# Oakley Capital Investments expertise incrementally improves investee companies – Hardman & Co (LON:OCI)

- Link: https://www.directorstalkinterviews.com/oakley-capital-investments-expertise-incrementally-improves-investee-companies-hardman-co-lonoci/4121068043
- Published: 2022-06-10T11:35:07+01:00
- Author: Amilia Stone

**Oakley Capital Investments Limited (LON:OCI)** is the topic of conversation when**
Hardman and Co**’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive
interview.

**Q1: Your recent report on Oakley Capital Investments sits behind a disclaimer.
What can you tell us about that?**

**A1: **It is just the standard disclaimer that many investment companies have. 
In essence, for regulatory reasons, there are some countries (like the US) where
the report should not be read. In the UK, private equity (PE) is not a simple asset
class, and it should only be looked at by professional/qualified investors. Page
2 of the report gives all the details.

**Q2: You called your recent piece _Capital Markets Day 2022 – let the sun shine_.
What can you tell us about that?**

**A2: **It was a pretty miserable, wet day in May, when OCI held its Capital Markets(
CM) Day; so we called our note _Let the sun_ _shine_. The underlying theme of the
day was explaining the business model, which means OCI delivering its impressive
market- and peer-beating 19% NAV CAGR growth 2017-21 (6% alone 1Q’22), and why this
growth should be sustainable going forward.

At its core is an investment focus on structurally high-growth areas, combined with
a unique proprietary network originating deals. Once a business has been acquired,
value is then added through business transformation (e.g. digitalisation), performance
improvement, leadership development and buy-and-build strategies.

Oakley Capital’s expertise incrementally improves investee companies. Investors 
are buying into this sustainable, long-term model, not just the current attractive
portfolio. OCI structured the day with an introduction to the group, followed by
sector reviews of its investments in the education, technology and digital consumer
sectors, and then followed by a session on ESG, a NED overview and a short Q&A session.

**Q3: So, what did the group overview tell us?**

**A3: **The key takeaways were i) 19% five-year NAV CAGR, driven by earnings growth
in investee companies, ii) a diversified and resilient portfolio, iii) long-term
commitments covered by cash, iii) likely near-term realisations of investments that
have already been held for three years or more, iv) the valuation approach, and 
so the NAV, having proved to be conservative, v) multiple actions taken to address
the discount, and vi) OCI expects further growth, despite market headwinds.

It was an interesting and refreshing approach in that OCI directly took on market
concerns on things like the valuation of technology companies – no holds barred,
heads straight over the parapet, so to speak.

**Q4: And what did you learn about its education investments?**

**A4: **We had already reviewed these investments in some detail in our report, 
_Educating on education_, published on 9 February 2022. One of the key points to
take away from the CM Day was the brand value of being a “Responsible Custodian”.

Additionally, with the education market growing strongly and with highly attractive,
resilient income streams, there are limited listed opportunities, and Oakley Capital
is a leading private market player. OCI gave a really interesting case study of 
IU Group, its largest investment, at 17% NAV, and now a global provider of degrees
and wider education services.

**Q5: What about its technology investments?**

**A5: **Technology has been the best-performing PE sector in past decade, and, in
our report, we outline why many of the key drivers that led to that performance 
remain intact. Adoption of new technologies will also drive growth, and Oakley Capital
is focused in sub-sectors with the fastest growth prospects. Oakley Capital also
detailed why it believes its valuation approaches in technology are conservative.
The investee company presentations re-emphasised the business driver themes of structural
growth, and how Oakley Capital enhances the businesses.

**Q6: And, finally, the digital consumer investments?**

**A6: **The focus is on digital consumers, because this area offers superior structural
growth, but not all the sub-sectors are the same. OCI is focused in under-penetrated
markets, where there are scalable unit economics and where it can improve revenue
quality, and also enhance iconic brand business models. The emphasis was that, even
in challenging markets, there are opportunities with the right approach that may
include things like a buy-and-build model.

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