Cymbria punches above NAV

offering,” Cymbria said then. Cymbria’s original EdgePoint investment was a tad over $500,000.

Since then Cymbria hasn’t been in the public markets raising additional capital, although on a regular basis it announces a normal course issuer bid. And it doesn’t talk much: messages sent to two of its management team weren’t returned.

But EdgePoint, which now accounts for 15.48 per cent of its portfolio, has been the big winner.

For instance, at the end of 2017, retail assets under management were about $15 billion while institutional assets were about $3.2 billion. Those assets come from a concentrated source of providers: at the retail level, 20 per cent of advisers represent about 83 per cent of the assets; at the institutional level, 20 per cent account for 93 per cent. “We look forward to building wealth for our investment partners over the long term,” said Cymbria.

Given the growth of EdgePoint’s business, what is the stake worth? Last December, Cymbria determined it was worth $185.9 million. (It has also received a total of $33.5 million in dividends.)

Given that Cymbria originally invested only $509,000, the returns have been rather spectacular. Cymbria said it determined that valuation “with the assistance of an independent valuator and the Valuation Committee.”

One year earlier, (December 2016) EdgePoint was valued at $110.3 million. But at end of 2013, it was valued at $35.6 million. Over the years, Cymbria, according to its annual information form, has used a number of valuation approaches. While it’s now mainly a discounted cash flow model, “as circumstances dictate, alternative valuation approaches to determine the fair value of EdgePoint may be utilized.”

For the period 2012 to 2014, the methodology was a combination based on metrics (a percentage of assets under management, or a multiple of EBITDA) as well as a DCF model.

So what gives? It would seem investors are prepared to pay up based on the strength and quality of EdgePoint, which could, for example, realize full value by going public. In rough terms, Cymbria’s 15.48-per-cent stake accounts for about $7 of Cymbria’s NAV and Cymbria trades around $7 above NAV. Accordingly, EdgePoint would have to double to bring NAV and trading price in line.