Powerhouse Ventures - IPO - take 2?

[Harvey Specter]

I bought a small(ish) holding in Powerhouse when they did a Capital Raise via Snowball Effect. I have to say that since then they've been very good at putting other investment opportunities under my nose that I wouldn't normally have had access to. I certainly wont be selling my holding when they list, I consider them a good long term hold if only for the ability to get early access to something new. Plus I like tech companies (my main area of expertise) so that helps.

I hold a small holding in PVL from there earlier, Partnership days, buying in for much the reasons you note above - access to early stage investments and options to co-invest. I actually disagreed with the move to a corporate model and the IPO but as a small holder, I just went with the flow. I think the partnership model, with a target exit within 1 years was better, though post IPO, there will obviously be much more liquidity.

Depending on how they do at IPO, I will probably take the opportunity to exit. I think their management structure is too expensive. This worked fine when it was the NZ government (Callanhan) funding it but I can't see this continuing, especially with the push into Australia. That expensive management cost with therefore come out of operating cash, or more likely capital raised. The salaries are high and given the type of fund that it is, if they must be so high, should be paid in shares with vesting periods.

In some ways I agree with you that it is too early to judge their performance at incubating and developing companies, but if anything, this just means that they are too early to list. Hydroworks and CropLogic are seeking IPO's in the next 6-12 months and I think Invert is too, especially if they land the big client they are in talks with. PowerHouse should have waited till after this but they need to do an IPO as they are quickly running out of funds (probably because the NZ rich like Morgan dont support them).

You also note the ability to co-invest along side them as a reason to hold. Two thoughts on this. Will they continue to do this as a listed company - in theory, if they can raise enough funds, they will keep as much allocation in house as they can. Alternatively, if they need investors to co-invest with them, do you think they will take your name of their mailing list as they need all the possible investors they can muster (as evidenced by recent raises not being fully allocated, even when syndicated onto crowdfunding platforms.

So while I am more positive than the Hate that is being shown in the NBR comments section, the concerns are real. I also think the comparisons to Punakaiki are worthwhile, in the sense that the fees, management size and performance aren't that similar.

If they IPO above NBV, I will be exiting. If they IPO at a huge discount, I will probably hold on. Somewhere in between who knows but I dont typically hold ASX shares so will probably sell.

[JamesST]

I think this paragraph in the prospectus points to the main problem:
"Powerhouse implemented a series of capital raisingprograms which resulted in proceeds from the issuance ofshares of NZ$3,552,210 during FY2015 and NZ$5,211,470during 3Q2016. These capital raisings funded purchases ofinvestments totalling NZ$1,059,778 and NZ$2,813,742 duringFY2015 and 3Q2016 respectively"

So of the $8.8m raised only $3.8m was invested into companies. The operating costs aren't sustainable.

Other big problems in that prospectus:
* There is basically no share lock up.
* Callaghan funding is taking a big drop to $500k in this financial year and then no contract after this year. The loss of this main source of revenue is to be replaced by an increase in fair value of investments. But this doesn't generate any cash so it is actually to be funded by the IPO.
* The profit was because of an increase in portfolio valuation. Same problem as above. No cash is being generated by the business.

[Harvey Specter]

James - I think you pretty much nailed it. I read all 74 comments on the NBR article - the best/fairest one is probably the one at the bottom. PVL needs to do two things:

- Raise as much money as they can so they can probably support their companies (Med tech and Bio tech are a lot more expensive that SaaS to incubate! just look at PEB, BLT, ATM). $10m wont cut is as half will go to capital raise and operating costs. Even $20m wont last long if they properly support.
- Cut their operating costs. It worked ok when they were sucking on the govt tit but won't now they are spending investors money. Employees should be on slim salaries and big share/option plans (that require share price improvement to be valuable).

[kiwidollabill]

FYI PVL have also placed a number of their people in CEO/SLT positions of their portfollio companies - particularly the early stage ones or 'problem children'.

[Biscuit]

Wow ,thats as scathing as one can get.; trashed it. Looks like they've done well so far.

"Powerhouse reported a profit of NZ$2.7 million on income of NZ$7.5 million in the nine months ended March 31. That included a NZ$5.8 million increase in the fair value of its investment portfolio"

.Anyone know what the quality/ track record of management is like and any other opinions

Personally, I'd steer clear of them, but then I don't like new techs without profitable track and a company that is all about nursing a stable of such things is anathema to me. Don't know much about Powerhouse specifically although I know a bit about one of their techs and not too impressive. Are you investing in the ability of the managers to pick winners or produce winners - any evidence they can do either?

[drcjp]

Past closing date. No info at all, not even NBR knows. What gives?

[Snow Leopard]

Past closing date. No info at all, not even NBR knows. What gives?

I know and you could too .

Best Wishes
Paper Tiger

Hint: read the supplementary prospectus.

[drcjp]

My God, it reads like an NCEA exam............."pick an answer, any answer, one day you'll get it right"

Thanks Mr Tiger

[Marilyn Munroe]

Was reading this item;

http://www.scoop.co.nz/stories/BU160...sx-listing.htm

What caught my eye was their claim of a proprietary fluid dynamic logarithm which can produce an increase of output up to 15% for existing plants.

There should be hydro generators beating a path to their door to licence this logarithm. Is there any evidence of intellectual property income in their disclosures?

Boop boop de do
Marilyn

We obey the laws of fluid dynamics in this house. Homer J Simpson

[mondograss]

The logarithm is used when rebuilding the turbine, so of no use to the generators, only to companies like Hydroworks that do the overhauls. By the looks of it their win rate is pretty good. I went to their investor presentation and they said there that the big players in the market all have their own variation of the same logarithm. Hydroworks has one developed here in NZ and proprietary software to run it.

But this logarithm is essentially the barrier to market entry for the smaller companies that do turbine maintenance. Tier 2 companies (that don't have this logarithm) can only rebuild the turbine as it was (which would improve efficiency back to as new or a little better, but not much). Tier 1 companies (that have this logarithm) can completely redesign the turbine to be more efficient. However, the other Tier 1 companies only want to do the really big overhaul jobs, it's not worth their while setting up shop here in NZ or even in Aus to do our smaller turbines. So Hydroworks thinks it's found a sweet spot in the market to do that smaller work that's not worth the other Tier 1 companies pursuing, but is too complex for the Tier 2 companies to take on.