3i says asset values lag stock market rebound

British private equity firm 3i Group doused hopes that the stock market rally would quickly feed through into the value of its assets, sending its shares down more than 3%.

In a statement on Thursday the company said the disposals it had made in the five months ended September 30 had been at about the same value it had previously assumed, helping snuff out a recovery in its shares driven by the stock market rebound.

“Realisations for the five month period have been achieved at approximately their 31 March 2009 carrying value,” the company said. “Gains from earnings multiples are unlikely to fully reflect the strong performance of stock market indices since 31 March.”

Shares in the group were down 3.7% at 277-1/2 pence at 0848 GMT, having touched a near one-month low of 268.1p.

“Despite the recent strong performance of equity markets, the economic outlook is still fragile and private equity and mergers and acquisition markets remain subdued,” said Chief Executive Michael Queen in the statement.

Some analysts said they had reigned in net asset value estimates for the company. Analysts at brokerage Oriel said in a note to investors they would pare their estimate to between 310p and 320p a share from 321p to 331p.

“Given the caution in 3i’s statement today and the sensitivity of 3i’s valuation to stock markets … we think it appropriate to value 3i on a larger prospective discount,” said Oriel.

The brokerage increased its discount applied to unquoted net assets to 20% from 15%, reducing its share price target to 270 pence from 285 pence.

3i’s total disposals over the five months to end-August amounted to £448m, not including the sale of its venture capital portfolio earlier this month for around £130m.

The group invested just £155m over the period compared with £560m over the same period of 2008 as dealflow remained sluggish.

3i said it had secured £350m in the form of two new credit facilities and now has credit lines worth £586m. It said net debt was £858ms at the end of August, down from £1.91bn at end-March, following a heavily-discounted 732 million rights issue earlier this summer.

It said lead arrangers on the new debt facilities included Lloyds TSB, Royal Bank of Scotland and Societe Generale