REG - AVI Global Trust PLC - Monthly Factsheet

AVI Global TrustAnnouncement

08/10/2024 17:45

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RNS Number : 4335H  AVI Global Trust PLC  08 October 2024

 

AVI GLOBAL TRUST PLC

 

Monthly Update

 

AVI Global Trust plc (the "Company") presents its Update, reporting
performance figures for the month ended 30 September 2024.

 

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

https://www.assetvalueinvestors.com/content/uploads/2024/10/AGT-SEPTEMBER-2024.pdf
(https://www.assetvalueinvestors.com/content/uploads/2024/10/AGT-SEPTEMBER-2024.pdf?mc_cid=1a0ad84508&mc_eid=335e1499b3)

 

 

This investment management report relates to performance figures to 30
September 2024.

 

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

                           to date
 AGT NAV            -1.0%  5.0%         13.7%  21.5%  65.5%  165.3%
 MSCI ACWI          0.3%   12.8%        19.9%  26.9%  63.3%  196.4%
 MSCI ACWI ex US    0.6%   8.5%         14.1%  13.5%  32.4%  101.0%

 

Manager's Comment

 

AVI Global Trust (AGT)'s NAV declined -1.0% in September.

 

D'Ieteren was the most significant detractor shaving -106bps from returns. We
discuss this below having materially added to the position such that it is now
an 8.2% weight. Other notable detractors included News Corp (-60bps), Aker
(-40bps) and Partners Group Private Equity (-38bps).

 

Chrysalis was the largest positive contributor (+83bps). Entain (+56bps),
which we discussed in last month's newsletter, saw an additional +18% increase
this month, bringing its total gain from the August low to over +50%.
Following closely was Cordiant Digital Infrastructure (+38bps), whose Prague
assets we visited during the month.

 

September marks the end of our financial year. Over the course of FY 2024, AGT
delivered a NAV total return of +13.7%, which compares to a return of +19.9%
for the MSCI AC World Index, our comparator benchmark.

It has been well documented that index level returns have principally been
driven by a narrow band of US technology companies. Even so, it is stark to
note that the equal weighted version of the MSCI AC World index returned 10.7%
over the period (£).

 

Our performance was driven by stock selection, with outsized contributions
from larger holdings such as KKR, Hipgnosis Songs Fund and Schibsted, as we
have continued to shape the portfolio around a concentrated handful of
situations where activism and events provide real catalysts to unlock value.

 

With discounts at historically wide levels - as indicated by the 36% portfolio
weighted average discount which is consistent with levels observed during
periods of market stress - and a high number of potential catalysts and events
across the portfolio, we are optimistic about delivering attractive long-term
returns.

 

The annual report will be published in early November and the AGM will be held
on the 19th December 2024. We hope to see as many of you there as possible.

 

If at the start of the month we had been told that D'Ieteren would report a
healthy set of half year results and announce a €74 per share extraordinary
dividend, our best guess would not have been for the stock to be the largest
detractor - but that is exactly what happened.

 

In early September, D'Ieteren announced that there was to be a reorganisation
of the controlling family's shareholding. Nayarit (the vehicle of Nicholas
D'Ieteren) is to acquire a 16.7% stake from SPDG (the vehicle of Olivier
Périer) at €223.75 per share (the then market price).

 

Concurrently, and to help fund this, D'Ieteren announced their intention to
pay a special dividend of €74 per share. At current prices, this equates to
a yield of 39%.

 

The dividend will principally be funded via a €3.8bn dividend
recapitalisation at Belron (of which €1.9bn will flow to D'Ieteren), as well
as a new €1bn debt facility at the holding company level and cash on hand.

 

We view this as highly positive - receiving a large portion of your market cap
back at NAV is an inherently good thing and investors suggesting otherwise are
missing the wood for the trees.

 

It is our understanding that tax-sensitive Belgian retail investors have been
sellers of the shares. In turn, price has led narrative and various negative
views have emerged.

 

Some investors have raised concerns about supposed governance failures in so
far as the controlling family's interests are leading to taxable events in the
form of the dividend. Not only are taxes a fact of life, but we believe such a
view misguidedly focuses on the wrong thing. Indeed, we believe the family
have handled the succession between generations (now into the seventh) rather
well, and the payment of a dividend to all shareholders and resulting
long-term stability in ownership is something to be celebrated.

 

Other investors have queried the increased debt at Belron, which will rise to
c.5.5x EBITDA. Yes, this is high by public market standards, but the company
is a prodigious cash generator and has a track record of deleveraging
following previous dividends. Moreover, the dividend recapitalisation is
enterprise value neutral for Belron and - in our view - most likely warrants a
tighter, not wider - "fair" level of holding company discount.

 

D'Ieteren has now fallen -16% from the preannouncement level, such the capital
return now equates to 39% of D'Ieteren's market cap (gross of tax). On an
ex-dividend basis D'Ieteren is trading at an implied -54% discount to NAV.

 

We believe this to be a highly attractive valuation and have correspondingly
increased our position by +57% over the last month such that D'Ieteren is now
an 8.2% weight. This will of course naturally reduce as the dividend is paid,
with AGT expected to receive dividends, net of tax, of c. £35m. This alone
equates to nearly 1.5x AGT's prior year annual dividend income.

 

Contributors / Detractors (in GBP)

 

 Largest Contributors             1- month contribution  % Weight

                                  bps
 Chrysalis Investments            83                     5.9
 Entain                           56                     3.7
 Cordiant Digital Infrastructure  38                     4.9
 Nihon Kohden                     21                     2.6
 Apollo Global Mgmt.              20                     3.7

 

 Largest Detractors  1- month contribution  % Weight

                     bps
 D'Ieteren           -106                   8.2
 News Corp           -60                    7.5
 Aker ASA            -40                    3.7
 Partners Group PE   -38                    5.5
 FEMSA               -26                    4.2

 

 

Link Company Matters Limited

Corporate Secretary

 

8 October 2024

 

LEI: 213800QUODCLWWRVI968

 

The content of the Company's web-pages and the content of any website or pages
which may be accessed through hyperlinks on the Company's web-pages, other
than the content of the Newsletter referred to above, is neither incorporated
into nor forms part of the above announcement.

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