Duke Capital plc: High returns, Limited risk, and Growth potential

Duke Capital plc unique product provides SMEs across diversified sectors with hybrid capital, allowing the existing team to retain control. By optimising the best of equity and debt, the company aims to achieve equity-type returns with debt levels of risk. The loan and participating preference share elements support their shareholders’ high (2024E: 9.0%), growing (2026E: 7% above 2024), and covered dividend. Early
exit fees and equity stakes should generate ongoing capital growth as the portfolio matures. PE-style due diligence before providing capital, and board participation after, reduces downside risk. Management and shareholder interests are aligned.

► Growth options: Duke Capitals’s earnings can grow with i) more revenue in the existing book as clients grow revenue, ii) positive inflation gearing, iii) gross advances (new clients and follow-on investments), iv) operational leverage, v) exit fees, vi) increasing value in equity stakes, and vii) high barriers to entry limit competition.
► Downside protections: Risk appears well managed with i) a highly selective approach to new deals, ii) appropriate counterparty assessment and excellent ongoing monitoring, iii) portfolio diversity and senior security, iv) active management of problem situations, and v) a floor to annual revenue adjustment.

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