its above-peer discount is based off the June NAV, while peers are
   based off more recent (higher) valuations. OCI yields 1.3%.
 * **Risks:** While OCI’s costs are slightly above-average, post-expense returns
   are still market-beating. Sentiment towards the global economic cycle is likely
   to be adverse, even though outperformance has been delivered in downturns. OCI’s
   portfolio is concentrated, and we believe its permanent capital is right for 
   private assets.
 * **Investment summary:** Oakley Capital Investments provides investors with liquid
   access to the attractive PE market, enhanced by Oakley’s incremental origination
   and management skills. Oakley Funds focus on mid-market, tech-enabled European
   companies that operate in the technology, consumer and education sectors. Accounting
   and governance appear conservative. There are risks – primarily sentiment-driven–
   around costs and cyclicality, as well as the liquidity and valuation of the underlying
   private assets. We believe buying long-term, compounding growth is the key attraction,
   with any further closing of the discount to NAV an added bonus. The current 21%
   discount is about one-year’s average recent NAV total return.

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