Archived articleThis is an archived article from 2020 - please note that any content within the article may be out of date.
SUPP
Wonder any other member holds SUPP and what do you think its prospect is ?
I bought when woodford launched it and wonder any point to hold on to it or sell it .
Many thanks for your opinion
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38 comments
Revised NAV announced at 40p up from 35p this morning wrapped up in a detailed assessment of the business at year end with comment on post year end activities. Tone is a bit more upbeat than previous reports - seems the managers feel a bit more sense of ownership of the fund now rather than simply working out legacy Woodford problems. Worth reading for holders.
https://www.stockopedia.com/sh...
Gus.
'Probably the usual BBC “2 + 2 = 128” hyperbole, but perhaps the “round Earthers” at Industrial Heat weren’t completely barking up the wrong tree with their cold fusion ideas'
The BBC article is about a method to overcome technical problems with the industrial use of extremely hot fusion (taking place at temperatures of millions of degrees Centigrade, comparable to those inside stars). We know that hot fusion occurs, because it goes on inside the sun and stars and in hydrogen bombs. The difficulty is trying to use it in a controlled way to provide usable power on earth. Industrial Heat claims it is trying to exploit cold fusion, i.e. fusion at room temperatures. There is no reputable scientific evidence that cold fusion can occur, and there is an effectively zero probability that Industrial Heat will ever produce a usable device, let alone a profitable one. Woodford squandered many tens of millions of his investors' hard earned savings on this hopeless project. Therefore the notional value of Schroder Uk Public Private Trust's holding in Industrial Heat should be written down to zero now.
Schroders today announced their first new investment since taking over Schroder Uk Public Private Trust (LON:SUPP) 18 months ago in U.K./US cyber security firm Tessian.
https://www.investegate.co.uk/....
Relatively small ticket size ($6.75m) but a significant moment as they move on from clearing up the mess they inherited from Mr Woodford.
Gus.
Novacyt’s core product is used in lateral flow tests for COVID. Many millions of these have been sold but they are not accurate enough to be of much use in screening when population infection prevalence is low (as it is the UK at present). I suspect this is why the govt have scaled back the contract. The company has recognised this and moved into PCR tests but has no competitive advantage there. Ultimately the potential total addressable market size for their product is minuscule compared with Oxford Nanopore. As many have realised in the past year, gene sequencing is an indispensable technology that will transform humanity and the potential market is vast. E.g. in the not too distant future, consumers may be able to buy a home gene sequencer at modest cost that will be able to diagnose virtually any infection, be it viral, bacterial or fungal. Genetic sequencing will also be essential in combatting anti microbial resistance which is another grave threat to humanity. Medicine will be totally disrupted but the tech also has myriad other applications , food safety and certification, plant and animal agriculture, bio security, forensics.
The retail division of Amazon still does not make a profit, because it’s focus is on gobbling up market share and wiping out the competition. Similarly ONT’s current focus is on rapidly scaling up production and investing in R&D to crush Illumina, it’s only real competitor. From looking at the lead times on ONTs online shop, they are currently selling their products faster than they can manufacture them, and their distribution network is also growing rapidly.
To use Buffett terminology, ONT’s competitive “moat” is about as big as it gets. It’s not difficult to imagine in an optimistic scenario that the company could even end up with a near global monopoly (as Illumina had for a while).
The news release states that 70m of the 195m went to existing investors. The management seem keen to select long term or strategic investors as they don’t want to see the company get taken over too early.
Momoko wrote on 5th May:
"Novacyt’s core product is used in lateral flow tests for COVID. Many millions of these have been sold but they are not accurate enough to be of much use in screening when population infection prevalence is low (as it is the UK at present). I suspect this is why the govt have scaled back the contract. The company has recognised this and moved into PCR tests but has no competitive advantage there."
This is not correct. Novacyt's core products are PCR tests, and they have the most advanced set of PCR tests for Covid currently available in the world because they are able to differentiate between several Covid variants of concern. Novacyt is soon going to release a lateral flow antigen test for Covid.
Not one, but two realisations announced by Schroder Uk Public Private Trust (LON:SUPP) today:
https://www.investegate.co.uk/...
https://www.investegate.co.uk/...
We know from the annual report that the previous post year end activity had wiped out debt. With these numbers plus the £25 million uplift on Oxford Nanopore announced yesterday it looks like the NAV is now about £376 million (41p per share), a discount to the current price of 34%.
timarr
Just like buses .... two announcements of disposals by Schroder Uk Public Private Trust (LON:SUPP) (and Ip (LON:IPO) for that matter) this morning with the realisation of investments in Kuur and Inivata. Inivata sale adds about £14.5m cash in NAV mark up (sale @ £27.6m vs. book value £13.1m). Kuur sale is predominantly in shares of the acquiring company Athenex* but headline figure is share value proceeds of up to US$23m against approximate book value of £0.85m.
https://www.investegate.co.uk/...
https://www.investegate.co.uk/...
By no means the potential blockbuster Oxford Nanopore may prove to be but healthy premium in cash and residual shares to book value. Further improves liquidity for SUPP and should facilitate an upward reevaluation of the NAV.
Gus.
* Just had a quick look at Athenex. £250m market cap NASDAQ listed company. Share price currently about $3.70 having peaked at about $15 or so earlier this year - possibly another “inherited” investment that Schroders may not have chosen to make.
Announcement that Oxford Nanopore has raised £195 million from new investors today from Ip (LON:IPO):
https://www.investegate.co.uk/...
Which, if my (invariably faulty) maths is correct, means that ON's fair value is now £2,475 billion, up from the previous £1,7 billion. So that is presumably now the pre-IPO baseline.
Roughly I reckon that adds about £25 million to the Schroder Uk Public Private Trust (LON:SUPP) NAV and about £100 million to IPO.
timarr
Oxford Nanopore is valued by IP Group at £2,475 billion today, based on the latest cash raised. Commenting on this, "Porky9" on the LSE chat board for Novacyt wrote today:
"Oxford Nanopore is loss-making at present and burning through cash. Despite increasing its revenue by over 60 per cent in 2019, investment in research and development and a new manufacturing facility saw its operating loss widen by almost 30 per cent to £80.9m - Revenues £ 54m"
In view of this, can anyone explain why the market capitalisation of Novacyt, which has cash on its balance sheet and is making large profits now with much larger revenues than Oxford Nanopore, is only about £300 million?
Personally, I think a comparison of Novacyt Sa (LON:NCYT) and Oxford Nanopore is as much about market sentiment as it is about fundamentals at the moment - ON appears to be on a roll, Novacyt Sa (LON:NCYT) has somewhat blotted its copybook of late.
The Novacyt Sa (LON:NCYT) share price ballooned up over the past year on the back of its COVID testing credentials. Then in March it announced a dispute with DHSC and the termination of its supply contract (pending expensive litigation that the company thinks it will win without giving much detail) representing 50% of its 20/21 FY revenues. If the DHSC is unhappy, what else might be rotten in the apparently glowing Novacyt story? All this on the back of a share price that had already lost its Mojo from the late January 2021 highs as their testing products roll out seemed to be stalling. The market is pretty damning when the halo slips.
https://www.stockopedia.com/sh...
All of the noise about how much Oxford Nanopore will be worth is largely just that at the moment. The recent fund raise was only small beer in the context of a full IPO of the whole company, mostly to parties already invested and looking to bolster the eventual IPO price. Whether there is sufficient depth in investor appetite for the £5bn+ being talked about remains to be seen. At the moment the ON talk is very bullish about the strength of the product and future growth potential but not yet really market tested IMO.
Gus.
** Rider: Schroder Uk Public Private Trust (LON:SUPP) have just put out an RNS mirroring the comments from Ip (LON:IPO) . Salient bit is “Following the recent funding round by ONT, the Company has been advised by Link that it intends to revalue SUPP's holding in ONT to the price of this latest funding round which is expected to lead to an uplift in NAV of approximately £22m, representing an increase of 6.9% to the NAV as at 31 December 2020.”.
Full release here:-
https://www.investegate.co.uk/...
SUPP prays for Nanopore lift as it tops up Woodford’s Mafic
It's an interesting update, almost reeking of frustration with how little they've been able to do. Getting to a net cash position changes that so this is no longer just about whether we think there is value in the old Woodford holdings but also whether we believe that Schoders are going to able to build value with new investments.
As such it's probably reasonable to assume this is the nadir for the company. The Oxford Nanopore IPO, if it happens, will add liquidity, probably quite a lot of liquidity. As they also note, the post year end sale of Kymab to Sanofi, the IPO of Immunocore and the NeoGenomics investment in Inivata are all significant in terms of future growth. I also think they're correct in noting that the Atom Bank devaluation is probably temporary, a facet of the company needing cash at the worst possible time.
Frankly, it's been a lousy year for them but given the hand they were dealt with it's hard to see how they could have done much better. From here on in, however, their fate is in their new managers' hands.
timarr
I see from SUPP's annual report that its 'investment' in the 'cold fusion' company Industrial Heat has been revalued down from £14.4 million to £4 million. The comments in the annual report about this are:
"There were a number of other portfolio companies, mostly notably Atom Bank, BenevolentAI and Industrial Heat, that experienced a fair value loss of greater than £5 million over the full year. Details of these writedowns and the reasons for them may be found in the Portfolio Manager’s report."
"Industrial Heat which was revalued due to a lack of technical and operational progress."
It should, of course, have been revalued to zero, as there is no prospect of it ever producing a useable cold fusion device because it is contrary to our present knowledge of physics. Woodford originally squandered £54 million of his investors' money on Industrial Heat. It should have been revalued to zero years ago.
Probably the usual BBC “2 + 2 = 128” hyperbole, but perhaps the “round Earthers” at Industrial Heat weren’t completely barking up the wrong tree with their cold fusion ideas:-
https://www.bbc.co.uk/news/sci...
May never happen in my lifetime and even if it does Industrial Heat won’t be leading the charge and making investors any money from it but interesting progress nevertheless.
Gus.
Schroder Uk Public Private Trust (LON:SUPP) annual report published this morning. A helpful warts and all summary of the current state of play.
https://www.investegate.co.uk/...
Still plenty of hair in the legacy portfolio inherited from Woodford evidenced by the recent mark down in NAV but at least with recent disposals they have brought the debt gearing under control (now just about net cash and with a recently extended R/C facility) and the managers are indicating an intention to put their own mark on the portfolio by beginning to consider new investments. Probably more “the end of the beginning” than “the beginning of the end” as Mr C. Once said but an interesting contrarian play IMO (I hold).
Gus.
For a play on the Oxford Nanopore IPO, would you not be better of investing in IP (LON:IPO) ?
Hi letap73.
Good question .... to which there’s a debate to be had. A few terms of reference taken from the Stock Reports: £IP holds 15% of Oxford Nanopore (ON), has a market cap of £1,390m and enterprise value of £1,220m (it’s cash positive). Schroder Uk Public Private Trust (LON:SUPP) holds 4% of ON, has a market cap of £288m and enterprise value of £391m (it’s carrying about 35% leverage although this is all based on historic figures and excludes e.g. the £70m from yesterday’s Kymab disposal).
Using the above figures, you would need to own £93m of IP’s market cap to have 1% implied exposure to ON. The equivalent figure for SUSS would be £72m, i.e. SUSS has significantly more exposure per share to ON than IP does. However, using the EV figures (arguably a better measure of a company’s true value) to take into account the respective net cash/net leveraged valuations the position would be reversed with IP costing £81m per 1% of ON and SUSS costing £98m.
Obviously, it’s not that simple since both IP and SUSS have a lot more about them than their minority holdings in ON. (Although if the ON IPO is a massive blow out to say the mooted upper £22 billion the impact on both is quite dramatic). So what does the wider market think? Looking at the respective share prices of both over the past couple of years, it’s probably fair to say that the market thinks IP is marvellous whereas SUPP is the proverbial crock of s**t. So clearly IP is the smarter way to play it since both have roughly equal exposure per share to ON ...... unless of course you take the view that all of the good news is already factored into IP’s (expensive) current share price whereas SUPP is such a (cheap) dog that it’s a remarkably valuable rough diamond just waiting to be discovered. On that view, IP is already quite a way up the “wall of fear” and could have a long way to fall whereas SUSS is so bombed out that there should be little downside from here. Maybe it’s just that £IP is the Momentum investors way to play it whereas £SUSS is the preferred Value investors’ approach?
Personally, I can see it both ways ..... possibly why I have a position in both of them (albeit weighted slightly more to SUSS). Of course if the ON IPO completely tanks then I’m looking at double jeopardy!
Gus.
Good writeup Gus. Perhaps it would be interesting to look at the quality of the other holdings in SUPP and IP? (i have a small position in SUPP).
Schroder Uk Public Private Trust (LON:SUPP)
Would someone be kind enough to link the RNS' from April 7th and 9th?
I can't find them anywhere, even on the SUPP website.
Cheers
A
Abtan, I found it here on this site on the News tab in the stock report
Well that's embarrassing.
I wonder why it is appearing nowhere else, not even on the company's website?
Sorry to waste your time, and thank you!
No problem - the lack of news where I expected left me flustered as well!
The mention of Industrial Heat in the RNS is a reminder that Woodford and his team were investing in tech they really had little understanding of. With the many biotech investments, Northwest Biotherapeutics, Circassian, etc I doubt that they were any better at choosing investments than any of us might be.
With many of the investments the outcome may be rather binary. So, how to value a binary outcome, 0.5? If Industrial Heat has not been written down to near zero value already it suggests to me that there may still be more write downs to come.
I held for a short while after launch until I realised that Woodford was basically taking far too many very risky biotech punts without any successful previous track record in this area. If I was still invested here I think that I would treat the losses so far as sunk but sell out as soon as Nanopore has come to market as that could well be the high point.
Announcement today (9/4/21) of realisation of Kymab shares disposal to Sanofi. Not sure if it is already in the numbers/market appraisal of Schroder Uk Public Private Trust (LON:SUPP) NAV but here are the headline details from the RNS.
“The Company's holding in Kymab has been revalued to £70m reflecting the terms of the agreed sale generating a fair value gain of £52m when compared with the holding value of £18m as at 30 September 2020.”
Gus.
Announcement today (9/4/21) of realisation of Kymab shares disposal to Sanofi. Not sure if it is already in the numbers/market appraisal of Schroder Uk Public Private Trust (LON:SUPP) NAV
This was the exact wording in the NAV update on the 7th April so already included in the NAV.
timarr
I don't know if it's just me but the April 7th announcement doesn't appear on either investegate or the LSE platform? Which I don't think I've ever seen before.
The write downs expose how weak the fund's position has been - for instance, they've had to accept dilution on the Atom Bank stake at a point in the cycle where you'd think the valuation is at its lowest. Similarly they've not been able to support Rutherford Health (noting that I don't know if they would want to anyway) who recently did a £40 million fundraise backed by their freehold properties, presumably because they couldn't get funding any other way. In fact I think both Atom Bank and Rutherford ought to do OK from here.
Meanwhile Carrick and Mission were revalued because SUPP chose to take lower valuations in order to get the cash out of Rosetta - which they needed to get the debt levels down. They need to get the debt levels down so they can actually start to do some proper management, and start funding portfolio companies and some new stuff.
It's all a grim echo of the Woodford legacy. The only saving grace is that the closed end structure meant redemptions didn't take them under - which leads to, as gus 1065 points out, the reasonable hope that the Oxford Nanopore float will see better days ahead.
timarr
Hi Tim,
I don’t see the RNS on investegate either. Which is annoying as I’m coming at things a day or so later than I would have done and trying to catch up.
I’ve sold. I’ll take a more considered look over the weekend but there are other opportunities that I’ll likely use the cash for.
Hi John
I don’t see the RNS on investegate either. Which is annoying as I’m coming at things a day or so later than I would have done and trying to catch up.
Weird isn't it?
I'm actually in profit and I was fully expecting the Atom Bank write down (it's public domain) and half expecting the Rutherford one. Part of the reason for the write downs is SUPP's inability to provide funding - Rutherford has had to borrow against its freeholds to fund growth despite the obvious post-pandemic opportunity.
The kicker here is all about Oxford Nanopore. Beyond that it comes down to confidence in the ability of the Schroders team to manage their way out of the mess. From here the portfolio is best viewed in VC mode - the odd spectacular success can more than make up for a whole bunch of failures.
I do think this shows exactly what a fiasco the whole Woodford farrago was. That the man has the chutzpah to come back for more cash perhaps indicates the lack of self-awareness that lay behind the meltdown in the first place. Beware star managers, they come bearing begging bowls.
timarr
Hi Tim,
From here the portfolio is best viewed in VC mode - the odd spectacular success can more than make up for a whole bunch of failures.
I'm sure that's correct and in principle I'm perfectly happy with that. But I can't get over them attaching any portfolio value whatsoever to Industrial Heat. I'm sure Link Solutions will have followed a defensible process etc. but it fails my smell test. It was that holding that made me sell out of WPCT at a profit after they published their first holdings spreadsheet and it's made me take my sliver of profit today as well.
Of course I could be making a mistake but then I often do.
But I can't get over them attaching any portfolio value whatsoever to Industrial Heat.
It's process as opposed to commonsense. The valuation will be based on whatever the last touchpoint was for a mark to market value. The underlying point is that the managers aren't free to choose the valuation metric that they think is appropriate - for obvious reasons.
With privately held companies this can lead to silly valuations one way or another and part of the investor's job is to compensate for that. It's the same reason Oxford Nanopore is held at the last funding round valuation rather than something closer to a likely IPO value. They're opposite sides of the same coin.
There are many reasons to not hold SUPP but I don't think the non-zero valuation of Industrial Heat is one of them - even though I agree with your valuation rather than theirs.
timarr
7 April RNS provides unaudited Net Asset Value as at 31 December 2020 of £318m or 35.01 pence per share as at 31 December 2020, representing a decrease of 20% relative to the NAV as at 30 September 2020 (£398m or 43.84 pence per share).
Outlook statement
"The scale of this reduction to the NAV is disappointing to both the Board and the Portfolio Manager, however we would highlight the significant progress that has been achieved post-period end which will result in the Company's debt position being significantly reduced and expected to be fully paid down with proceeds received from the Kymab sale. In addition, the Company has refinanced its credit facility to place it in a strong financial position enabling the Portfolio Manager the opportunity to improve the portfolio's diversification going forward."
I bought into this to have exposure to Nanopore, what do people think, opportunity to add or perhaps bail out?
Hi turbo.
I have a residual position in Schroder Uk Public Private Trust (LON:SUPP) buried somewhere in my ISA from its Woodford days - heavily underwater. I’m inclined to let it run as a punt on Oxford Nanopore and some of the other mainly Bio/Tech legacy positions. Not sure I’m in the market to top up but will monitor the situation. Here’s why I’m holding on ......
Back of a fag packet calculation - very rough and ready but gives an idea of possible impact of a successful exit from the Oxford Nanopore investment. Approximately 18% of the SUPP NAV as of Dec 2020 was attributed to the book valuation of Oxford Nanopore (“ON”) in which, I believe, SUPP hold 4% of the equity.
This equates to about £57m (.18 x £318m) on the SUPP books - giving a gross current book value to all of ON of (£(57/.04) = £1.425 billion. ON confirmed on March 30th its intention to IPO in the latter part of 2021. Plenty of hype about possible valuations running from £5bn to £22bn or more. This would imply an increase in the Schroder Uk Public Private Trust (LON:SUPP) NAV of £140m (4% of £5bn - £1.425bn) to £820m (4% of £22bn - £1.425bn) i.e. an increase to £458m £318+140m) to £1,138m (£318+820m) i.e. 44% to 257%.
This would imply an approximate price per Schroder Uk Public Private Trust (LON:SUPP) share of 46p to 114p compared to today’s c.32p close. Think that makes sense - not an exact science but an idea of the direction and possible magnitude of travel.
Gus.
Thanks for that interesting reply gus. By the way, the RNS does give some more detail as to the reasons for the drop in NAV,
I added to my SUPP position on the news of the Oxford Nanopore float but the RNS yesterday is a reminder of the amount of dross in the old Woodford holdings along with the Nanopore jewel. They clearly weren't as aggressively written down as I hoped. I'm expecting the low end of the hyped numbers in the ON IPO - maybe £3-4bn. The question is how much is left when that is gone.
I also have ON exposure through Ip (LON:IPO) and am wondering if that's a safer bet.
The NAV writedown does mean that Schroders gets a lower annual fee and has to work harder for the performance fee. I'm surprised about the Rutherford writedown as they've had some positive news recently with NHS contracts etc. I've held on due to the Nanopore holding but I've only bought Ip (LON:IPO) since 2020 to get further exposure to Nanopore.
Hi Gus
To confirm, I have the same workings as you for SUPP's possible ONT-inspired upside, with an upside range of +7% to +230%.
No position for me, though the downside from here does look limited.
Cheers
A
Hi abtan.
Hopefully a case of “Great minds think alike” ......... rather than “while fools seldom differ”. (Thanks also for your recent commentary on another thread about the recent Burford Capital (LON:BUR) results).
Thinking more about Schroder Uk Public Private Trust (LON:SUPP) I’ve done a bit more digging and have decided to put a bit more cash in this morning at just under 32.5p/share. This is about an 8% discount to the recently downgraded NAV figure. Definitely a risky, Contrarian play.
Always risky averaging down but in this case I think the risk:reward with a 6-12 month horizon is acceptable. Why? Sentiment towards this particular IT feels about as bad as it can get and I think the latest asset mark downs were the final straw for many residual WPCT holders (and a few bottom feeders that bought in at last year’s lows) who will bail out. With Woodford out of the way I feel Schröders are a safer pair of hands and will not pump good money after bad to prop up vanity project investments - many of the residual positions will go to zero value but should not suck out subsidies from the realisations from the occasional good outcome. Unlike Woodford, I don’t feel Schröders will feel the moral hazard of being the lender of last resort to these lame ducks. Likewise, as a closed end IT it shouldn’t become a distressed seller of illiquid positions to finance withdrawals as was a primary factor in the demise of Woodford’s Income Fund. Today’s Kymab sale appears to give them liquidity to deal with their outstanding debt and still have some funds to maximise the value of their more promising investments.
The share price of the IT may well continue to fall but it won’t be accelerated by investors requiring cash from forced liquidations. Lastly, I also sense there’s been an element of “kitchen sinking” going on with the new management. (While accepting they’re hardly new having been on the case for a while now). First thing most new company Boards do after a takeover is to put all the bad news out there so their downside is limited and they look like heroes when things aren’t quite as bad as they first appear - I wonder if there has been a bit of that here.
As such, the game will be allowed to play out in an orderly fashion with hopefully some of the positions (Oxford Nanopore being the most high profile) having material value - a classic Venture Capital play. Looked at another way, if the ON IPO realises a valuation of about £7bn this in and of itself represents the current 32.5p share price even if everything else is written down to zero. What could go wrong? The IPO market in general or ON in particular (or both) could tank leaving Schroder Uk Public Private Trust (LON:SUPP) high and dry. At least Schröders appear to be taking a more hard nosed and pragmatic approach in how they’re handling things. Hopefully they have enough skin in the game to not simply fire sale everything at a knock down price and try to maximise the upside from the legacy positions they are now left holding. Time will tell.
Gus.
I’ve held this since IPO and was looking at cutting my losses but it’s on a huge discount to NAV and some of the large position portfolio companies e.g. Benevolent AI and Oxford Nanopore have done very well in the corona-crisis and may see valuation uplifts when they announce trading updates. Have a watch of the recent Schroders presentation:
https://www.brighttalk.com/web...
Picking through Woodford’s wreckage is not a bad investment theme as there is some great value to be had still.