Powerhouse Ventures' CEO Paul Viney sat down with Finance News Network Australia and talked about FY2018 portfolio successes and significant progress in portfolio company stakeholder alignment.
Rachael Jones: Hello I’m Rachael Jones for the Finance News Network. Joining me today from Powerhouse Ventures Limited (ASX:PVL) is CEO, Paul Viney. Paul, welcome back.
Paul Viney: Thanks Rachael.
Rachael Jones: Powerhouse Ventures has a portfolio of early stage investments in companies spun out of universities and research organisations. Can you tell me more about this?
Paul Viney: Powerhouse’s business model is to form companies based on intellectual property, developed at universities, other research-intensive organisations and publicly funded crown research institutes, in New Zealand and Australia. We venture to import companies that are seeking to commercialise technology in the following sectors: Cleantech and engineering, digital and ICT, agritech and environmental, and medical and healthcare.
We take a systematic approach to developing outstanding businesses that aim to compete on a national and an international scale. Our investment team works closely with and uniform portfolio companies, to shape them from the inside out. And we’re well positioned to take advantage of breakthrough technologies as they emerge. With renewed focus on innovation in both New Zealand and Australia, Powerhouse is uniquely positioned to assist universities and CRIs, to help both economies develop an ecosystem of emerging start-ups.
Rachael Jones: Now to your recent announcement about Tiro Medical. What can you tell me about this?
Paul Viney: Tiro is an exciting young company that is now positioned for growth. They develop tools for the digital medicine sector. Their technologies are beneficial to many areas of the healthcare industry. From point of care tools through to departmental and organisational monitoring, revue and refinement, they really are developing the next generation of tools for the healthcare sector. They’re leading the way in the development of personalised breast cancer imaging, monitoring and detection, and their system is currently undergoing significant clinical studies in New Zealand.
The Tiro Board has just announced a planned capital raise and it’s based upon the proven study of their technologies. The Tiro Board has actually stated that the value of Tiro has grown to $13 million. Powerhouse owns 30 per cent of Tiro and so our investment could now be worth up to $4 million. We have very conservative accounting valuation policies and we’re currently carrying Tiro on our books, at just $400,000.
Rachael Jones: When we last spoke, you provided an update on a new level of accountability PVL is bringing to its portfolio companies. How is that progressing?
Paul Viney: We’ve been working hard on our investment processes. We’re an incubator of technology companies and it’s really important that we add value. We’re expert at finding technologies for the new companies, creating the business plans for the new spinouts and then growing those businesses. We shape them for anidentified market need. Obviously we aim to disrupt existing businesses and existing business models.
We’ve now refined our investment policy and our procedures, so that we can maximise the impact of our new spinouts. This work has culminated in development of what we call, the Powerhouse Way. We aim to ensure that the new company’s goals are clearly established. We aim to strengthen the performance of those companies and we monitor and build, the performance of the Board and management. We actually appoint the CEOs of all the new spinouts and the chairman, and other directors. You may even have seen our adverts running in New Zealand and Australia, as we’re aiming to form deeper pools of talent. And some of this work will be to support our Australian expansion, which we have now underway.
We often help out companies raise external capital, and we ensure that the company adheres to high standards of ethics and corporate behaviour. And clearly also, we ensure the company has appropriate mismanagement policies in place, because early stage companies are clearly a high-risk environment. But we ensure we hold the Boards and the management of these companies to account, both froma technical and other milestone achievement perspective.
Rachael Jones: Now to financials. Can you provide us with an update, including the discount to NTA?
Paul Viney: Our share price is currently quite weak at 20 cents. We appreciate that this is a long way south from our 2016-listing price. And much of this weakness is due to the loss of a major investee company last year, which was HydroWorks. Post that event, our ETA is around 50 cents, so at 50 cents we’re still trading at a very heavy discount. So our portfolio value sits at around $14 million, but many of our investees are now growing, or have grown in value.Our accounting policies as I mentioned earlier, are conservative and lag value growth. Our portfolio IRR is still on track with around 25 per cent per annum. So as such we think that Powerhouse or PVL, represents good buying for investors interested in high tech and a portfolio approach to investment.
Rachael Jones: Last question Paul. Why should investors consider adding PVL to their portfolios?
Paul Viney: This is an exciting time for Powerhouse. We’ve been working in New Zealand for some years, but now we’re poised to expand into Australia. And we’ve got relationships with a number of universities in South Australia, Victoria and New South Wales. We’ve also been working with the CSIRO. In addition, the portfolio is really starting to perform. I’m really pleased to say, we’ve just announced a very positive outcome for Motim. The shareholders of Motim have agreed to sell to a new syndicate in the US, to be called Motim LSE.
Motim will now be better resourced to make the most of their unique augmented reality technology. And Powerhouse has made a real difference to Motim, finding that acquisition partner. Some other companies heading to revaluation inflection points are as follows:Upstream, this is division based with cardio technology from the Otago University. Tiro, we spoke about earlier- objective acuity, technology for optometrists heading to a revaluation event. Ferronova, our South Australian based nanoparticle cancer detection technology, again heading to a revaluation event in the next few months.
We also anticipate that ASX-listed agritech company CropLogic will retrace some recent share price falls. So overall, we’ve got line of sight to some very significant value creation. And we think that that could be up to $10 million in revaluation events, in the next few months. And that’s going to make a big difference to our NTA, which has been static for around a year now. So overall, some very positive news heading our way on Powerhouse.
Rachael Jones: Paul Viney, thanks for the update.
Paul Viney: Thank you.