Published 8/12/24

Onex(CA:ONEX) 2024 Annual Review

It’s been two years now since I first invested into Onex(TSE:ONEX) and it’s been a bumpy ride bottoming in late 2023 at $59 CAD vs the current price of $96 CAD. Since my last article things operating wise have been much more stable though not exactly positive. On the positive side PE portfolio performance and invested capital per share growth both improved over the prior year. But the FEAUM is slightly down and FRE is still negative.

In more negative news when I wrote my article last year ONEX was fundraising on both their flagship fund(OP) VI and ONCAP V. I was thinking a big AUM was coming until the next conference call where the company said they were shelving the fundraising for OP VI(The largest fund) due to LP’s wanting to see more realizations before wanting to dive into another fund(Q1 2023 Conference Call). An additional reason the fundraising was shelved was the overall private equity market where deal value and count are down 60% and 35%, respectively. In the Q4 2023 Conference call management talked about how the current environment is making it difficult to realize exits because of lack of PE to PE deals. And another bad thing is ONCAP V is still fundraising and as of Q1 2024 has only raised 800M compared to their target of 1.5B. Due to these fundraising snafu’s Onex mentioned that their previous 2026 goal will not be achieved in 2026 and will probably be pushed back. If you don’t remember Onex was projecting 65B of AUM and 110M-130M of FRE. 

So overall not great

However, if you believe the challenges in private equity are temporary, with firms holding substantial dry powder and deals eventually needing to happen, and you expect rates to decrease as inflation falls, plus the fact that deal value and volume are at 2020 COVID lows and are likely to rebound, then I’m inclined to keep buying, especially given its current valuation.

The company is currently trading at .6 times book which is a pretty big discount and gives no value to the asset management side of the business. Which is fair considering it loses money. Over the past 5 years BPS per share has grown at 12% CAGR. The discount is probably due to the same reason that LP’s have given above and that is realizations. For example OP V where 2.5B of capital for Onex is invested only had 40M in realizations in 2023. And between Onex’s OP and ONCAP funds where 4.9B is invested, total realizations were 350M. In the Q1 2024 Conference call the company said they were working hard on a number of realizations for 2024 and hopefully if the PE market recovers they’ll get some. Another metric to track for Onex could be realizations. As of Q2 2024 realizations look like they may pick up as the sale of Powerschool and ASM should bring in 1.6B in capital.

Overall I should consider selling if the PE industry starts to improve and Onex doesn’t keep pace, if the next capital raise for the main PE fund underperforms, or if asset realizations occur at a discount to their valuations.