AlphaValue Corporate Services
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IDI

CR
Bloomberg   IDIP FP
Holding Companies  /  France  Web Site   |   Investors Relation
A challenging environment for private equity after a record year
Target
Upside 65.7%
Price (€) 46.5
Market Cap (€M) 337
Money Making

IDI’s holdings are not consolidated, regardless of the size of the stake held (majority or co-controlled), hence the company’s accounts reflect solely the activity at the holding company level. Based on his pure-play investment company structure, the P&L is not particularly elucidating and is thus of lesser importance compared to the NAV, which stands as the chief performance indicator for this type of structure.

Focusing on cash generation, as is the case for pure investment companies, the lion’s share of the cash stems from exits from investments and the capital gains realised from the sales. These capital gains are accounted for under ‘Changes in fair value of financial assets’, which comprises both realised and unrealised gains, which evidently carry very different cash implications. In 2020, changes to fair value of assets amounted to €39.6m, accounting for 91.6% of the result from investment activities.

In terms of recurring income, the main source comes from the dividend upstream from portfolio companies that pay out dividends, which is usually the case for the more mature larger assets. In 2020, IDI received €3.5m in dividend inflows, of which 76% (€2.7m) from investee companies under the Private Equity Europe segment.

Although marginal, the third-party capital management activity nesting in the IDI Emerging Markets Partners subsidiary also generates interest income from the invested AUMs, which, when combined with the carried interest earned from these funds, makes it the third — though quite minor — source of cash for the holding company. In 2020, interest income amounted to €108k, with the PE Emergents segments representing 57% of the result (€62k).

Attractive dividend yield stands out from peers

IDI’s flexible investment approach supports its ability to identify the best time for exits, allowing the company to achieve high IRRs (averaging 15-25% for its PE Europe activity) and realise sizeable capital gains. This, combined with a disciplined stance on maintaining an average share of 20% of liquid assets & cash in the portfolio, is translated into a robust dividend policy that is able to withstand a volatile market environment (to the benefit of the family-owners and minority shareholders alike); which was the case in 2020. Despite the impact of the global pandemic, IDI was able to distribute a dividend of €1.50 per share (modestly cut from a pre-pandemic proposal of €1.90), which represented a solid 5.0% dividend yield. This compared quite favourably to the 3.1% dividend yield averaged across holding companies under our coverage last year.

When market conditions improve, IDI is also keen to follow with more generous dividend pay-outs, which helps support IDI’s case as an alluring investment proposition for investors that value attractive and dependable dividends as part of improving shareholder returns. Motivated by the successful disposals carried out in H1 21, and a €185m-strong liquidity position at the close of H1, the HoldCo decided to distribute a €1.10 per share interim dividend at the end of September, ahead of the final dividend proposal on the FY21 results (to be decided at the next AGM in 2022). We currently expect a €2.10 dividend per share, which would correspond to a 5.10% yield, well above the 2.3% average yield that we forecast for its holding company peers.

Change 22E/21 Change 23E/22E
  12/21A 12/22E 12/23E 12/24E €th of % total €th of % total
Total 3,600 3,690 3,875 4,068 90 100% 185 100%
PE Emergents 635 651 683 718 16 18% 32 17%
Actifs Liquides 336 344 362 380 8 9% 18 10%
PE Europe 2,629 2,695 2,829 2,971 66 73% 134 72%
Other/cancellations 0.00 0.00 0.00 0.00 0 0% 0 0%
 
12/21A
12/22E
12/23E
12/24E
 
Total
70.6%
70.6% 70.6% 70.6%  
PE Emergents
85.7%
85.7% 85.7% 85.7%  
Actifs Liquides
100%
100% 100% 100%  
PE Europe
69.0%
69.0% 69.0% 69.0%  
       
Changes to Story : 06/09/2022, Changes to Forecasts : 06/09/2022.