The basis of our valuation starts with the NAV, which is estimated as an aggregate of the individual valuations of the participations in the portfolio, segmented in IDI’s two operating pillars, Private Equity Europe and Private Equity Emergents. IDI has seen its discount to NAV decrease substantially, from over 50% to just above 30%. We still believe there is significant upside, as IDI’s conservative asset valuation has been proven through successful disposals, where exit prices often exceed the fair value retained in the NAV.
Being a pure-play investment company with no consolidated activities outside the parent and IdiCo, the DCF is not particularly elucidating when it comes to valuing this type of holding company structure. As a result, the DCF primarily reflects the dividend flows from investee companies, as trying to estimate cash entries from potential disposals seems too vague an exercise given IDI’s investment profile, which is not subject to fund liquidation schedules like the majority of its private equity peers. This flexibility was illustrated during the COVID-19 pandemic, when IDI postponed disposals amid unfavourable market conditions, rather than being forced to exit investments at depressed valuations.
Regarding the peer metrics valuation, the approach is much more clear-cut. We base it on a group of family-type holding companies with a control/hands-on style in the management of the underlying assets. Many of the above hold assets in their respective portfolios that follow a service-based focus, which supports added-value ambitions and recurring-revenue generation, setting them apart from more commoditised and, hence, cyclical peers. The yield-based valuation remains supportive, with IDI offering a higher prospective dividend yield than its peers.
