CEO Trevor Brown on turning strategic investments into shareholder returns
Investment company Braveheart Investments takes active and significant positions in high-growth businesses to profit from their long-term success or sale to a major organisation. Here, chief executive Trevor Brown explains how the organisation is unique among its peers and why it could represent an attractive buying opportunity at 12.8p a share.
Strategic investments
Following a capital reduction last October, this year has seen Braveheart make several material changes to its strategic focus.
In April this year, the organisation revealed that it would dispose of Viking Fund Managers, its primary fund management company an initial £110,000 followed by a further £170,500 in early 2020.
Although Braveheart will continue to run its fund management business, Brown tells us that the Viking sale has allowed the company to allocate more time and capital to its strategic investment division.
At its root, this division is not too strategically dissimilar to a VCT or private equity-style investment product. Indeed, Brown and his team seek out businesses with high growth potential and support them by injecting capital in exchange for equity and using their expertise to advise management. However, Brown says that Braveheart boasts several crucial characteristics that distinguish it from its surface peers:
‘We are like an investment company, but it is not a portfolio situation where we have a small percentage of a company and minimum influence. We always have a director on the board and are in contact with them daily, ensuring we are heavily involved with operations. Likewise, we will not invest in a business unless we can take more than a 30pc stake. We own more than 50pc of some of our strategic investments. This ensures our shareholders have maximum exposure.’
Portfolio holdings
As it stands, Braveheart’s strategic investment portfolio consists of six holdings. These include:
-Kirkstall, which has developed a system of interconnected chambers for cell and tissue culture in laboratories;
-Gyrometric System, which developed a patent-protected system of hardware and software to accurately monitor the vibrations in rotating shafts;
-Paraytec, which develops high-performance specialist detectors for the analytical and life sciences instrumentation market;
-Sentinel Medical Limited, a company which will seek to exploit Paraytec’s technology to detect cancer cells in urine; and
-Phase Focus, which has developed a proprietary process called the ‘Virtual Lens’ that can generate high definition images of an object without the need for high-quality lenses.
The company’s final, and most recent investment is Pharm2Farm, a Nottingham Trent University spinout that has developed and patented a fertiliser than can increase nutritional uptake in both flower and crop farming. According to the business, its technology was developed initially to enrich the nutritional value of potatoes, successfully increasing iron uptake and yield and reducing time to harvest in an early trial. It has now been developed for use in the growing of other commercial crops, both in soil and hydroponically.
With the worldwide hydroponics market alone expected to grow from $8.1bn in 2019 to $16bn by 2025, Braveheart believes there is a substantial market opportunity for Pharm2Farm’s technology. As such, it is currently in negotiations to take its position from 33pc to 54pc by way of working capital investment. Speaking to TMS, Brown said there could be a particularly significant opportunity for Pharm2Farm in the burgeoning global cannabis market:
‘Cannabis growers are in a very profitable business, so if Pharm2Farm can enhance the growth of their crops, then they will be willing to spend. There is a large market for cannabis around the world and even the market at home here in the UK is growing. The belief is that it will be legalised at some point in Britain, and we will be in a great position as a supplier of a particularly potent fertiliser.’
Undervaluation
Braveheart’s share price has enjoyed a long period of strong performance this year, rising from 8.3p in May to its current 12.8p. Despite this, Brown – who himself owns a 29.8pc stake in the firm – believes it remains undervalued with a market cap of £3.45m. He says it is essential for investors to remember that, unlike many alternatives investing in young firms, Braveheart’s investments are all generating revenue and have proven their commercial viability to some degree:
‘Rather than offloading businesses for a relatively small sum when they are still very young and ‘blue sky’, we take firms to the mid-point in their journey, when they can command more money because they have gathered much more traction,’ he says. ‘With this in mind, investing in Braveheart is a bet that is stacked in the investor’s favour. They are gambling on one or more of our investments hitting pay dirt by way of an acquisition by a major company or a technological or sales breakthrough. The chance of this happening in our portfolio is strong as we are left with all the survivors who have already progressed past that most early ‘ideas’ phase.CEO Trevor Brown on turning strategic investments into shareholder returns
Investment company Braveheart Investments takes active and significant positions in high-growth businesses to profit from their long-term success or sale to a major organisation. Here, chief executive Trevor Brown explains how the organisation is unique among its peers and why it could represent an attractive buying opportunity at 12.8p a share.
Strategic investments
Following a capital reduction last October, this year has seen Braveheart make several material changes to its strategic focus.
In April this year, the organisation revealed that it would dispose of Viking Fund Managers, its primary fund management company an initial £110,000 followed by a further £170,500 in early 2020.
Although Braveheart will continue to run its fund management business, Brown tells us that the Viking sale has allowed the company to allocate more time and capital to its strategic investment division.
At its root, this division is not too strategically dissimilar to a VCT or private equity-style investment product. Indeed, Brown and his team seek out businesses with high growth potential and support them by injecting capital in exchange for equity and using their expertise to advise management. However, Brown says that Braveheart boasts several crucial characteristics that distinguish it from its surface peers:
‘We are like an investment company, but it is not a portfolio situation where we have a small percentage of a company and minimum influence. We always have a director on the board and are in contact with them daily, ensuring we are heavily involved with operations. Likewise, we will not invest in a business unless we can take more than a 30pc stake. We own more than 50pc of some of our strategic investments. This ensures our shareholders have maximum exposure.’
Portfolio holdings
As it stands, Braveheart’s strategic investment portfolio consists of six holdings. These include:
-Kirkstall, which has developed a system of interconnected chambers for cell and tissue culture in laboratories;
-Gyrometric System, which developed a patent-protected system of hardware and software to accurately monitor the vibrations in rotating shafts;
-Paraytec, which develops high-performance specialist detectors for the analytical and life sciences instrumentation market;
-Sentinel Medical Limited, a company which will seek to exploit Paraytec’s technology to detect cancer cells in urine.
-Phase Focus, which has developed a proprietary process called the ‘Virtual Lens’ that can generate high definition images of an object without the need for high-quality lenses.
The company’s final, and most recent investment is Pharm2Farm, a Nottingham Trent University spinout that has developed and patented a fertiliser than can increase nutritional uptake in both flower and crop farming. According to the business, its technology was developed initially to enrich the nutritional value of potatoes, successfully increasing iron uptake and yield and reducing time to harvest in an early trial. It has now been developed for use in the growing of other commercial crops, both in soil and hydroponically.
With the worldwide hydroponics market alone expected to grow from $8.1bn in 2019 to $16bn by 2025, Braveheart believes there is a substantial market opportunity for Pharm2Farm’s technology. As such, it is currently in negotiations to take its position from 33pc to 54pc by way of working capital investment. Speaking to TMS, Brown said there could be a particularly significant opportunity for Pharm2Farm in the burgeoning global cannabis market:
‘Cannabis growers are in a very profitable business, so if Pharm2Farm can enhance the growth of their crops, then they will be willing to spend. There is a large market for cannabis around the world and even the market at home here in the UK is growing. The belief is that it will be legalised at some point in Britain, and we will be in a great position as a supplier of a particularly potent fertiliser.’
Undervaluation
Braveheart’s share price has enjoyed a long period of strong performance this year, rising from 8.3p in May to its current 12.8p. Despite this, Brown – who himself owns a 29.8pc stake in the firm – believes it remains undervalued with a market cap of £3.45m. He says it is essential for investors to remember that, unlike many alternatives investing in young firms, Braveheart’s investments are all generating revenue and have proven their commercial viability to some degree:
‘Rather than offloading businesses for a relatively small sum when they are still very young and ‘blue sky’, we take firms to the mid-point in their journey, when they can command more money because they have gathered much more traction,’ he says. ‘With this in mind, investing in Braveheart is a bet that is stacked in the investor’s favour. They are gambling on one or more of our investments hitting pay dirt by way of an acquisition by a major company or a technological or sales breakthrough. The chance of this happening in our portfolio is strong as we are left with all the survivors who have already progressed past that most early ‘ideas’ phase.
Braveheart’s Trevor Brown details investment in ‘exciting’ Pharm2Farm Limited
