Private equity is growing in popularity as an alternative asset class for investors who have become disillusioned by the performance of listed equity. Typically considered the domain of the rich, one of the ways to access the private equity market is through a listed vehicle like Ethos Capital Partners.
Ethos Capital Partners came to the JSE at the tail-end of 2016, where it raised R2bn in new capital through the issuing of R200m shares at a target price of R10/share.
At the time, CEO Peter Hayward-Butt, Chief Executive Officer of Ethos Capital, said:
“Ethos Private Equity’s historical performance has consistently outperformed the listed benchmarks with 57% of its 91 realised investments having returned greater than three times the original invested capital, and 93% of realised investments having returned greater than twice the capital invested.”
Ethos hasn’t been immune to the weak economy and since listing, the share has traded as low as R7 (8 March 2019). The share currently trades on a PE of 27 times earnings and it has a Net Asset Value of R11.34/share.
Below is a breakdown of its major assets:
| Company | Description | Year of initial Ethos acquisition | % of total Ethos Assets |
| Channel VAS | FinTech | 2018 | 21.1% |
| Kevro | Corporate Clothing and Gifting | 2017 | 10.5% |
| Primedia | Media | 2017 | 8.5% |
| Synerlytic | Specialised analytical and testing | 2019 | 5.5% |
| Gammatek | TMT Accessory Distribution | 2018 | 5.1% |
| Twinsaver | Manufacturing (FMCG) | 2015 | 3.8% |
| Vertice | MedTech | 2018 | 3.1% |
| Tyme Bank | Banking | 2019 | 2.4% |
| Chibuku | Brewing and distribution | 2018 | 2.2% |
| MTN Zakhele Futhi | Telecommunications | 2017 | 2.1% |
| Autozone | Automotive Parts | 2014 | 2.1% |
| Eazi Access | Industrial Support Services | 2016 | 1.8% |
| Ster-Kinekor | Media | 2017 | 1.5% |
| Echotel | Corporate ISP | 2018 | 1.4% |
| The Beverage Company | Drinks Manufacturer | 2017 | 0.9% |
| Eaton Towers | Telecoms | 2015 | 0.8% |
| RTT | Logistics | 2014 | 0.5% |
| Waco International | Industrial | 2012 | 0.4% |
| Neopak | Paper and Packaging | 2015 | 0.3% |
Return analysis by portfolio company:
In its most recent results presentation, the company shared the below:
In its results commentary for the full-year results to the end of June 2019, the company noted: Ethos Capital ended the year with total assets of R1.9 billion and increased its NAVPS to R11.34. This represents the 12th successive quarter since listing that the Group has increased
its NAVPS although the increase during the year was muted largely as a result of the macroeconomic headwinds and the fact that Ethos Capital invested c. 50% (R0.7bn) of its invested
capital during the year. Ethos had a very active year on the investment front acquiring or investing in seven assets.”
Cash-flows are worth looking at:
One area which might be worth monitoring is the cash-flow where cash took a dip:
The cash-flow statement is un-packed below and does highlight the importance of “doing a deal”:
Summary:
Ethos offers investors access to a number of potentially attractive assets that are outside of the reach of retail investors.
The Ethos team have a fantastic track record and are well respected in South African financial circles. The listed environment is challenging at the moment and the question will be whether NAV growth translates into a positive return at a share price level.
