VSA Morning Technology Comment, 14/06/21
Frontier IP Group (LON:FIPP)
Frontier IP Group has today announced that portfolio company Nandi Proteins ("Nandi" or the "Company") has appointed David Flower as Chief Executive Officer. David is the former Managing Director, Europe, for Singha beer maker the Boon Rawd Brewery Company. He was previously Managing Director Home Baking for Kerry Foods.
Nandi is a spin out from Heriot-Watt University, Edinburgh and commercialises the work of Dr Lydia Campbell and her team.
Nandi is scaling up its first commercial products to create a range of customised ingredients based on vegetable and animal proteins. These functional proteins can be used to replace undesirable ingredients, such as fat, gluten and E-number additives in processed foods, or those that people do not want to consume, for example, replacing animal proteins with vegetable proteins.
According to the announcement this morning, Nandi has already gained significant industrial traction and is collaborating with major companies on several applications, including:
Vegetable proteins to replace egg whites and xanthan gum in gluten-free products to improve their taste and texture. Nandi is leading a project in collaboration with one of the world's biggest ingredient companies, AB Mauri, and Origin Enterprises, part of Agrii to develop this technology;
Vegetable proteins to replace egg whites in mycoprotein-based meat alternatives, turning vegetarian products into vegan products;
Vegetable proteins to replace chemical binders in plant-based alternative meats;
Proteins to replace chemical emulsifiers in baked products; and
Animal proteins to replace fat in processed meats.
Frontier IP Group provides commercialisation services in return for equity in private technology companies.
Of the 19 portfolio companies that Frontier IP has stakes in, a number are at a point of acceleration in commercial development, paving the way for a significant step up in valuation or a potential exit – they are at “inflexion point”. Nandi is one such company. David Flower’s appointment as CEO is the latest in a series of senior appointments made across Frontier IP’s portfolio companies as the management teams are strengthened to accelerate development. Pulsiv recently announced Darrel Kingham as CEO, and Jeremy Salt joined The Vaccine Group (TVG) in the same role.
Frontier IP holds a 20.1% stake in Nandi. Given food industry interest in its products and global market growth in healthier foods, Nandi, alongside Pulsiv and TVG, could provide significant future valuation upside.
Another example is Exscientia, which has developed an artificial intelligence-based drug discovery technology company. On April 28th, 2021, Exscientia completed a US$225 million Series D funding round led by SoftBank’s Vision Fund 2i. This followed a $100m Series C funding round completed in March 2021 and led by Blackrock.
The Group’s equity holdings are in four high growth technology clusters comprising: artificial intelligence, robotics and big and sparse data; pathogens and cell imaging; food and agritech; and engineered particles and materials. We believe that Frontier IP represents an excellent opportunity for investors to gain exposure to early-stage technology companies, based on leading edge IP, which meets the needs and demands of international markets.
Although Frontier IP has yet to have an exit to crystallise cash value, and the timing and value of potential exits is hard to assess, given the number of companies in the Frontier IP portfolio now at inflection points, such as Nandi, TVG, Pulsiv and Exscientia, this is becoming a real possibility.
As a result, we believe the shares offer distinct valuation upside potential. Buy
#Indicates VSA house stock.
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Phil Smith, Equity Analyst, Technology | T: +44 (0)20 3617 5187 | E: psmith@vsacapital.com
VSA Capital Research | T: +44 (0)20 3005 5000 | E: research@vsacapital.com
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