6X Leverage And Tech Exposure Will Depress Valuations

Key Takeaways

• Overreliance on tech sector growth and divestment-driven gains leaves earnings and portfolio value vulnerable to market shifts and normalization.
  
• Challenging exit environment, high leverage, and increased regulatory scrutiny threaten future private equity activity, margin expansion, and capital inflows.
  
• Growth in investments, active portfolio diversification, and disciplined divestments support resilient earnings, lower risk, and long-term shareholder value.

Catalysts

Altamir SCA, formerly known as Altamir Amboise, is a private equity investment arm of Amboise SAS, specializing in both direct and fund of fund investments, small and mid-cap companies.

• There is a risk that Altamir's current valuation assumes a continued robust rebound in private equity exits and elevated exit multiples, yet the global IPO window remains closed and overall economic growth in developed markets is still weak. If exit opportunities remain limited outside of M&A, future realized gains may be lower than implied, impacting revenue and earnings growth.
  
• Investor optimism may be overestimating the sustained margin and EBITDA growth recently achieved, as a significant portion was driven by divestments and cost cutting rather than fundamental top-line expansion; with possible normalization of these extraordinary gains, earnings growth could decelerate and net margins may compress.
  
• The portfolio is now heavily weighted in technology and digital transformation plays (53% tech, significant SaaS/software exposure), with high embedded growth expectations; any slowdown in tech sector multiples or reduced digital transformation spend (as digital investment cycles mature) could drive NAV and revenue headwinds.
  
• Elevated leverage levels in the portfolio (close to 6x in some holdings) amid the risk of prolonged higher interest rates could dampen future private equity activity, increase debt costs for portfolio companies, and limit the potential for value creation, adversely affecting net margins and distributable earnings.
  
• Expectations for continued rapid growth in private equity as an asset class may be too aggressive given increasing regulatory scrutiny and more skeptical institutional investor sentiment on fees and illiquidity, which could limit Altamir's ability to attract fresh capital and negatively impact long-term revenue and assets under management.

Altamir Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Altamir's revenue will decrease by 14.0% annually over the next 3 years.
• Analysts are not forecasting that Altamir will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Altamir's profit margin will increase from 25.9% to the average GB Capital Markets industry of 37.0% in 3 years.
• If Altamir's profit margin were to converge on the industry average, you could expect earnings to reach €17.1 million (and earnings per share of €0.47) by about August 2028, down from €18.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 75.6x on those 2028 earnings, up from 56.3x today. This future PE is greater than the current PE for the GB Capital Markets industry at 19.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.0%, as per the Simply Wall St company report.

Altamir Future Earnings Per Share Growth

Risks

• Strong EBITDA and portfolio sales growth in 2024-25.6% EBITDA growth and significant increases in divestments (€332 million vs. €24 million last year)-signal improved operational performance, which may support revenue and earnings resilience over time.
  
• Accelerated investment activity (€180 million in 8 new investments) and a focus on sectors with higher growth potential (notably tech, services, and fire safety/buildout) position Altamir to capture upside from digital transformation and industry consolidation, underpinning net asset value and long-term earnings growth.
  
• Consistent ability to generate positive value uplift on asset disposals and a historical IRR of 15% on €2.5 billion investments, indicating a track record of value creation and disciplined capital recycling-both supportive of net margins and shareholder returns.
  
• Robust geographic and sector diversification (70% Europe, 23% U.S., and 53% in tech, 26% in services) coupled with reduction in underperforming sectors (healthcare) reduces portfolio risk, potentially stabilizing and improving revenue and net margins over the long term.
  
• On-track delivery against multi-year strategic targets for both investments and divestments, alongside a continued commitment to a 3% dividend policy, signals strong management execution and sustainable cash generation, benefiting distributable earnings and shareholder value.

Valuation

• The analysts have a consensus price target of €28.5 for Altamir based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €46.2 million, earnings will come to €17.1 million, and it would be trading on a PE ratio of 75.6x, assuming you use a discount rate of 8.0%.
  
• Given the current share price of €29.0, the analyst price target of €28.5 is 1.8% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.