A FTSE 250 stock trading at a huge discount
2nd November 2022 15:20
by Graeme Evans from interactive investor
In a mixed session for the mid-cap index, our City writer has spotted a share that could be mispriced, and other stocks in the news.
A 58% discount to net asset value today put shares in Cazoo and Trustpilot backer Molten Ventures (LSE:GROW) in the sights of investors during a mixed session for the FTSE 250 index.
Molten, which used to be known as Draper Esprit, lowered the fair value of its portfolio by 17% at constant exchange rates to not less than £1.45 billion, reflecting significant market adjustments that left the Nasdaq 25% lower over the same six-month period.
Molten said its overall performance has been protected by a well-diversified portfolio, with over 70 companies across four sectors at different stages of development. Many are held through preference share structures, which also limit the downside.
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Chief executive Martin Davis added: "We have built our model to capture upside and minimise downside, and we continue to invest funds and deploy our expertise to maximise value in our portfolio.”
He expects net asset value per share of not less than 830p when Molten posts results up to 30 September later this month, compared with 937p at the end of March and 887p a year ago.
Broker Peel Hunt believes this 58% discount to last night’s closing price looks unwarranted: “Its assets remain well-funded, with the vast majority of its core portfolio having 18 months and more of cash runway and growing revenues at over 60%.” It has a price target of 861p.
Liberum pointed out that Molten’s portfolio manager had a proven track record, delivering annualised net asset value total return from launch of 19%.
It said: “Notwithstanding the fact that the environment has shifted significantly, we believe this level of discount is overly punitive.”
Molten shares were 5% stronger before settling 5.4p higher at 352.4p, in a session when this week’s interest rate decisions in the UK and US fuelled investor caution.
One of the FTSE 250-listed stocks under pressure was Wizz Air (LSE:WIZZ) despite the Eastern Europe-focused carrier reporting a return to profitability in the second quarter of its financial year and sticking by its plans for capacity growth of 35% in the second half.
Shares fell 49.5p to 1,685.5p, as the overall first-half operating loss of 64 million euros (£55.1 million) came in higher than expected due to airport charges and depreciation.
The stock is down more than 60% in the year to date, but had been as low as 1,357p last month. Peel Hunt has a price target of 1,735p and says the current valuation of 15 times next year’s forecast earnings is too low given the carrier’s development plans.
The broker added: “With rapid fleet growth and a pivot to the Middle East, the group will continue to expand quickly, using its low-cost base to increase market share.”
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The best performing FTSE 250 stock was specialist insurer Hiscox (LSE:HSX) after its 9% growth in gross written premiums to $3.68 billion (£3.2 billion) for the first nine months of the year.
The buying reflected bigger-than-expected average rate increases, leading to premium growth ahead of claims inflation assumptions. The Lloyd’s of London insurer also revealed a potential third-quarter loss from last month’s Hurricane Ian damage in Florida at around $135 million (£117.6 million), which is towards the bottom end of the City’s forecast range.
Shares rose 46.2p to 944.6p but Peel Hunt has a target of 980p. It said: “We believe the business is on track to significantly improve its underlying profitability as the reinsurance market hardens and rate adequacy in the London Market (Lloyd’s) is achieved.”
On AIM, shares in Cambridge-based video games publisher Frontier Developments (LSE:FDEV) rose 22p to 1,340p after it announced the acquisition of Winnipeg, Canada-based Complex Games for up to £11.6 million.
The deal means Frontier now holds both of its Warhammer titles in-house, having partnered with Complex on the creation of Chaos Gate - Daemonhunters. Released in May, the game has been one of the most successful yet for Frontier’s Foundry division.
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