Analyst positive on Chrysalis despite 41% Nav drop

Analyst positive on Chrysalis despite 41% Nav drop

The companies held by Jupiter’s Chrysalis Investment Trust delivered a “robust” trading performance, despite a drop in the trust’s net asset value, analysts at Liberum have said.

In a quarterly results update to the stock exchange this morning (November 21), the trusts' managers said its Nav had dropped 41 per cent in the year to September 30, including a 9.6 per cent fall between Q2 and Q3 this year.

The decline was predominantly driven by a fundraising round by one holding, buy-now-pay-later firm Klarna, which lowered the company’s value.

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Co-portfolio managers of the trust, Richard Watts and Nick Williamson said while this “down-round” would be viewed as disappointing from a value perspective, there are some positives.

"We believe its ability to raise $800mn (£677mn), including from new investors, at the peak of market fears over rising inflation and interest rates, demonstrates the attractiveness of its business model.”

The fundraise, in July, led to a post-money valuation for Klarna of $6.7bn (£5.67bn), an 80 per cent decrease in valuation compared to its last round.

The pair added they were “very encouraged” that in a challenging market, five of the trust’s largest holdings raised $1.5bn (£1.27bn) over the year-to-date.

“The macroeconomic and geopolitical backdrop is uncertain, but we remain confident that many of our assets will continue to disrupt the huge markets in which they operate; our top six holdings have a sub one per cent market share of their aggregate total addressable markets.

“In our experience, disruptive companies generally compound strong rates of growth throughout the economic cycle, and we believe this will be reflected in our Nav over time.”

The investment trust, which focuses on early stage, mostly unquoted companies, is projecting its revenue growth to be 53 per cent in the next year.

Analysts at Liberum said the trust reported a “robust” trading performance across the portfolio.

“Despite a further reduction in Nav quarter-on-quarter, reflecting lower valuation multiples for listed peers, we note the strong performance of the underlying businesses.”

Liberum said Starling Bank is a case in point, as despite the lower valuation, underlying performance remains strong.

Starling reported its first year of profitability in the year to March 31, with a pre-tax profit of £32.1mn.

“Ample liquidity also leaves the company well-placed to participate in future funding rounds,” Liberum added.

Finally, it said, the trust will benefit from its exposure to financial companies, which will do well amid rising interest rates.