Pepper Group Ltd
According to Morningstar, Pepper Group (PEP:AU) is a diversified, global financial services business comprising Lending, Advisory and Asset Management (aka Servicing) services across residential and commercial property sectors and provides loans for consumer, auto and equipment finance. The company has been operational since 2000, and listed on the ASX 31st June, 2015. It operates in Australia, NZ, Ireland, UK, Spain, South Korea, China and HK. European readers may better know Pepper Group as ‘Pepper Money’. Pepper had a market cap circa $537 mln.
I bought Pepper in May 2017 at $2.89 per share. Recently Pepper was acquired by a private equity firm, KKR & Co. The takeover price was $3.60 with an additional 10 cent dividend, fully franked to sweeten the deal.
I’ll be the first to admit however I need to fine tune my valuation skills. Still, I thought the take over offer undervalued the company’s worth 3-5 years from now, though something like 99% of shareholders agreed to the offer. The valuation range set out by an independent expert was $3.52 to $4.02 per share. As I mentioned in a previous post, this was below my estimated valuation of $5.29 – $7.35 over the next few years and also below a valuation by portfolio managers of The Boat Fund, Ron Shamgar and Sam Orr who disclosed their valuation of $5.40 per share.
Overall though, I’m happy to take the profit from what turned out to be a short-term holding. I would have enjoyed holding Pepper while it continue its expansion overseas and believe Management were doing an excellent job in this regard.
Total investment return: 29.77% over 7 month holding period. This included 23.38% capital gain and a 6.39% grossed up dividend yield.