London, UK, 29 April 2024

Edison issues review on Princess Private Equity Holding (PEY): Introducing a well-defined buyback policy

Princess Private Equity Holding’s (PEY’s) 12-month NAV total return (TR) to end-February 2024 was a modest 0.6% amid low exit activity across private equity (PE) markets. That said, if the pick-up in global M&A volumes witnessed earlier in 2024 continues, it should support PEY’s exit activity. This in turn would translate into improved returns if PEY delivers sizeable uplifts to previous carrying values upon exits, as it has done historically. In this context, we note that PEY has a good pipeline of mature investments that are potentially ripe for sale. PEY’s shares now trade at a 24% discount to NAV versus a 10-year average of 18%.

PEY offers a solid annual dividend payment of 5% of opening NAV, which it has been able to successfully deliver since 2021 with few exceptions. Furthermore, PEY’s board recently introduced a well-structured framework for conducting NAV-accretive buybacks. This is designed to ensure a significant part of PEY’s free cash flow will be allocated to share repurchases in the event its shares trade at a wide discount to NAV. In this context, we highlight PEY’s good balance sheet headroom, with available liquidity and contracted exit proceeds exceeding all its outstanding investment commitments.

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