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London, UK, 1 April 2021
Edison issues review on HgCapital Trust (HGT)
HgCapital Trust (HGT) reported a strong NAV total return of 24.0% in FY20, driven by double-digit earnings growth across the portfolio (last 12 months EBITDA for top 20 holdings up 31% y-o-y) and solid uplifts to end-2019 book values on exits (50% on average in FY20). Investments and realisations reached record-high levels in FY20 and HGT had a healthy coverage ratio of c 64% as at 24 March 2021 (vs 48% on average between 2015 and 2019), backed by a £200m credit facility secured in Q420 and c £56m raised in tap equity issues in FY20 and FY21 to end-March 2021.
HGT's share price declined c 7% on the day its 2020 results were published in mid-March, following which the premium narrowed to c 5% (vs c 8% on average in February 2021). While FY20 was undoubtedly a successful year for HGT, its NAV total return in Q420 was lower than in previous quarters due to cash drag (cash and liquid assets represented c 34% of its NAV at end-Q320 vs 15% at end-Q420) and a provision for carried interests, which could have slightly cooled down investors' expectations. However, given its private equity focus, HGT should be assessed based on its long-term performance, which has been stronger than its benchmark and the peer average over recent years.
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