We believe a key message from these strong results is that Pantheon International plc (LON:PIN) platform (and so PIN’s investments) gives it the opportunity to capture the best PE opportunities wherever they arise. With ca.45% of the portfolio now made directly into companies, and an increasingly selective choice of manager, PIN offers investors a focused, but global, exposure to what has been a very strong PE market The NAV per share grew 22% in six months. Portfolio valuation gains of 19.7% were achieved, with 16%+ gains seen across all regions and investment strategies. The weighted average uplift from fully realised exits was 43%, and the average cost multiple was 3.3x.
- Cash generation: PIN was again strongly cash-generative. Distributions received during the half year were £198m, equivalent to a distribution rate of 24% of the opening attributable portfolio. After funding £77m of calls, the net cash inflow from the portfolio was £121m. End-cash balances were £220m.
- Commitments: Pantheon International steadily increased its commitments coming out of the pandemic; at the end of November 2021, they stood at £658m (end-Jan’22 £645m), with cash of £220m and undrawn credit lines of £300m (with capacity to increase this by £50m). PIN remains much less over-committed than is the case for its peers.
- Valuation: PIN shares trade at a 29% discount to NAV, despite their long-term outperformance. We believe the “real” NAV is likely to be above the book value on the accounting date, given the consistent uplift to carrying value achieved on exits. The weighted average uplift achieved on exit in 1HFY’22 was 43%.
- Risks: We note i) sentiment to the economic cycle (NAV rose every year in the 1990s’ recession, and in FY’20), ii) adverse sentiment to illiquid and unquoted investments (PIN has permanent capital and proven exit uplifts), and iii) sentiment to the sustained discount may be an issue. Short term, there could be forex volatility.
- Investment summary: Pantheon International is in an attractive market, can pick the best part of that market and has competitive operational advantages. Its manager and deal selection, and portfolio structuring, add value. To the end of January 2022, this had delivered 12.2% annual NAV growth since inception in 1987. Corporate governance is strong, and the NAV is conservatively valued. Investors get liquid access to the global PE market. There are risks around the cycle, and illiquid and unquoted underlying assets. The discount appears anomalous with risk-adjusted returns.
