Opportunities abound amid new world order

Prospects for Severfield, the UK’s top steel construction specialist, should be underpinned not only by existing markets including infrastructure and datacentres but also, longer term, by three key themes: security, decarbonisation and lifestyle changes. The group’s specialist skills ideally place it for new nuclear, green energy and ‘gigafactories’. This wide-ranging note peers over the horizon to Severfield’s longer-term opportunities.

Opportunities abound amid new world order

Tern recently issued a strategy update following the termination of its proposed acquisition of Pires Investments plc. While the termination was disappointing given the complementary portfolio potential from Pires, we believe that focus should shift to Tern’s hybrid VC model and the value and organic growth potential from its own network of companies. In our view, pressure to realise cash through an exit is unfounded given the timeframe required to deliver maximum value to shareholders by preparing a business for harvest. Coupled with delays due to Covid, we believe this would make an immediate exit premature. The group has delivered consistent valuation uplifts, with 35% year-on-year total net asset growth achieved in FY21. Tern remains focused on the route of value creation and ultimately exit at the appropriate time, and has the model to succeed in this.

A hybrid VC model to access the IoT opportunity

With the global economic situation increasingly uncertain, we have taken the opportunity to review recent industry forecasts on the streaming video market. The message remains positive: the industry continues to expect robust growth in the near/medium term, despite the challenging macro backdrop. We have also taken a deep-dive into Netflix Inc’s Q1 22 release, which revealed that the industry leader in streaming video is facing a number of headwinds. In our view, one difficult quarter for Netflix is not a sign of turbulence for the global video streaming market, nor an indication of more challenging conditions for the markets addressed by Aferian.