SINGAPORE (Nov 27): NRA Capital has found 11 “hidden gems” within Trendlines’ portfolio and derived a higher valuation of US$139 million ($187 million) or 22.5 cents per share.
Currently, Trendlines trades at 15 cents or 0.73 times book value and 14.6 times FY18 earnings, meaning the full upside of potential exits has not been priced in.
In a Monday report, analyst Liu Jinshu says NRA have identified 11 high confidence portfolio companies with high growth promise which could be sold off.
While two of them -- MVPC and Vensica -- have already been taken up, most of the rest has the potential to be sol off at valuations of more than US$100 million, based on deals with comparable companies, says Liu.
For example, ApiFix’s peers in the orthopaedic industry were acquired at valuations of US$212-US$410 million during the last two years. In addition, some of the portfolio companies are riding on broader trends that are not obvious at first.
One of them is Leviticus Cardio which is in the race to make the world’s first wireless left ventricular assist device (LVAD). With major LVAD makers being acquired for billions of dollars in 2015 and 2016, the price tag for Leviticus is likely to be steep.
Over in the Agtech unit, BioFishency is enjoying growing sales driven by high growth in commercial fish farming as global wild fish stocks decline.
See also: Trendlines' AquiNovo raises US$1.5 mil from leading animal nutrition and health company
Indeed, Liu says Trendlines’ track record is impressive, with a success rate of more than 20%. He attributes the high success rate to Trendlines’ relationships with technology leaders and established players in the industry.
These relationships in turn provide valuable feedback to help Trendlines identify industry needs, select the right portfolio companies and rapidly commercialise them by leveraging on the resources of partners.
Looking ahead, Liu says Trendlines will sell its stake in Vensica upon successful clinical trials in 2018. Other potential exits include ApiFix, Leviticus, and Gordian Surgical where B. Braun has taken a stake.
Meanwhile, Trendlines has made an effort to cut expenses by about US$1.3 million in FY18.
“We expect Trendlines to report FY17 PATMI of US$5.3 million in FY17, followed by growth of 18% to US$6.3 million in FY18,” says Liu.
Trendlines will also likely remain profitable in 4Q17; albeit at a slower pace as 3Q17 results were elevated by substantial new funding which raised valuations.
NRA is rating Trendlines “overweight” with a high-average return and average risk view.
