On review of CHRY - the current market price seems to be valuing in a lot of failure so could be a good entry point…
Full RNS hidden below, but to summarise after the significantly discounted Klarna fundraising, the NAV was discounted to 179.5p, and CHRY trades around 105p, so representing around a 40% discount. The RNS also states that 45% of the portfolio is profitable, and they have access to 105m of liquid assets, with a mcap currently around 600m.
Assuming everything as it is are all valued fairly in the NAV, the market is almost pricing the unprofitable growth companies to mostly fail. A stark contrast to some of the write ups earlier in 2021 through multiple independent channels recommending this private investment trust.
11th July 2022 RNS
Mon, 11th Jul 2022 13:17
RNS Number : 0427S
Chrysalis Investments Limited
11 July 2022
The information contained in this announcement is restricted and is not for publication, release or distribution in the United States of America, any member state of the European Economic Area (other than to professional investors in the Republic of Ireland), Canada, Australia, Japan or the Republic of South Africa.
11 July 2022
Chrysalis Investments Limited (“Chrysalis” or the “Company”)
Portfolio Update
Today, the Company can report that Klarna Holding AB (“Klarna”) has announced an $800m funding round that values the company at $6.65 billion post new money.
The round, which was larger than anticipated, was led by Sequoia Capital and has been undertaken at a valuation that represents a material discount to the Company’s current carrying value of the asset. Other investors in the round include Silver Lake and Commonwealth Bank of Australia, both existing investors, and new investors such as Mubadala Investment Company and the Canadian Pension Plan Investment Board.
The Company’s Investment Adviser believes the current valuation to be very attractive, and the Company has therefore committed to its pro-rata entitlement of $8.7 million. Consequently, the Company will not suffer any dilution of its holding because of this funding round.
The Company first invested in Klarna in August 2019 at a post-money valuation of $5.5 billion, with an EV/Sales multiple of approximately 6.7x. In 2019, Klarna generated revenues of $753m and a +20% rate of growth. The company had a very strong market position in the Nordics and Germany but had not fully proven its ability to penetrate some of the largest ecommerce markets globally, including the US, UK and Asia.
Since our initial investment, Klarna has achieved the following milestones:
· Revenues have grown from $753 million in 2019 to $1.6 billion in 2021 (+112%).
· Gross Merchandise Volume (GMV) processed has increased by $45 billion (to $80 billion).
· The number of Global Active Users has increased from 60 million to 150 million (+150%).
· The number of users in the US has increased to 27 million (+700%).
· The number of merchants using Klarna has increased from 130k to 400k (+167%).
· 10 new markets have been entered and Klarna is now present in 45 countries globally.
· The company has acquired Pricerunner, Hero, Inspirock, APPRL and Stocard.
· A global partnership with Stripe was announced in October 2021 giving access to millions more small-to-medium sized businesses.
Over the past three years, Klarna has grown into a global payments business with a dominant market position in several territories. The company’s rate of growth has accelerated, and the customer and merchant base has expanded materially. Innovative products and services have continued to be rolled out across new and growing verticals such as travel, event ticketing, beauty, and high-frequency verticals such as pharmacy and grocery.
The current valuation of $6.7 billion implies an EV/Sales multiple of approximately 3.0x; this represents a discount of over 30% to Affirm’s EV/Sales multiple and a 55% derating versus our initial entry valuation. Some investors view Affirm as Klarna’s closest listed peer.
Richard Watts (co-portfolio manager) comments:
‘‘The current funding round does not reflect Klarna’s progress since our initial investment, it reflects the very attractive terms that providers of capital are demanding against the current macroeconomic backdrop. We remain extremely positive on the outlook and potential of this business and believe that Klarna now has sufficient capital to reach profitability, whilst continuing to grow strongly.’’
Company Update
As announced on 23 May 2022, the Company’s net asset value (“NAV”) per ordinary share was 211.76p as of 31 March 2022.
It is estimated that the revised valuation of the Company’s investment in Klarna due to this funding round, along with the movement of listed assets and FX post-period end, would result in a decrease in the NAV per ordinary share of approximately 32p as compared to the Company’s last reported NAV per ordinary share. The resulting NAV would therefore be 179.50p
Note that 45% of the portfolio is currently profitable and 51% of the portfolio is now either profitable or has sufficient cash to reach profitability. The remaining 44% of the portfolio, excluding cash, has approximately 15 months of runway without raising further capital.
Cash Update
As of 7 July 2022, the Company held approximately £51m of cash. In addition, the Company also has significant further liquidity available, most notably its holdings in listed assets, which currently total approximately £64m.
Personally, this is a hold for me, as I’m saving up a bigger cash buffer, other wise I would continue to drip in up to 5% of my monthly investments as see value in a lot of Investment Trusts, especially once inflation settles down these should recover.
