Shares in HgCapital Trust (HGT) ticked up 4.1% to 260.75p after the private equity investor announced it would pour about £17.1 million into Norwegian enterprise software company Visma.

Investing alongside private equity powerhouses Warburg Pincus and TPG as part of the world’s largest ever software buyout, this new investment round triggered an upwards revaluation of HgCapital Trust’s stake in Visma and prompted Stifel to upgrade its recommendation on the FTSE 250 listed company.

WHAT IS HGCAPITAL TRUST

A listed investment trust that puts money to work with unquoted software and service businesses across Europe, HgCapital Trust seeks to provide shareholders with consistent long-term returns in excess of the FTSE All-Share.

It is managed by private equity outfit Hg, a backer of unquoted software firms where it can create value through strategic and operational change.

THE ATTRACTION OF VISMA

Today’s new news is that HgCapital Trust will invest roughly £17.1 million in Visma, with other institutional clients of Hg investing alongside the trust through the wonderfully-monikered Hg Saturn 2 Fund.

As part of the transaction, Hg’s Genesis 7 Fund will reduce its holding in Visma, which provides business-critical software to private and public enterprises in the Nordic, Benelux and Baltic regions.

HgCapital Trust says the Covid-19 pandemic has demonstrated the power of Visma’s cloud solutions, which have empowered businesses to stay connected and continue working through the crisis.

The resulting revaluation of the Visma investment boosts HgCapital’s net asset value (NAV) by £69.1 million or 17p per share.

WHAT A DIFFERENCE A DAY MAKES, 24 LITTLE HOURS

The investment also marks the third positive development at one of the trust’s portfolio companies within 24 hours, which is encouraging during the quiet month of August.

Not only has HgCapital Trust agreed to a further investment in global tax software provider Sovos, it will also generate roughly £25.8 million in cash proceeds following manager Hg’s sale of Citation, a provider of tech-enabled compliance and quality related subscription services to small and medium sized firms, to global investment giant KKR.

Stifel analyst Iain Scouller upgraded his recommendation on HgCapital Trust from ‘hold’ to ‘buy’ and raised his fair valuation from 235p to 290p.

Scouller reckons HgCapital’s focus on the technology sector will mean that ‘it could be a stand-out performer in the private equity sector this year. This view has been reinforced by the gains of the last 24 hours.

‘The size of realised gains delivered by HgCapital in recent years, together with prospects for further profitable realisations going forward, mean the shares are likely to trade at NAV or even on a premium, whilst the market’s enthusiasm for this sector continues.’

READ MORE ON HG CAPITAL TRUST HERE

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Issue Date: 21 Aug 2020