VSL - och it's a wee fox!
A Positive Read Across for VPC Speciality?
In CHRYing out loud a few days ago I wrote about a possibility of a WeFox sale. This is forecast to happen sometime in the next months.
The estimate was based on the 5.5p uplift for CHRY that one of its holdings would be sold at a 17% premium. They don’t say which.
Who else owns WeFox?
None other than VSL.
Some months ago I mused in “is VSL a risky bet” and I spoke about the avoidance of a hair cut vs the possibility of hair growth.
This news if it concludes would be hair growth. 17% growth of 12.65% of the portfolio. So a 2.2% uplift to VSL’s NAV or 2.1p per share.
Now while that might not appear a huge sum of money, remember most of the portfolio is debt with a near term repayment profile. Such a realisation would help close VSL trading at an (unwarranted) 25% discount (in my opinion) to NAV (89.9p). So:
A cash realisation of WeFox would be 11.4p a share. The gain is 2.1p. This represents a capital return of 13.5p or nearly 20% of today’s share price.
Returns are faster - in my model potentially 32p a share could be returned in 6-9 months from now (so including dividends that means over 50% of buying aVSL share today is back in your pocket!)
Haircuts turn into hair growth. The total return grows from £1.09 to £1.12 - so a gain of 3p due to lower hair cuts.
I’ve left all other hair cuts in there but I do appreciate you might disagree with the levels. There’s about 8p a share of hair cuts still in the price. And no other hair growth - which might be pessimistic - if hair growth is uniform (i.e. the other ordinary/pref/convertible shares and warrants increase in value - sorry if I’m baffling you with the hair analogy).
How do I know it’s WeFox?
I don’t. It’s deduction. Calculation.
CHRY holds 13 holdings. But some are small. A 5.5p gain for Secret Escapes would be an over 200% uplift…. nice! But on balance probably not that one. Some are already public. Some have a stated aim to IPO. So why would there be a private sale?
To be fair, the other CHRY holding that fits is Starling. The ex-CEO is a large holder and perhaps she plans to buy back her investors. But IPO would be as equally a likely outcome, perhaps the more likely one.
So WeFox could be it. It feels right.
The fact that both CHRY and VSL are under pressure to achieve capital returns, buy backs and so on also fits. A potential buyer will only potentially buy if they know they can get agreement from Willing Sellers. We know with WeFox there are two of these!
This is not advice.
Oak
My gut feeling on CHRY announcement was that it was Starling...we shall see