IP Group PLC (LSE:IPO), the venture investor behind Oxford Nanopore and a raft of university spin-outs, has won backing from both Berenberg and Deutsche Bank.
The shares, at 56p, trade at roughly half of book value, a discount both banks argue has gone too far.
Berenberg sticks with its 'buy' rating and 100p target, while Deutsche trims its own to 103p from 114p but keeps the stock on 'buy'. Both, it should be pointed out, are brokers to IP.
The message from both is similar: the portfolio is showing resilience, cash is plentiful, and management is making progress on costs and exits.
The numbers bear that out. Net asset value per share was 96.2p at the half-year, down 8% year on year but steady against December.
By September, NAV had climbed to 100p thanks to gains in Oxford Nanopore, which makes up about 12% of the portfolio, and Hinge Health, the US musculoskeletal care company floated this summer.
Together, they account for more than 15% of NAV. Losses narrowed to £43 million, less than half last year’s figure.
Cash of £237 million, almost half the market value, underpins confidence. Realisations of £30 million in the half, mainly from Intelligent Ultrasound and Centessa, were nine times the prior year’s haul.
Hinge’s IPO, up 60% since listing, provided another boost. Meanwhile, smaller companies such as Accelercomm and Mixergy have raised fresh funding, reducing calls on IP’s balance sheet.
Deutsche notes that about two-thirds of the portfolio by value is funded out to 2027 or beyond, taking pressure off near-term cash burn.
Istesso, the drug developer written down heavily in 2024, has at least held its value after encouraging trial data. Overheads are down 12%, with management promising more savings.
The big challenge is exits. Both banks highlight management’s target of £250 million from private disposals by 2027. Progress has been made, but markets for growth capital remain difficult.
Investors will want to see a steady flow of sales above carrying value before awarding a higher rating.
Even so, with the shares still 45% below NAV, the valuation case is plain.
The combination of cash, a stabilised portfolio and visible exits argues for a narrowing of the gap.
As Deutsche puts it, IP has “proven it values its portfolio sensibly” and deserves more credit.