Hidden value in Electra

The Investment Column

Last year's flotation of the venture capital group 3i has somewhat eclipsed Electra, formerly the stock market's biggest player in this business. While 3i's shares have outperformed the All Share index by 27 per cent over the past year, Electra's have merely held their own.

The group's underlying performance has actually been better than the share price suggests, as yesterday's figures confirmed.

Net assets of 390p a share in March represented a rise of 2.6 per cent over the previous six months and 2.4 per cent over the previous 12, outpacing respectively a 1.8 per cent increase and 1.5 per cent fall in the All Share over the same periods.

That is a respectable performance, which is only likely to improve. Electra revealed that net assets had already risen to 405p a share by the end of May. Since then, other things being equal, two further deals should have added another 6p or so.

Both transactions display the hidden value that may lie lurking within the portfolio. A stake in McBride, the detergents group bought out from BP just over two years ago, has grown from pounds 6.3m to close to pounds 11m following yesterday's flotation.

Arguably even more impressive is the proposal to sell a half share in Electra Kingsway, the trust's management company, to Robert Fleming for pounds 29.5m. The link with Fleming opens up new overseas markets for the trust and gives it more financial muscle.

Meanwhile, there should still be a store of value in the UK unquoted portfolio from the lag effect of companies still to report higher profit figures.

Credit Lyonnais Laing calculates the current discount to net asset value at 13-14 per cent with the shares at 358p, up 8p. The latest moves could narrow that. Meanwhile the venture capital cycle should have further to go. Reasonable value.