Topic: 029 published its FY22 figures. As the company holds only minority stakes and reports under German HGB (no mark-to-market valuation), the publication was rather a non-event. While peer multiples have slightly improved (positive impact on our SOTP valuation), the current valuation looks fair.

As no companies were divested during last year, 029 generated no sales. The company’s operating expenses amounted to roughly € 0.7m, which were additionally impacted by costs related to the listing and uplisting. Going forward, 029’s annual cost base is seen to be around € 0.4-0.5m (eNuW). However, this does not yet include any expenses related to potential investments/divestments. While cash on hand at the end of last year stood at only € 6k, the company’s operating expenses should be adequately financed for the next 2-3 years thanks to existing credit lines.

Promising developments across the portfolio. 029's key portfolio company, Limestone Capital (72% of fair NAV), should be well on track thanks to the expansion of its hotel portfolio (eNuW: +10 locations by the end of FY23e) and record high occupancy rates at its existing locations. On top, Emerald Stay (6% of fair  NAV) which can be seen as "AirBnB for luxury homes", looks set to be able to continue to onboard new homes (eNuW: +65% for FY23e) onto its booking platform. Also the CBD-infused drink company TRIP (9% of fair NAV) is quickly increasing its distribution cooperations with leading retailers (e.g. Co-op and Boots

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, which could easily triple FY23 sales to € 35-40m, in our view. Further, Conscious Good (6% of fair NAV), is seen to launch its first, nootropics-based consumer product towards the end of the year, likely followed by a funding round (eNuW).

Portfolio expansion remains on the agenda. In line with the company's investment strategy, we expect 029 to acquire two minority stakes in strongly growing consumer brands with a focus on emerging megatrends during 2023e. While cash on hand is rather limited, the company could either access undrawn loan facilities or raise the necessary money through a capital increase. Mind you, in the mid-term, proceeds from successful exits look set to partially be used to fill the company's "war chest".  

We increase our PT slightly to € 14.70 (old: 14.20) on the back of improved peer multiples (mainly SohoHouse, AirBnB and Booking Holdings) since our last update in December 2022. At the same time, we downgrade our rating to HOLD (old: BUY) in light of the limited upside to the shares’ fair value.