Thanks for the great challenge. I welcome challenges and comments, as the valuation of this case is difficult during the current transition phase.
Sentica
I agree that KPY has a great deal to prove for a valuation of EUR 28 million to be justified; also, as you described, my own valuation of EUR 7.3 million requires clear successes in the future. It is true that, based on current figures, one could justify a very low valuation for the company. On that basis, we would have many companies close to zero value on the stock exchange. However, I see optionality for the future in Sentica, which, combined with the current AUM (Assets Under Management), justifies value for the company in my opinion.
Even though there has been turnover in the team, high-level talent also moved from Sentica to KPY. These individuals are, at least for now, relatively well-committed, and they know that Sentica’s development plays a significant role in KPY’s share price performance. In this forecast, I have estimated that the company would manage to raise two EUR 150m funds over the next six years. An informed reader knows that if Sentica/KPY does not succeed in fund-raising this year or next, there will also be downward pressure on the EUR 7 million valuation.
Administrative Expenses
I re-read that section of the report, and indeed, I think my communication comes across as too optimistic. I have slightly edited my text so that it doesn’t give the wrong impression, and I added data points. Regarding administrative expenses, the analysis must, to some extent, rely on what the company officially reports, as these have been thoroughly reviewed with advisors. It is true that the parent company’s fixed costs (EUR 3.1 million vs. EUR 1.5 million) do appear significantly larger. Naturally, there is no more detailed visibility into the cost structure. I will follow this closely in the future and challenge it if necessary when I have the chance to speak with management on the H1 results day.
Edit: Due to the uncertainty factors, the investment company discount I applied relative to my defined net asset value is 25%, and just over 30% regarding the target price.