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AVI Global TrustAnnouncement

10/01/2024 15:45

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RNS Number : 2966Z  AVI Global Trust PLC  10 January 2024

 

AVI GLOBAL TRUST PLC

 

Monthly Update

 

AVI Global Trust plc (the "Company") presents its Update, reporting
performance figures for the month ended 31 December 2023.

 

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

https://www.assetvalueinvestors.com/content/uploads/2024/01/AGT-DECEMBER-2023.pdf
(https://www.assetvalueinvestors.com/content/uploads/2024/01/AGT-DECEMBER-2023.pdf)

 

Performance Total Return

 

This investment management report relates to performance figures to 31
December 2023.

 

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

                           to date
 AGT NAV            6.4%   18.8%            18.8%  34.2%  80.0%  162.7%
 MSCI ACWI          4.1%   15.3%            15.3%  26.8%  73.9%  178.6%
 MSCI ACWI Ex US    4.3%          9.1%      9.1%   12.3%  40.7%  89.2%

 

Manager's Comment

 

AVI Global Trust (AGT)'s NAV increased +6.4% in December.

 

Performance was broad based but Oakley, Schibsted and Nihon Kohden were
particularly strong, adding +75bps, +73bps and +67bps each. Symphony
International was the greatest laggard, shaving off -14bps.

 

Japan

 

As long-term readers of our letters will know, seven years ago we became
increasingly enamoured with the opportunity set in Japan where it was evident
that the winds of change had begun to blow, and that the corporate governance
reform agenda had gained critical momentum. This was not a consensus view,
with Japan considered to be a perennially cheap, never changing, and largely
irrelevant market for global investors.

 

Since then, AGT has consistently had about a quarter of its portfolio invested
in Japan, and we have demonstrated an ability to generate attractive returns
through an engaged and constructive activist approach. Since 2017 this had
added +20% to AGT's NAV (£) and we have generated a JPY total return of +84%,
versus +51% and +67% for the MSCI Japan Small and TOPIX, respectively.

 

In 2023 global investor interest in Japan increased as progress on corporate
governance and shareholder reform continued unabated. In particular, the
announcement at the start of the year that the Tokyo Stock Exchange (TSE) will
require companies to disclose capital efficiency improvement plans, especially
if trading below 1x book value, received considerable attention.

 

Then, at the end of November, news broke that Toyota Motors - one of Japan's
last holdouts to reform its balance sheet - will partially unwind its cross
shareholding in Denso. This was followed in December by the TSE's announcement
that it will add further pressure by calling on the over 1,000 companies in
parent-subsidiary relationships or that have listed or equity-affiliates to
increase disclosure around their rationale for having listed subsidiaries and
their efforts to ensure their independence.

 

The cascade of events in 2023 are, in our view, a seminal moment in the long
and winding road to unlocking the enormous value trapped in Japanese
companies. In recent months we have added new positions in Toyota Industries,
Keisei Electric and Kyocera Corp, all of which are particularly exposed to
this theme.

 

Schibsted

 

Despite us having written extensively about Schibsted last month
(https://www.assetvalueinvestors.com/content/uploads/2023/12/AGT-NOV-2023.pdf)
, a further update is warranted.

 

In early December Schibsted positively surprised both us and the market with
the announcement that that the Tinius Trust, the controlling shareholder,
intends to acquire Schibsted's legacy News Media division for 5.4bn NOK and
Schibsted's stake in Polaris Media for 0.8bn NOK. As well as this, the company
intends to collapse the dual A-B share class structure. This is a significant
positive development that should help reduce the conglomerate discount at
which Schibsted trades and force investors to pay attention to the attractive
qualities of Schibsted's Nordic Marketplace assets - which have hitherto been
overlooked.

 

Using the price of the B shares which we own, Schibsted has a market cap of
62bn NOK. Pro-forma of the completion of the two transactions, deducting the
value of the retained stake in Adevinta (16bn NOK), News Media (6.2bn NOK) and
net cash and other adjustments (18bn NOK) implies the Nordic stub assets are
trading at an implied value of 22bn NOK, or approximately 9.5x 2024 EBITDA.

 

Whilst this has increased from the low of ~6x (inclusive of News Media)
earlier in 2023 we believe there is ample room for the shares to re-rate
higher and the valuation gap to global classified ads peers to narrow under
the simplified structure, with peers on average trading at 18x 2024 EBITDA.
The combination of the potential multiple re-rating and strong earnings growth
prospects provide for attractive upside. In the near term we believe that the
returning of excess capital to shareholders is a key catalyst to drive the
shares higher, with proceeds from the Adevinta and News Media sales just shy
of 30bn NOK (48% market cap).

 

Contributors / Detractors (in GBP)

 

 Largest Contributors                           1- month contribution  % Weight

                                                bps
 Oakley Capital Investments                     75                     7.6
 Schibsted ASA 'B'                              73                     4.8
 Nihon Kohden                                   67                     3.1
 Long Brookfield Corp/Short Listed Underlyings  54                     4.5
 D'Ieteren                                      53                     4.2

 

 Largest Detractors               1- month contribution  % Weight

                                  bps
 Symphony International Holdings  -14                    2.4
 Toyota Industries                -8                     1.1
 Princess Private Equity          -7                     5.7
 Entain                           -3                     0.9
 Shiga Bank                       -3                     1.1

 

 

Link Company Matters Limited

Corporate Secretary

 

10 January 2024

 

LEI: 213800QUODCLWWRVI968

 

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than the content of the Newsletter referred to above, is neither incorporated
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