Last July, Substrate AI offered shareholders (on the register as of 31st July 2024) 1 share of their subsidiary Subgen AI for every Class A Substrate AI share held and 1 share per 100 Class B shares held. Effectively, Substrate AI will (once the transaction is executed) reduce its stake in Subgen AI from the current 100% to below 20%.
Given that approximately half of our prior SAI.MC target price of €1.00 (May 24 report) was attributable to Subgen AI, we are now adjusting our target price to €0,60.
The Venture portfolio of Substrate AI (excluding Subgen AI) continues to do well across all its verticals and we maintain our estimate of potential value in excess of €50 million (5.3x 2024 and 3.8x 2025 estimated sales).
We estimate the equity market is currently attributing a value of just €11 million for the Medtech, HRTech, AgriTech and Fintech portfolio companies, which we consider an undervaluation.
We believe the most valuable holdings are the 70% stake in 4D Medica (MedTech) and Fleebe AI (HRTech), with a combined potential value of €39 million, according to our valuation estimates.
Substrate AI has also announced its intention to list some of its participated companies in public markets, so to provide more value visibility to its portfolio and a way to provide them access to the capital markets for growth financing.
We maintain our BUY recommendation and we introduce and introduce a new price target of €0,60.
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