REG - AVI Global Trust PLC - Monthly Factsheet

AVI Global TrustAnnouncement

11/10/2023 15:30

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RNS Number : 8282P  AVI Global Trust PLC  11 October 2023

 

AVI GLOBAL TRUST PLC

 

Monthly Update

 

AVI Global Trust plc (the "Company") presents its Update, reporting
performance figures for the month ended 30 September 2023.

 

This Monthly Newsletter is available on the Company's website at:

https://www.assetvalueinvestors.com/content/uploads/2023/10/AGT-SEPTEMBER-2023.pdf
(https://www.assetvalueinvestors.com/content/uploads/2023/10/AGT-SEPTEMBER-2023.pdf)

 

Performance Total Return

 

This investment management report relates to performance figures to 30
September 2023.

 

 Total Return (£)   Month  Calendar Yr  1Y     3Y     5Y     10Y

                           to date
 AGT NAV            2.4%   9.8%         15.3%  45.6%  48.7%  149.3%
 MSCI ACWI Ex US    0.5%   3.8%         10.1%  18.2%  21.3%  84.4%
 MSCI ACWI          -0.5%  8.5%         10.5%  29.4%  46.1%  174.9%

( )

 

Manager's Comment

AVI Global Trust (AGT)'s NAV increased by +2.4% in September.

Schibsted (+7%), Symphony International (+21%) and Apollo (+3%) were the most
significant contributors, with an additional tailwind from Sterling weakness.
Our hedged trade at Brookfield Corp was the most significant detractor
(-33bps) as the discount widened. Christian Dior and FEMSA also detracted.

 

September marks the end of AGT's financial year. For FY23 AGT achieved a NAV
total return of +15.3%. This compares to a +10.1% return for the MSCI AC World
ex-US index and a +10.5% return for the broader MSCI AC World Index (all
figures in GBP).

 

Performance has been driven by stock selection - something we believe is
coming back to the fore. Our high conviction larger weight holdings, such as
Apollo, KKR, FEMSA and Schibsted, have on average performed better.

 

The latter two are good examples of the types of idiosyncratic "events" to
which we are attracted - where management teams and boards are undertaking
strategic and structural changes to unlock value. As well as this we are
particularly excited about opportunities where we can unlock value as engaged
shareholders, both in the London listed closed-end fund market where discounts
have widened considerably, and in Japan, where we continue to find attractive
opportunities.

 

We maintain that the outlook for equities en-masse is arguably a challenging
one. This is throwing up a rich and varied opportunity set within the areas of
the equity market that we focus on. We are optimistic about our ability to
exploit these opportunities and drive attractive long-term returns.

 

The annual report is due to be published in early November, and the AGM will
be held on the 20th of December.

 

Schibsted B

Shares in Schibsted rose +7% over the month as a key part of our investment
thesis started to play out. We will provide an update here notwithstanding the
numerous unknowns at the time of writing.

As a reminder, we initiated a position in the summer of 2022. We wrote up the
investment in the September 2022 newsletter
(https://www.assetvalueinvestors.com/content/uploads/2022/10/AGT-September-2022.pdf)
, highlighting the extreme undervaluation of Schibsted, with its then 33%
listed stake in Adevinta swamping its enterprise value.

 

Overall, we argued that Schibsted exhibited a number of attributes we look for
- high quality assets, a discounted valuation and catalysts to unlock value.
More specially, Schibsted offers 1) exposure to high quality online classified
ads businesses which have dominant market positions protected by a powerful
network effect, high levels of pricing power and strong margin expansion
potential which should compound in value; 2) an inefficient and unsuitable
group structure leading the company to trade at a wide discount to NAV and the
stub at an inordinately low (then) c.6x EV/EBITDA; and 3) potential catalysts
to unlock value, with either an in specie distribution or sale of Adevinta
suitable outcomes to both re-rate the stub and help realise Adevinta's fair
value.

 

During the month it was confirmed that Blackrock and Permira made a
non-binding proposal to take Adevinta private. This will see Schibsted
crystalise a large portion of its value, whilst also retaining a stake in the
private company. Of course, the devil will be in the detail, with the
pertinent questions being around price and the size of the stake that
Schibsted will maintain, but we believe this to be a successful outcome.

 

The deal will allow Schibsted to garner a control premium (albeit an unknown
one at this stage) and removes some of the friction of an in-specie
distribution. Most importantly, it will simplify the group structure and shine
a light on the undervaluation of the stub assets.

 

On the other hand, this raises the risk of capital (mis)allocation - something
we will continue to discuss with Schibsted management. We are also frank about
the low value the market will likely ascribe to Schibsted's remaining unlisted
stake in Adevinta. However, we very much concede that the return on this
position has the potential to be highly attractive, with significant low
hanging fruit from non-core asset sales (OLX Brazil plus Italy and maybe
Spain); improving monetisation rates at Mobile and Leboncoin which currently
under-earn relative to global peers and the economic utility they provide; and
improving margins with tighter cost control (particularly at HQ which runs to
the tune of ~€250m p.a.). Over time this value creation will shine through
in Schibsted's NAV growth, with a future crystallisation of value likely
allowing for capital returns.

 

Schibsted remains cheaply valued at a 34% discount to NAV and with the stub
trading at 6.7x NTM EBITDA. Further news on Adevinta will be the key catalyst
to drive both NAV and discounts. We remain excited about prospective returns.

 

Symphony International

Shares in Symphony International rose +21% in September as the company
announced an "orderly realisation" of its portfolio.

 

Long-term readers of our newsletters will know that, as the largest
independent shareholder, we have worked to improve corporate governance at the
company and unlock value trapped in the persistently wide discount at which
the company has traded. This culminated in a 2021 public campaign to Save
Symphony (https://www.assetvalueinvestors.com/campaign/save-symphony/) .

 

We view this as a pleasing outcome and will be following the realisation
process closely to ensure shareholder value is optimised.

 

Contributors / Detractors (in GBP)

 

 Largest Contributors    1- month contribution  % Weight

                         bps
 Schibsted B             84                     8.5
 Symphony International  63                     3.1
 Apollo Global           37                     5.8
 Godrej Industries       29                     3.3
 D'Ieteren               28                     4.0

 

 Largest Detractors      1- month contribution  % Weight

                         bps
 Brookfield Corporation  -34                    5.1
 Christian Dior          -27                    2.0
 IAC                     -19                    3.3
 Digital Garage          -12                    1.6
 Molten Ventures         -12                    1.7

 

 

Link Company Matters Limited

Corporate Secretary

 

11 October 2023

 

LEI: 213800QUODCLWWRVI968

 

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