3i GROUP (III) – Investment Trusts
| Price: £33.77 -17.2% | P/E: 6.3x |
| Market Cap: £33.3bn | Yield: 2.0% |
The 3i board must be wondering what they said to send the share price down by 17%, one of the biggest one-day moves in the firm’s long and venerable history.
The group reported a solid total return of £3.29 billion or 13% on opening shareholders’ funds over the six months to the end of September, with NAV per share rising by 315p to £28.57 including a 78p per share foreign exchange gain against a loss in the same period last year.
Almost all of the return came from the private equity business, and most of that from Dutch discount grocery chain Action, where 3i now owns a 60% stake.
In the first nine months of this year, Action generated sales of €11.23 billion, up 17.4% on last year, thanks to LFL sales growth of 6.3% and new store openings.
However, chief executive Simon Borrows let slip in his comments that the group was being ‘cautious in the deployment of capital into new investment’ and he was ‘mindful that both the transaction market and the wider environment are likely to remain challenging into the second half of our financial year’.
Our View
Given 3i shares were trading over £40 yesterday against an end-September NAV per share of £28.57 (i.e. a 42% premium), even the slightest hint of a slowdown in growth or a lack of investment options was bound to hit the shares.
Even so, for a FTSE 100 stock to lose around £7 billion in market cap in one day is highly unusual. Hopefully it’s a reminder that companies which trade on exalted valuations need to keep delivering, and investors should check their portfolios for any other stocks which might constitute a potential banana skin.
Read the press release here: https://www.3i.com/investor-relations/
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