Pengana Private Equity Trust (ASX: PE1)

Unifrax is a global leader in manufacturing high performance specialty fibers and inorganic materials, whose products are used to solve countless application problems across many industries, including chemical processing, power generation and storage, ceramic and glass, fire protection, aerospace, appliance, hearth, automotive, and transportation.

Founded in 2002 by Elon Musk, SpaceX designs, manufacturers and launches advanced rockets and spacecrafts. The company operates out of two primary business segments: Launch and Satellite.

Launch provides rocket services, primarily commercial and government satellites, via the Falcon-9 (main launch vehicle), the Falcon Heavy (launched in February 2018, the most powerful operational rocket in the world), and the Dragon Spacecraft (free-flying spacecraft). SpaceX is currently completing its nextgeneration vehicle, the Starship, which is larger and more cost efficient than the Falcon-9.

Starlink is the company’s Satellite business. In early 2018, SpaceX received the first FCC approval of a US-licensed satellite constellation to provide broadband internet services using a new generation of low-Earth orbit satellite technologies.

The company is also the largest private producer of rocket engines in the world.

The New Era Cap Company is an American headwear company headquartered in Buffalo, New York. It was founded in 1920. New Era has over 500 different licenses in its portfolio. Since 1993 they have been the exclusive baseball cap supplier for Major League Baseball. New Era is the leading authority for authentic licensed headwear in the world.

Headquartered in Chicago, Illinois and launched in 2017 by its parent company, Uber Technologies (“Uber”), Uber Freight is a digital freight broker and leading innovator in the ~US$86 billion US truck brokerage market. The freight brokerage marketplace is highly fragmented, and Uber Freight currently serves 270+ enterprise shippers and 5,300+ small-to-medium business shippers with ~60,000 carriers. The company brings proprietary IP to the historically manual brokerage process of matching shipper loads to carrier capacity, with the goal of lowering operating costs, reducing empty miles for carriers and providing better price transparency in the market. Uber Freight has primary operations and 900+ employees in the US and Canada.

Founded in 2013 and based in São Paulo, Brazil, Nubank is the largest fintech company in Latin America. Nubank offers credit cards, personal loans and savings accounts by smartphone without the need for physical documents or branch visits, at more competitive rates than traditional Brazilian banks and with zero fees. At March 2020, Nubank had 23 million unique customers (14% of the adult population of Brazil), with 13.3 million cardholders and 19.8 million depositors

Founded in 2012 and headquartered in Lenoir City, Tennessee, Ministry Brands is the largest provider of core back-office software and payment solutions to faith-based organisations in North America. The company serves 96k+ FBOs, which represents ~24% of total FBOs in North America, and is the #1 provider in terms of both revenue and number of clients.

Founded in 1949 and based in Eden Prairie, Minnesota, MSG is a vertically integrated ingredient manufacturer focused on the processing of raw dairy inputs, such as liquid whey and milk, to provide functional ingredients that are used in a variety of growing nutrition end-markets including sports nutrition, fortified foods, infant formula, and animal nutrition. MSG operates across 12 processing facilities strategically located across the US to reduce freight time and cost from liquid whey suppliers.

MSG is an entrenched market leader (#1 in whey protein isolate production and #2 in whey protein concentrate production) in an industry with high barriers to entry due in part to the lengthy requalification process often associated with switching ingredient suppliers, as well as the significant capex required to build new whey processing facilities. Moreover, secular trends toward health and wellness, convenience, and supplements have led to annual sales growth every year since 2005 (through the GFC) for protein powders, shakes, and bars. This strong, recession-resilient end market demand, when taken together with identified opportunities for the company to both expand into new product adjacencies and geographies and to execute on potential near term acquisition opportunities, made the investment opportunity particularly attractive.

goPuff operates an on-demand convenience store and delivery service that today sells more than 3,000 products and has operations in over 500 US cities. The company leverages its network of over 200 micro-fulfillment centres to complete customer orders, which are delivered in 30 minutes or less. goPuff purchases products from wholesale distributors and generates a majority of its profits on the mark-up earned when the products are sold to consumers. The company typically charges a flat US$1.95 delivery fee and also generates revenue from advertising.

goPuff is disrupting the US$36bn US convenience store market and the US$120bn off-premise alcohol market; and we believe it has the potential to move into large adjacent markets (e.g., in-store sales at convenience stores colocated with gas stations) to further its growth. These categories have significantly lagged broader ecommerce adoption because they are largely convenience purchases, and the industries are highly fragmented, discouraging investment in technology and infrastructure to facilitate short delivery times for a wide breadth of stock-keeping units. However, as consumer demand for faster delivery continues to grow (which has been accelerated by COVID), we expect ecommerce adoption to continue to rise. goPuff’s competitively advantaged, vertically integrated business model allows for an industry leading 23-minute average delivery time, best in class customer experience, and attractive, proven
market level unit economics.

Based in Stamford, Connecticut, Blue Triton is one of the leading providers of bottled water in North America, with products sold in nearly all retail outlets across the US. The company comprises eight highly recognisable brands sold through retail (approximately 75% of sales) and home and office delivery (approximately 25% of sales) channels, including Poland Spring, Arrowhead and Nestlé Pure Life.

PE1 was attracted to this investment opportunity for a number of reasons, including:

1. Blue Triton’s leading position in a staple products industry with favourable market trends (e.g., since 2016, consumers have increasingly substituted purchases of bottled water in lieu of carbonated soft drinks),
2. the company’s diverse line of products with 97% penetration in mass, supermarket, office, and value sales channels,
3. the significant opportunity to make meaningful operational improvements across warehouse automation, distribution and logistics, and marketing, and
4. the significant barriers to entry stemming from water and property rights as well as the high initial cost of infrastructure to collect and distribute water.

Spice World is the largest supplier of fresh and processed garlic in the US a benefitting from strong demand stemming from increased at-home food consumption during
COVID and several capex projects that will drive labour efficiency and lower costs going forward. Based on Spice World’s strong performance, the company recently completed a debt recapitalisation that enabled a distribution to equity holders.

Founded in 1980, RANDYS is a designer and asset-light supplier of highly engineered, branded aftermarket drivetrain, suspension, and wheel components for pickup trucks, SUVs, and CUVs through all distribution channels, including to installers, wholesale distributors, big-box, and e-commerce. The company operates across two segments – needs based replacement (i.e., vehicle owners repair / replace parts after failure or for preventative maintenance) and vehicle enhancement (i.e., vehicle enthusiasts looking to upgrade their vehicles for off-road, hauling, towing, racing, and aesthetics) – each of which comprises ~50% of sales. RANDYS maintains 11 facilities across seven US states and has ~550 employees.

We believe RANDYS is an innovative, well managed leader in a large, attractive segment of the auto aftermarket with positive secular trends. The company is the #1 player in differentials, an essential component of a vehicle’s drivetrain. RANDYS has had very strong organic growth since 2014 (2x the organic growth CAGR of the market over that period) and has strong customer loyalty across its eight brand offerings with ~90% of its 2021 revenue coming from repeat customers.

Founded in 2018 in Bangalore, India, CRED provides high-income and credit-worthy users with a single interface to manage their finances, including credit and debit card spending, rent payments, and investment portfolios. CRED helps customers develop and maintain healthy financial habits by incentivising consumers to pay their bills on time in exchange for rewards at retailers and exclusive restaurants. In addition to helping users manage their finances, CRED is building a comprehensive database of financial and purchase behaviour of affluent Indian consumers, a valuable customer acquisition tool for financial institutions and merchants.

We believe CRED provides a differentiated offering in a large and growing market segment. There are approximately 70 million affluent households in India, which are expected to grow 15% per annum by 2026. While these households represent only 24% of total Indian households, they also represent 80% of the nation’s total wealth and 95% of the country’s credit card spend. CRED’s user base is therefore highly attractive to merchants and financial institutions looking to grow their business, with India’s banks ($450 billion total market cap) reliant on consumer lending and wealth management as key profit pools.

Cotiviti is a healthcare service provider that leverages data analytics and technology to limit costs and ensure regulatory compliance for various stakeholders in the healthcare industry. Cotiviti’s deeply embedded analytic and predictive modelling solutions, complemented by deep subject matter expertise, empower clients to maximize profitability through cost reduction while improving the quality of healthcare, enhancing the patient experience and assuring appropriate and compliant reimbursement. Cotiviti has continued to perform well since the COVID-19 pandemic started and was recently profiled in a Forbes article about companies that are saving the world from COVID-19. The company has created a COVID-19 Outbreak Tracker that provides weekly predictions about potentially hidden hot spots around the US. The map also highlights areas where coronavirus mitigation efforts may be working, illustrating a decreased probability of a hidden outbreak.

Bolthouse Farms, founded 1915 in Grant, Michigan, is a vertically integrated farm company specializing in refrigerated beverages. It is located in the San Joaquin Valley of California and is headquartered in Bakersfield, California in Kern County.

Headquartered in Miamisburg, Ohio and founded in 2007, Crane is a diversified provider of mission-critical overhead crane and hoist services in production plants and large warehouse environments. The company provides its customers with a full suite of federally mandated inspection, maintenance, repair, and refurbishment services, as well as services involving the design, fabrication, assembly, and installation of new overhead crane systems. The company currently operates 21 facilities across 15 US states and services over 90,000 overhead cranes and hoists for more than 4,000 customers annually.

Pathway Vet Alliance is a leading consolidator of general practice, specialty, and affordable care veterinary clinics, as well as a provider of veterinary management services in the US. Pet adoption rates have been at all-time highs due to the work from home restrictions, which has led to a significant increase in general vet needs (e.g., vaccinations). The company continues to successfully execute on its acquisition strategy and, despite some recent concerns about a current shortage of veterinarians and vet techs, performance continues to be strong.

Gainwell Technologies is a leading provider of technology solutions that are vital to the administration and operations of health programs throughout the US. The company’s solutions impact approximately two-thirds of the Medicaid beneficiaries across the US and facilitate cost savings, performance efficiencies, and improved care outcomes for state and local governments. Operational performance has been very strong since our original underwriting in March 2020, and in Q2 2021, Gainwell closed on a strategic acquisition of the Medicaid and managed care market focused capabilities of HMS Holdings Corp. (Nasdaq: HMSY) (“HMS”). The HMS transaction significantly expands Gainwell’s capabilities with unique, data-driven technology and service solutions expected to drive greater impact in the healthcare market.

Bolt Technology is a leading ridesharing provider in Europe and Africa that offers vehicles for hire, micromobility (i.e., scooters and electric bikes), car-sharing, and food delivery services. Bolt’s strategy to price at a ~20% discount to its closest competitor in any geography has earned the company a #1 or #2 market share position in each of its core markets. Since our initial investment, the company has raised capital at a significant premium to support continued market share growth and expansion into related services, including grocery delivery.

Osaic is one of the largest networks of independent wealth management firms in the United States with more than 10,000 financial professionals. The company provides financial advisors with things like technology support, securities processing, custody and clearing, regulatory and compliance support and statements and reporting. Since our entry back in mid-2019, the platform has made a number of accretive acquisitions and realised significant synergies, which have helped pro forma EBITDA increase materially.

Core Specialty Insurance is a specialty Property & Casualty insurance business that was lifted out of Enstar Group Limited late last year and recapitalised with new equity with the goal of creating a best-in-class specialty insurer. Core Specialty is already performing well and is projected to significantly exceed our expectations for 2021 in terms of gross written premiums, driven by new Property and Agriculture business units that are already surpassing management’s year-3 target for the units. Additionally, Core Specialty signed a definitive agreement to acquire Lancer Insurance earlier this year (expected to close this quarter), which will add a leading commercial auto division to the platform.

Peraton Corporation is a leading provider of technology-focused services and solutions to various federal US government agencies. The company has completed a number of significant acquisitions this year, including (i) in February, Peraton acquired Northrop Grumman’s integrated mission support and IT solutions business, and (ii) in May, Peraton completed the take-private acquisition of Perspecta, Inc. (NYSE: PRSP), a leading government services provider. The combination of these three heritage companies creates a top-tier, next-generation national security provider that is well-positioned to serve as a valued partner to essential government agencies across the intelligence, space, cyber, defense, civilian, health, state, and local markets.

Headquartered in Basel, Switzerland, Schneider is a provider of multi-modal asset-light cross-border logistics services, managing international logistics chains across road, rail, sea, and air in combination with value-added services and fulfillment. The company manages freight forwarding, customs services, warehousing, and a wide range of value-added services across hundreds of routes between key logistics hubs throughout Europe, Asia, North America, and the Middle East. Schneider has an attractive business model with strong historical gross profit and EBITDA growth. The company has low customer concentration, which means the company is not dependent on any single customer or group of customers in generating revenue, as well as low supplier concentration, which means it doesn’t rely on a small group of suppliers and can therefore optimise capacity utilisation on specific trade lanes without comprising reliability and on-time delivery. There are also a number of favourable market tailwinds that should help the company grow, including the general growth in outsourcing of freight services and the continued shift to e-commerce (which is a major growth driver for logistics service providers). Finally, there is clear and direct alignment with Invision and company management in this deal, with both re-investing nearly all of the proceeds they received as part of the continuation fund transaction, which provides a strong signal about their conviction with the investment.

Innophos is a leading global producer of phosphate and non-phosphate ingredients primarily used across the food, health, nutrition, and industrial end markets. Innophos’ products across the phosphate and non-phosphate segments are critical to the taste, texture, performance and/or nutritional contents of foods, beverages, pharmaceuticals, oral care products and other applications. The company has not been impacted to date by the current crisis, with all plants running normally, and financial performance is currently ahead of the sponsor’s original plan for 2020.

Mavis is one of the leading independent tire dealers in the U.S. with approximately 1,200 company-owned units primarily in New England,
the Midwest and Southern U.S. The company operates under several brands (including Mavis, Town Fair Tire, Express Oil, and Brakes Plus) and while it is primarily focused on tire sales (over 60% of the company’s revenue mix), it also derives significant revenue from providing auto-related services (e.g., mechanical work, tirerelated services, oil service). Mavis is also the only tire chain that has its own brand of private label products, offering over 1,000 different SKUs across a broad range of suppliers. The market for replacement tires in the U.S. is structurally stable and benefits from being “internet resilient” due to the installation/service element associated with replacing tires. Additionally, tires are insulated from longer term auto aftermarket “game changers” such as autonomous driving and electric vehicles. T