Pantheon International tipped as analyst suggests valuation discount is too wide
Published: 11:33 07 Dec 2023 GMT
Pantheon International PLC (LSE:PIN) received a 'buy' rating from Stifel as the investment trust's buyback and tender offer has so far trimmed its price discount to net asset value (NAV), but it remains wide at 39%.
"This appears to be discounting a lot of bad news from the portfolio," analysts at the US investment bank said, lifting its fair valuation of the shares to 390p from 365p, a 20% discount to NAV.
"We think at a time of worries about company earnings and possible write-downs, one of Pantheon's strengths is the negligible company-specific risk in the portfolio, with the largest 10 investments accounting for just 8% of NAV."
They noted the portfolio is also well diversified by industry and growth stage, with the balance sheet strong with only modest leverage of 4% of NAV being used, plus the availability of £374 million undrawn on its loan facility compared with outstanding commitments of £788 million.
The board's action to commit £200 million for buybacks and tenders in the year ending May 2024 "shows strong intent to return some cash to investors".
"We think the likelihood of further cash being deployed in this way in the future should be helpful for the share price."
Stifel said PIP was "viewed as a pioneer" in the listed private equity sector when it announced the new capital allocation policy equivalent to 8.2% of NAV and 14.6% of Pantheon's market cap of £1.37 billion.
The discount has narrowed from 43% on the day before the scheme was announced, but remains "very wide" after around £160 million of cash has been deployed so far.
"We are surprised the discount hasn't narrowed more - and on a relative basis to other private equity funds, the Pantheon discount has actually narrowed to a similar or even lesser extent than some peers," the analysts said.
