Summary
- Investor AB has a very solid portfolio of private companies, all with major healthcare exposures.
- In the public markets, there's a solid portfolio of Swedish blue chips.
- The company trades at NAV, and the only place where there's a genuine discussion is over the private assets which, while important, are still only a little over 10%.
- There's no value story here yet, but if capital markets recover, equity markets may be slow on the uptake in revaluing the private assets.
Investor AB ( IVSXF ) ( IVSBF ) is a publicly traded holding company owned by one of the most important families in Sweden. There is no real discount to NAV here, and the only source of discussion is in the private markets portfolio which is important but not the biggest needle-mover, so there's no story here yet, but consider that capital markets are currently dead. When they come alive, there's a greater likelihood of these assets becoming monetised. Investor AB as a holding vehicle is in a part of the market that could be left behind, so it's a perfect watchlist pick to look at when things become more optimistic, and its portfolio of private holdings in the healthcare market is liable to revalue with acquisition premiums. As high-quality PE plays, they are likely to be first on the list in a re-budding PE environment.
Looking at Investor AB's Portfolio
Let's break down the holdings :
Half of the public holdings are in the first four holdings of Atlas Copco ( ATLKY ), ABB ( ABB ), AstraZeneca ( AZN ), and SEB ( SVKEF ). While there are quite a few industrial exposures in the portfolio, both ABB and Atlas, both are forecast to see EBITDA growth and recent industrial data for Europe was not weak. The continuing rate cycle isn't great for these higher operating leverage manufacturing plays, but the economic revisions shouldn't be too noticeable.
SEB is a little disadvantaged. Banks do well for a period after rate hikes, but the Riksbank has been slower to raise rates due to leverage in the housing system. Meanwhile, the IB business and other capital market-facing businesses are suffering. Not bad, but you'd have liked to see better.
Patricia Industries is the portfolio of private assets owned by Investor AB. It accounts for a little over 10% of the NAV. Almost all businesses are in healthcare. You have wound care businesses, measurement and analysis, medtech and surgical devices, healthcare mobility systems, reagent products for healthcare, and then a couple of manufacturing and real estate businesses. Their revisions in value have been primarily multiple-driven.
Arguably, some of these assets are being unfairly penalised within the NAV. Besides Piab and to an extent BraunAbility whose economics are going to be different from the typical healthcare stock, the assets are in the healthcare space, and usually, niches where multiples have held up very well to the market downturn, in particular medtech and also surgical devices and measurement. Intuitive Surgical ( ISRG ) is an example, as well as Stryker ( SYK ), both companies maintaining very high multiples despite hits to capital markets. Molnlycke trades in line with Medtronic ( MDT ) or more aptly with ConvaTec ( CNVVF ), even though it is demonstrating weaker growth. With the biggest asset in the private portfolio looking relatively expensive, it's hard to make a case for a major revision in the NAV, but some of the other companies, accounting for more than 50% of the private asset NAV, are trading at pretty low multiples despite resilience and high rates of growth in EBITDA and sales.
Bottom Line
However, even within the private assets, the amount of revision that could be argued is marginal relative to the total NAV. At no real discount from NAV today, there's nothing compelling about choosing Investor AB in particular as a vehicle to own these assets, especially when one would usually expect a holding company discount.
But Investor AB will be substantially levered to a general recovery in capital markets. This has been a major theme for us , and when multiples are ready to get revised, Investor AB shares may be slow on the uptake, since it reports its private asset values on a quarterly basis. Moreover, as time passes, the results of these companies will continue to improve. If the multiples revise upwards on higher financial statistics, there is further force for revaluation. There may come an opportunity to take a position once multiples have begun to revalue.
For further details see:
Investor AB Doesn't Offer A Value Angle