VEF: Has all the flexibility it needs - ABG

NAVPS (SEK) flat q-o-q and up 55% y-o-y in Q1’22
Trading at 45% discount to NAVPS
Fair value range of SEK 4.9-7.6

NAVPS (SEK) flat q-o-q and up 55% y-o-y in Q1’22
VEF’s NAV decreased by 3% q-o-q in Q1’22, to USD 738m. The NAV per share, however, remained flat q-o-q and up 55% y-o-y, to SEK 6.58 per share. In the portfolio in Q1, it was primarily the addition of the portfolio companies Gringo and Solfácil and FX tailwinds that kept the group’s net asset value per share (SEK) flat sequentially. The fair value of Nibo and FinanZero were lowered (q-o-q) in Q1, by 17% and 9%, respectively, while the value of VEF’s Russian holding, REVO, was marked down to USD 0m from USD 13m.

Trading at a 45% discount to NAVPS
Since its inception, VEF has built up an impressive track record, growing its NAV per share by a CAGR of 31%. Following the issuance of ~USD 50m of sustainability bonds in April, liquidity remains strong at USD 73m. This increases the financial flexibility and should support the current portfolio of companies in future financing rounds and any new deals that will enable VEF to further grow its NAVPS. Between Q4’21 and Q1’22, the NAVPS in SEK has been flat, while the share price has decreased by 27%. After Q1’22, VEF’s share price has fallen an additional 14%. Given the latest reported NAVPS, we asses VEF currently is trading at a 45% discount to its NAV. This is close to a record and well above both the one-year and five-year averages of 7% and 20% discounts, respectively (ABGSC estimate).

Updated fair value range per share of SEK 4.9-7.6
We have updated our fair value range for VEF to SEK 4.9-7.6 (5.0-7.8) after the Q1 report. We have used three approaches to derive the range: 1) a 7% discount to its last calculated NAV, in line with the average discount/premium over the last year; 2) an average target IRR of 20% in the portfolio, in line with the current IRR average of the portfolio, and 3) an average target IRR of 30% in the portfolio, in line with the company’s own ...
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