Brokers' Views: Gall & Eke

This month, Gall & Eke puts the spotlight on St Peter Port Capital (SPPC), a listed investment company whose aim is to generate value by investing in growth companies prior to IPO. SPPC, which listed in April 2007, was set up by three well known and successful investors – Howard Shore, Tim Childs and Bob Morton.

Says Gall & Eke, ‘the company announced a strong set of interim results last December. In particular, SPCC made realisations of circa £21 million from its investments, generating gains of around £6.8 million during a time of turbulent financial markets.’ Furthermore, ‘management’s continued ability to realise investments and achieve attractive returns from non-IPO exits bodes well for the future, with the hope that market conditions will inevitably improve in the IPO market.’

Strong investment case
The case for investors to back management and buy the shares ‘is a compelling one’, considers Gall & Eke. ‘SPCC currently has a market cap of £36.5 million and investments worth £50 million, or 66p per share. In addition, its £25 million of cash equates to 34p a share giving a net asset value (NAV) of approximately 100p. A conservative valuation of 50 per cent of the investments (33p) plus cash (34p) would suggest a target price of 67p per share.

‘Given the current 52p price, this suggests that the shares trade at a 20 per cent discount to our target price and a highly attractive 49 per cent discount to NAV, making the shares attractive over the short and medium term. It is unlikely that the principals involved will allow these sorts of discounts to linger or they will attract activists.’