Edison issues update on HgCapital Trust (HGT)
London, UK, 13 September 2022
Edison issues update on HgCapital Trust (HGT)
HgCapital Trust (HGT) consistently executes its successful active ownership strategy, undeterred by the turbulent macroeconomic conditions. It has invested a net amount of c £332m ytd (16% of opening NAV) in announced deals (closed and to be closed), all in the manager's core areas of software and services expertise. Moreover, HGT should receive net proceeds of c £180m from exits and refinancings announced so far this year (with more exits in the near-term pipeline). HGT posted a 1.8% NAV per share total return (TR) in H122 and a one-year NAV TR of 20.6% (22.2% per year over the last five years). HGT's discount to end-June 2022 NAV is now c 17%, while it has traded much closer to NAV in recent years.
HGT's slightly positive NAV TR in H122 of 1.8% (2.7% ytd to end-August 2022) was driven by continued strong portfolio performance with last 12-month revenue and EBITDA for its top 20 holdings up 31% and 26% y-o-y, respectively. This is in line with the 2017-2021 average EBITDA growth of 28% per year, of which c 10-15% is normally organic. We believe that despite the weaker global economy, the earnings outlook for tech and services companies with a mission-critical, low-spend offering (such as HGT's holdings) remains favourable as corporate customers seek to improve business flexibility and cost efficiency. In July 2022, Gartner forecast global software and IT services spending to increase by 9.6% and 6.2% in 2022, respectively (followed by 11.8% and 8.3% in 2023).
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