This was our share tip of the year at a 2.3p offer (£1.53 million market cap) on 27 December, the shares are now 2.85p bid so that is a 24% gain already. But we still see material upside... In September Pires Investments (PIRI) updated including “as at 20 September… unaudited net asset value was approximately £2.78 million or 4.2 pence per share… The company currently has a cash balance of circa £1.48 million and listed investments of circa £1.40 million”. But still just another unremarkable, sub-scale, investment company? Recent developments suggest not…
On 3rd October the company announced all AGM resolutions were passed – these included an amendment to its investing policy; moving from ‘principally focused on opportunities in the resources and energy sectors’ to also include “the technology sector”. This was particularly with it having reached an in-principle agreement to invest an initial £1.1 million into Sure Valley Ventures and up to a further £2.1 million over the life of the fund. The initial investment, and a 13% interest in Sure Valley Ventures, was completed in November.
Sure Valley Ventures describes itself as “an entrepreneur led Venture Capital Fund that invests in early stage software companies. Working in partnership with Shard Capital, a specialist broker and asset manager based in the City of London, we focus on areas of large growth and potential over the next 5 years”. It was founded by Barry Downes and Brian Kinane. The former, with also Silicon Valley experience, is currently also Chairman of the Telecommunications Software and Systems Group, an international software research institute that specialises in augmented and virtual reality (AR/VR), artificial intelligence (AI) and communications technologies research and development. Brian Kinane is perhaps presently better known in the financial markets for smaller company funding (Riverfort), but also has an extensive technology background – including at Barry Downes-founded FeedHenry, a cloud-based mobile applications platform acquired by Red Hat Inc (NYSE:RHT) for $82 million in 2014. Sure Valley Ventures currently has a portfolio of nine investee companies;
NDRC Arclabs Fund I – EU accelerator providing propriety deal flow
ProVision – IoT cameramatics for commercial fleets
VR Education (LSE:VRE) – virtual reality education
Warducks – AR games studio
WIA Technologies – IoT developer platform
The Pires Investments agreement with Sure Valley Ventures also saw “the initial investment to be made by Pires effectively puts the company in a similar position as if it had invested at the inception of the fund alongside the other investors. Pires will therefore have an interest in 13% of the underlying portfolio at valuations equivalent to that at which the SVV investments were originally made. The NAV of the fund as at 30 June 2019 was €8.3 million”.
Although a small-scale, AIM-listed, investment company, the scale of the Pires discount to NAV anyway looks harsh. That's added to with operating expenses for its half-year ended 30th April 2019 having been just £0.11 million and, speaking to a source close to the company, we believe technology investment aided by the relationship with Sure Valley will be the future strategic focus here and that the noted Sure Valley fund NAV will likely prove highly conservative. Some tangible support for this was delivered on 23rd December, with news that “an agreement has been signed to sell one of the companies within the SVV portfolio, Artomatix, for cash to a leading technology company… the amount accruing to Pires is expected to be around €803,000… The sale of Artomatix represents a cash multiple of around 5x the initial investment made by SVV”! That is with “whilst the fund has a life to March 2027, the proceeds realised by SVV through any realisations of its investments will be distributed to investors at the time of the realisation”, and the Artomatix news saw Pires Chairman Peter Redmond add “we look forward to good progress being made at the other companies within the SVV portfolio and expect further positive developments in the portfolio during 2020”. Meanwhile, we expect the emerging story here to see the share price further respond – at least towards stated NAV. We consider 3.5p+ possible in short-order on the emerging story becoming better known and further positive news flow.
Filed under: Pires Investments, Brian Basham, ADVFN, Sarah Cope, Anglo African, Audioboom, Versarien
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