CIP Merchant Capital Limited Q1 2019 - Corporate Presentation
Table of Contents 1. Overview • Executive Summary • Performance Review • Portfolio Review • Portfolio Companies 2. Outlook • Public Markets • Private Equity 3. Appendix • Investment Objective and Policy • Investment Team • Note to recipients
Overview
Executive Summary • 4 Admission to trading on AIM market of LSE on 22 December 2017 with gross proceeds of £55 million • 4 investments in the first year Business Services Healthcare Healthcare Oil & Gas Alkemy S.p.A. 7Star S.r.l. Orthofix Medical Inc. Coro Energy plc ( “ Alkemy ”) (“ Happy Friends ”) (“ Orthofix ”) (“ Coro ”) Italian digital consulting Italian veterinary clinics US medical devices UK exploration and firm production company chain producer • Public markets performed poorly in 2018, first quarter of 2019 marked by uncertainty due to both global and local threats • Private markets mixed in 2018, with US still growing while Europe slowing down
Performance Review • 5 Cautious approach taken to deploy capital • Tough market conditions • Remain well placed to take advantage of investment opportunities Share Price and NAV progress Share Price 95.00p 95.50p 89.50p 88.00p 72.00p 68.50p NAV 95.36p 94.73p 92.18p 92.46p 87.20p 86.86p AIM All Share 1 100 97.43 103.97 105.52 81.70 88.07 Share Price FTSE AIM All Share Share Price, FTSE AIM All Share & NAV (p) Happy Friends: 11% 2 or 9.89p 3 Alkemy: 8% 4 or 7.21p 3 Orthofix: 10% 4 or 8.33p 3 Coro Energy: 6% 4 or 5.21p 3 Cash & gilts: 65% 4 or 56.22p 3 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Analysis based on public information 1 FTSE AIM All Share, 27/12/2017 = 100 2 Book Value of the investment divided by NAV 3 Value of the investment divided by number of CIP Merchant shares in issue. For private companies Value is Book Value, for listed businesses Value is Market Value 4 Market Value of the listed investment divided by NAV
Portfolio Review Current 1 portfolio value: £16.9 million 29 March 2019 • 6 • Diversification among different industries, countries and type of securities • 35% of capital raised invested Current Portfolio Composition (industry, country and type of security as % of portfolio) Industry Country Security UK Oil & Gas 17% 17% Private Equity 32% Business Italy Healthcare Services US 56% Public 59% 24% 27% Equity 68% Analysis based on public information NOTE: the Company accounts and share price are denominated in sterling. All the investments in foreign currencies are not hedged at this time. The investors are encouraged to ponder thoroughly and carefully the impact of fluctuations in the exchange rates in relation to their unique needs, goals and risk considerations. 1 Based on 29 March 2019 NAV as reported to shareholders on 2 April 2019.
Alkemy S.p.A. 7 Market : AIM, Borsa Italiana R ATIONALE OF THE INVESTMENT Ticker: ALK 1. Double digit growth both through organic growth Country : Italy and aggressive M&A policy Industry : Business Services 2. High standing and cross-industry client base, First investment date : July 2018 with high loyalty and increasing share of wallet Transaction : Purchase of shares via blocks 3. Plan to move from AIM Italia to Star segment of Strategy : Active approach the Italian main market of Borsa Italiana 4. Trading at a discount to peers and potential for a S IGNIFICANT SHAREHOLDERS re-rating R ECENT DEVELOPMENTS Dec.18 Started the activities for the transition from AIM Italia to the Main Market, in the STAR 31% Segment. Mar.19 Announced 2018 results with € 71.6m sales Directors/founders (+67.7% growth year-on-year), € 6.2m 44% EBITDA (+58.5%) and € 3.4m Net Income (+150%). free float (market) Business growth 72 7% 8% 45 € m 35 1 5% 5% 29 18 1 treasury shares 6 5 4 3 1 Source: Alkemy’s website 2014-12 2015-12 2016-12 2017-12 2018-12 T HE CASE Alkemy is the result of the combination of the experiences of its founders in Revenue EBITDA corporate consulting, communication and advisory services in Source: Alkemy's financial statements and market releases technological innovation.
Coro Energy plc 8 R ATIONALE OF THE INVESTMENT Market : AIM, London Stock Exchange 1. Operations in Italy constitute the foundation for an Ticker: CORO international expansion in South East Asia Country : UK 2. Strategy of expansion in a geography with Industry : Oil & Gas untapped resources First investment date : January 2018 3. Target markets population growth trends will Transaction : Acquisition of c. 20% interest as part of strategic fundraise create shortages of gas production Strategy : Active management with PE approach and seat on the Coro 4. CEO has track record of building and selling a Board portfolio of assets in South East Asia S IGNIFICANT SHAREHOLDERS R ECENT DEVELOPMENTS Mar.18 Appointment of James Menzies as Chief Executive Officer. 26% Sept.18 Acquisition of 42,5% of Bulu PSC in Indonesia, with resources of 359Bcf (2C) + free float (market) potential upside of 420 Bcf (3C) at low price ($0,10/Mmbtu). 48% Feb.19 Acquisition of 15% of Duyung PSC in Indonesia, with resource of 276 Bcf (2C) + 21% potential upside of 392 Bcf (3C) Asset Value & Market Capitalisation growth 300 35 Bulu acquisition Asset Value (US$ m) 30 5% Duyung 250 Market Cap. (£ m) acquisition 25 CIP Source: Coro's website 200 Merchant 20 investments 150 T HE BUSINESS 15 100 Coro Energy plc is a pan Euro-Asian upstream oil and gas exploration 10 50 and production company. 5 Full cycle E&P company, with 5 production licences in Italy & 6 – – exploration licences across Italy and Indonesia. Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Asset Value (2C) LHS Asset Upside (3C) LHS Mkt Cap (RHS) Source: Coro's website
Happy Friends 9 Market : private company R ATIONALE OF THE INVESTMENT Ticker: (-) 1. Attractive market with structural growth due to Country : Italy increasingly smaller families and humanization of Industry : Healthcare pets First investment date : December 2018 2. Very fragmented market in Italy, while Transaction : Share capital increase + shareholder loan structurally concentrating industry in other Strategy : Active approach, Board seat European countries, including the UK 3. Strong Private Equity appetite within the sector S IGNIFICANT SHAREHOLDERS R ECENT DEVELOPMENTS Dec.18 € 6.1m investment by CIP Merchant completed. 21% Business development on track, 2 nd hospital Mar.19 others work in progress and further locations under analysis. 49% Founders 30% Source: company share register T HE CASE Happy Friends seeks to disrupt the veterinary industry creating the first Hospital – live Italian chain of veterinary practices. Founded by two successful Hospital – work in progress Clinics – work in progress entrepreneurs with a significant track record in building and selling retail Future geographic expansions services, the last one being a dental practices chain sold to a leading European private equity fund in 2017. Source: Happy Friends
Orthofix Medical Inc. K EY FINANCIAL METRICS 10 Market : NASDAQ Ticker: OFIX Country : United States of America USD M 2017A 2018A 2019 Guidance Industry : Healthcare Low High First investment date : July 2018 Revenue 433,8 453,0 472,0 477,0 Transaction : Purchase of shares on the market Adjusted EBITDA 81,6 87,6 86,0 89,0 Strategy : Passive approach Net income cont. op. 6,2 13,8 18,9 21,7 S IGNIFICANT SHAREHOLDERS Source: Orthofix's financial statements R ATIONALE OF THE INVESTMENT 15% 1. Global company with growing sales and EBITDA 2. Market leading position in its niche 3. Healthy financial structure 4. Significant upside potential from 10% Accelerating top line Margin expansion Premium paid by larger players from the free float (market) acquisition of the business units or in delisting 5% process 59% Multiple alignment to industry 4% 4% 1% R ECENT DEVELOPMENTS 3% Feb.19 Acquisition of Options Medical, a successful distributor for Orthofix Bone Growth Therapies devices for many years based in Source: Bloomberg Florida. Feb.19 FDA Approval of the M6-C Artificial Cervical T HE CASE Disc to Treat Patients with Cervical Disc Degeneration. Headquartered in Lewisville, Orthofix is a global medical device company focused on musculoskeletal healing products and value-added services. Feb.19 Announced fourth quarter 2018 results and guidance for 2019. Expected double digit growth from 2020 .
Outlook
Public Markets • 12 In 2018, public markets have registered substantial losses across the countries on the two sides of the Pond. • Hunting ground is at the smaller end of the market, which has mostly suffered wider losses than the blue-chip indexes. UK Italy FTSE MIB FTSE AIM Italia FTSE100 FTSE AIM 100 2018 % CHANGE 2018 % CHANGE (12.0) (12.5) (16.1) (18.9) -6,4 +4,2 Source: Borsa Italiana Source: London Stock Exchange Germany US DAX SDAX Dow Jones Ind. Av. Russel 2000 2018 % CHANGE 2018 % CHANGE (5.6) (12.2) -6,5 (18.3) (20.0) -1,7 Source: Bloomberg Source: Deutsche Boerse
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