Earnings Call: Q3 2021

Oct 22, 2021

Quarterly report

Welcome to the VNB Global Third Quarter 'twenty one Call. Today, I'm pleased to present Per Brillios, Chief Executive Officer. For the first part of this call, all participants will be in a listen only mode and afterwards, there will be a question and answer session. Speaker, please begin. Thank you. I'll go through a couple of slides highlighting the quarter, and then we'll move over to Q and A. I hope you can see me flicking the pages now. But if I think a good summarizing page Will be this one. And so I think if you sort of flick through the actual report, all of this will be clear to you. But NAV is Roughly $1,500,000,000 that's up since last quarter, and that's driven by various sort of revaluations and one markdown and collectively sort of that has us up nearly 14% over this quarter. I mean, the it's our largest investment is Babylon. Babylon lists pretty much now on the New York Stock Exchange. So that's big for us. Not that we're in any way looking to say bye bye to Babylon at these sort of levels at this point of time or anything like that. But it's So it's not by any means an endpoint to our sort of journey on Babylon, but it's more sort of one step forward. It gives the company access to new capital markets and other cost of capital, etcetera, etcetera. But so important to follow that. So it's difficult sort of to have anything else that's and I was going to say it's difficult to sort of that sort of dwarfs everything else. But at this particular moment, We didn't really have any intention to sort of do this call at the exact same moment that it started trading, but here we are. And but beyond that, I think there's been a lot of activity at our end over this quarter with several new investments that we are very, very excited about. A couple of Just taking the time to do a couple of background slides, not that any of you need any background, but just stick through quickly a couple of slides that we use When we talk to shareholders, this is an Akeri one, sort of NAV development over the years We spun off that listed portfolio now nearly 10 years ago. Time goes quickly. So we're Our annual NAV is some 33% since. We I think it's good. On this page, you'll see a good sort of NAV bridge from the 2nd quarter NAV, which was just under SEK1.08 per share. So there's been 2 revaluations, which we have talked about over this quarter in sort of separate press releases, but swivel. That revaluation added another SEK8 just above VOICE round, added another nearly SEK 8. Newmann, which we haven't talked about, which I'll touch upon a little bit later, added another 2 krones. And then in this quarter, we've taken down BlaBlaCar a little bit. I'll come back that too. And we end up at 1.22. 5. And now that Babylon is trading, it's You guys may be more updated than me at this particular time. Last I heard, we were looking at I think the pre market put the price at $10.8 per share. We owned 43,200,000 shares in Babylon. So that has the NAV pretty much banging where our stock is trading right now. So Talk about efficiency of markets, but I'll the slides I wanted to sort of use that we use in our presentation, I think just I think just worthwhile repeating sort of the backdrop to what we do. So in contrast to those of you who've been with us for a long time, this portfolio is sort of diversified now. That's not Something we seek. We sort of let things run and develop as they do. And if they become a large part of the portfolio, that's fine. But today, 70 of the NAV is are across 6 assets. This is the same 6 assets that would have been there a quarter ago, but they're somewhat sort of moving around. Voig has now become the 2nd largest taking over from Blavlakar in that sort of number 2 position after Babylon. Importantly, also, it's well, not much of a change, but importantly, this is across 3 We not maybe sectors, but macro themes, mobility being the largest, followed by digital health and then our more traditional marketplace space. We're not so much about Russia anymore. This is about Europe really. We do have some Russian stuff. We have some Middle Eastern stuff. We have a global focus. As you know, we've done some small things in the U. S, small things in Latin America, small things in Asia, But most of this is sort of Europe and our time zone. But what I wanted to get to is that as of this exact moment, Babren is also listed, which means that we have the green part here, as you see. So just north of 30%. Say, onethree of the portfolio is in fact now listed with Hemnett and Babylon. Swivel Dark Blue here is about to be listed. The planning there is early December for that to be listed. We feel good about that. That's and then this, as we call it, blueberry mixed with milk kind of color. VoilaBlaBlaCar and Getha are all companies that are in a at a matured stage, which they can access public capital markets as well. So in fact It's not totally inconceivable that come give us a year or so that as much as 70% of the portfolio is in a lifted format. And as you'll know that we're not investors into public companies, very conscious of that we are a public company and that our typical investor can invest in that themselves, but that doesn't mean that we have to sell things upon an IPO. And if we feel that there is 30% -plus sort Or 20 plus, but obviously 30% IRR is our it's what we produced earlier. If we think there's that sort of kind of annual upside left. We will sort of hold on to them as we go along. And I think Pablo sort of clearly checks that box of that I mean, in our view, that kind of upside. Beyond that, we I think it's so important To highlight that there is more in this portfolio than the 6 large ones that make up 70% in what we call in our next generation portfolio, there's four names that stand out as very good candidates to sort of become much larger percentage wise in the portfolio. PropertyFinder, you've known for a while. Newman has Been in our portfolio for a couple of years, but now starting to become a seriously sort of large company. Borzo is the new name of Dostavista. It's also been there, and that's developing very well. Buksi in sort of the same position. So these are names that are large enough to actually show up, but they're maybe not large enough to matter in the short term, but that can change quickly. And finally, in this large other space, there are a lot of names. And in fact, if we click to the next page, it's this the other part is broken out into a sort of a little bit more detailed sort of pie chart. And you see here that This is these sort of 30 or so names that are not large enough to show up in any sort of material way Our spread across C, CHA, B, some C. All of these companies Ardo are young and growing very fast. And it's not inconceivable that they will Grow in the same way that Aviso went from a $5,000,000 position to a $500,000,000 position. Voy went Sort of had a similar sort of very, very large upside or had become something that was very small and into something that's our 2nd biggest position. So we essentially think that there's this potential in this portfolio among these names to become something that actually sort of much more material in the portfolio going forward. So leaving that sort of big picture background, a couple of slides on the different companies that matter in this quarter. And well, Babylon, it's completing its listing. It's merged with the Aperolis back. It's Change this ticker, so you should look for BBLN Babylon without the vowels. And That's particular where Trade's at. And yes, well, This the transaction update in this slide is somewhat sort of quaint now as That's all in the past, but obviously, the merger was approved, the transaction completed, and the Australian. And it's Australian just above 10. As we speak, we've got 43,200,000 shares. So our mark will now follow that price. So no more models from us valuing Babylon. This will all be done with the help of the market. And in rough, rough terms, dollars 1 on Babylon, it's SEK 1.8 per share in terms of our NAV. If we continue here to VOI, Well, VOY contributed positively to our NAV growth during this quarter. It's been since then, it's obviously been out in the press that they're out there doing another round. So we'll see how that sort of develops. They are developing very, very healthily. They're in 70 cities now. They clocked in the Q3 this Q3 that we're now reporting on, they clocked 25,000,000 rides. You can see sort of the green line on this chart. It speaks for itself. And I think it's also important to highlight how strong VOY is versus all competition And basically across all any way you measure it, it's strong. But also importantly, it's a clear number 1 in terms licensed markets. And this space is becoming more and more sort of infrastructure operated under license, Although with network effects, which is obviously what we're looking for here. But as you can see, VOI clearly leads space in Europe in terms of number of licenses. Blavlacar is, as you know, we're very, very enthusiastic on. We are But the way our models work are that we look out into the near term and we apply sort of a We build a peer group of the best peer group we can, and then we multiply the 2, right? And the fact of the matter is that It's that the outlook is, in fact, not It's been long distance travel is yet to come back in a way where you can sort of say things clearly about the near term, which is what we use when we do the models. I mean, obviously, if you look beyond the very near term, I think there's some very, very rosy pictures That you can sort of point at to Babylon. But for the near term, that I mean, 2022 doesn't look like the 2022 of a few years ago, if you see what I mean. And that matters for our model. Having said that, as you noted in our report, We the company in September saw that it was coming back to 2019, so essentially pre COVID level in terms of net revenues for the first time since the crisis. So this model is something that may move around, And it should by no means be seen as us being negative on the company. We are I mean, as you know, we funded the company earlier this year. We're We're in fact very enthusiastic about this marketplace. And I think it's and our funding And the company at large is, of course, making our funding, I think, helps the company in terms of on the M and A front to be smart and optimistic on M and A. And as the company has stated themselves, They're positioning themselves as the leading player in terms of digitalizing long distance buses in emerging markets, and that's a very, very large growth area. We've seen the sort of strong effects of them buying the bus marketplace of Russia and Ukraine bus for and the good synergies that creates with the C2C markets of cars. And there's simply more to do there, and the company is optimistic and strong in that M and A sense. So We're very enthusiastic about that. And a short term markdown should not be seen as a negative for us. We are very enthusiastic, And that model will likely move around as we go forward in these sort of quarters. Swivel is, of course, also contributed nearly SEK 8 per share. It is they have announced their SPAC plans at a $1,000,000,000 pre money that should close in this by December, in December. And the company is performing very well. I mean, to date, it has processed 53,000,000 bookings this year, which is, of course, very strong. And we think there's the strong upside to this space and this company for in the coming year, So very enthusiastic about that. And Newman is perhaps a new company. It's not per se a new company in our portfolio, and I think some of you may have come across it. But it's Become a new company in terms of the size in our portfolio. So this is a it's a digital health care provider, And it's actually number 1 in the U. K, and it's focused on men, on men health and well-being. There are U. S. Peers for this, most notably HIMSS, which have sort of developed very well and also sort of developed into quite substantially larger absolute valuations than we have at Numan today. But they did I mean, first of all, we have invested in it during the quarter, and it has closed round, which has had us revalue our stake in Neumann to nearly $40,000,000 And so and the company is just doing very well. Finally, a company that it has been in the portfolio actually since last summer when we bought a small secondary stake in Olio. But for we own less than a percent of the company. We've now moved up, and we own 11% of this company after having led their most recent round of some $40,000,000 And we this has since moved up to like a $16,000,000 position for us. And I'm very, very enthusiastic over this company and think that This may be one that sort of develops into I think all of our smaller positions now, this is No longer small positions have the potential to go sort of some like an Avito sort of future. It has to have an Avito type of return future ahead on themselves. But this one, maybe especially, and it has a lot to do that the space is not One that anyone has really built before, but the community around their product, which is Although the overall sort of ambition here and the gap that they are have a large Good possibility to Phil is want to become a global even iconically global sustainability brand, which is, as you can imagine, there is none out there today. I think someone said that it's that the only one out there today is Patagonia. So there There's some big sort of gaps for companies to fill, but their current product their product today is one around food waste and which is such an important part of the sustainability focus of the planet overall. And they have sort of really sort of built a community that It's very effective in terms of dealing with this problem. And they are and so become the largest in the UK And growing a lot outside the U. K. To become the global leader in this. And so there's 4,000,000 large community around this. And We sense that this community will be able to grow enormously over the coming sort of years. And if this company is monetized today versus large corporates who need help with to deal with this food waste product. I think the Our feeling here is and our and more than that, sort of we've built models around this, as has the company, of course, that there is very, very interesting ways that this community will be able to be monetized in the coming years. We should be able to interact exactly high. How? It's low. But that there is Potential for that is, I think, our conviction is very high. It's not too dissimilar from doing classifieds In Russia and the lack of visibility into the monetization opportunity around that in sort of the mid-two 1000, This just feels similar. Tons of more details to talk about that, but I hope that works as an intro. With that, I think we'll open up for questions. If the operator could help us manage that, that would be great. Thank you. Brillouz. And there will be a brief pause whilst any questions are registered. Brillos. And our first question comes from the line of Stefan Wirt from Hereditary. Please go ahead. Your line is open. To the line from Pareto Securities. Your line is open Brillio's questions. If you have put yourself on mute, please take yourself off mute and you can speak. Okay. Sorry, I was on mute Per. Thanks for a very interesting presentation, Per. Also wonder if you could give a little bit more detail on the actual process of the listing of Babylon. If you have has there been any announcement on how they redeemed share The amount of that or any other details that you can give in relation to this? Well, thanks, Stefan. Yes, no, it's This is new for us. The being part as a substantial shareholder in a company that lists on the New York Stock Exchange. And I hope that as we go along, we'll Find sort of a firmer footing in terms of how we deal with this communication wise. But for now, I think it's we have to defer basically everything to what the company says Endas and right, it becomes a delicate position for us. So in terms of the details around the listing, I think that the normal procedures that, that becomes clear in the different filings as we go along. But I'm not at liberty to sort of go into it now. I'm sorry, but I'm sure you understand. Of course, of course. Thanks. Then just a few questions. If you could give a little bit more details on the on how your thinking is on GlaBlacar. I read the report, so I see the argument that you take it down a little bit because it's still sort of impacted negatively by pandemic considerations. But I think it could be useful to get some more clarity on your view of that holding and what you expect maybe in the sort of a medium term perspective for that asset. Thanks. Yes. No, the short- to medium term, I guess, definition of but travel coming back. And as we noted in the report, it is I mean, it is coming back, Right. I mean, the September, we clocked in at September 2019 pre COVID level. So It's really coming back with the wengens, and that's, I guess, is an effect of vaccinations being more spread than people sort of feeling more at ease, etcetera, etcetera, etcetera. So maybe this markdown, yes, we have a model. We have to follow it. But As Per before, there will be more there will be volatility around that. But that is clear. And then Beyond that, what will be important here is the monetization of They're new market, so to speak, and that is the larger emerging markets. That will be very interesting to see. Russia, Brazil are becoming very, very liquid markets and sort of huge GMV and big potential sort of To monetize that, which I wouldn't expect sort of I would expect sort of Aviso type of rollout of that. I mean, you start small and then it increases. But that will be another interesting sort of thing to follow. And then as the company has said, it's and which we have supported through our funding will be them using their very strong balance sheet to be optimistic on the M and A side. And as we try to point out in our report here, The focus is obviously that they position themselves as a leading player in terms of bus marketplaces, which marries very well with the C2C side. So long distance travel coming back, big sort of positive. And then monetization of markets beyond the sort of the most mature developed markets of Western Europe and then more acquisitions like VASFOR. We think the if you combine that, they're clocking 113,000,000 users. I really think that you could stretch that outlook if I mean, even on a medium term to that, that could grow to like 200,000,000 users. And if they are monetized today at like $1 or €1, Not quite as low, but a year, 1.5 year per user. I think that has the potential to go to 5. France and the developed markets will be higher, and the emerging markets will be lower, but an average of 5, I think, entirely possible. That's how we look at our investment case here, and we feel strong, high conviction that, that's possible. So 200,000,000 users, €5 a piece in annual revenues, €1,000,000,000 of revenue, Aviso type of margins Because it's a very fragmented supply to a very fragmented demand in all these markets. And you get So yes, you get the classified type of margins. And you then you sense that the sort of the mark that we have with that leads a lot of room, So that's sort of the thinking. I hope that helps your question. Yes, absolutely. I'll Take the opportunity to follow-up with another question regarding future investments. I mean, the Bob That has been hugely successful for your side. But from my point of view, it still feels like the digital health space It's maybe not your sort of core focus area? Or will you try to do More investment in that area, just from my own sort of thinking? Yes. No, I mean, I think, first, it's important sort of to for me to sort of Reinforce that we look we really invest bottom up. Our niche is not mobility, digital health or anything else. We look for network effects. We look for companies that can build so high barriers to entry that they really become like something close to natural monopolies. And that may get us into that has currently got us into classifieds, of course, but mobility and digital health. But it could and it will, and I think an OLU is a good example. It will get us into it is getting us into a climate macro. It may get us into other macros as well. But so that's important. But of course, as you sort of allude to, this digital health, there's a lot of stuff going on there. There's a lot of interesting stuff that we say no thanks to because they don't necessarily build very high barriers to entry, But that could still be interesting, but it's not for us because we really feel strongly and have a setup that's catered through to these sort of barriers to entry type of businesses. But having said that, we I mean, there are we have done investments here, right? I mean, A lot of them center around data or communities. So beyond Babylon, there is we have what is it now? We have 2 doctor booking platforms, doctor booking platforms, right? 1 in the Middle East, 1 in Russia. We've got 1 health insurance, digital health insurance company, Best Doctor in Russia. That's essentially like an Alain of France or Oscar Health of the U. S, that business model in Russia and the Middle East. We have recently or during the quarter invested into Palta, which is essentially it is exposed to digital health in a large capacity with a lot of junk companies in that portfolio, but the big and mature company is a company called Flow, which is the world's leading period tracker, but also a very sort of interesting sort of product development beyond just the period tracker and very centered around data. So there is a portfolio of companies in the portfolio that are obviously not as large as Babylon. But I think they I mean, they have this That's certainly the potential to become large contributors to the portfolio, all of them, if not perhaps I mean, Babylon obviously has the potential to become maybe the global leader in digital health. The others are niches more to geographies or certain sort of areas, but I think all of them have a strong potential. So there's still little help stuff going on for sure in the portfolio. Okay. Thank you very much, Per. Thank you, Stefan. Thank you. And as we have no more questions registered, I'll hand back to our speaker. Thank you so much for listening in. And well, you know where to find us if you want to Discuss anything else. Otherwise, I'll talk to you all in the quarter. Thank you. This concludes our conference. Thank you all for attending. You may now disconnect your lines.