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AVI Global TrustAnnouncement

09/09/2025 14:45

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RNS Number : 6456Y  AVI Global Trust PLC  09 September 2025

 

AVI GLOBAL TRUST PLC

 

Monthly Update

 

AVI Global Trust plc (the "Company") presents its Update, reporting
performance figures for the month ended 31 August 2025.

 

This Monthly Newsletter is available on the Company's website at:
AGT-AUGUST-2025.pdf
(https://www.assetvalueinvestors.com/content/uploads/2025/09/AGT-AUGUST-2025.pdf?mc_cid=645b5adac1&mc_eid=335e1499b3)

 

This investment management report relates to performance figures to 31 August
2025.

 

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

                           to date
 AGT NAV            0.3%   7.1%         11.3%  39.1%  88.1%  214.1%
 MSCI ACWI          0.4%   6.0%         12.6%  40.3%  74.7%  226.2%
 MSCI ACWI ex US    1.3%   12.8%        12.3%  31.5%  52.0%  131.0%

 

Manager's Comment

 

AVI Global Trust's (AGT) NAV increased by +0.3% in August.

 

Rohto Pharmaceutical (+59bps) was the top contributor during the month, as an
encouraging set of earnings drove the shares up +16%. We discuss the situation
further below. Other contributors over the month include D'Ieteren (+45bps)
and Kyocera (+26bps).

 

Looking at the detractors, Vivendi (-58bps) was the largest after a strong
performance in July on news that the AMF had obligated Bollore to make an
offer for the company, followed by Entain (-56bps), which fell -14% as a solid
H1 earnings report, where guidance was upgraded, was more than offset by media
speculation around increases to UK gambling tax.

 

Rohto Pharmaceutical

 

Rohto is the largest skincare and eye-drop manufacturing company in Japan, yet
trades at a significant discount to peers. AVI believes that Rohto's
undervaluation can be explained by the lack of focus on its core businesses,
misleading IR communication, and lower allocation to shareholder returns than
its peers. Specifically, management needs to reallocate its R&D spending
from low-profit business areas such as the prescription drug business and
regenerative medicine business, towards its high-value, high market share
product lines, such as skin care products.

 

In August, Rohto announced its FY2025 Q1 earnings, with revenue rising +20%
YoY while operating profit fell modestly by -1% YoY, although this beat
consensus guidance. Full-year guidance remained unchanged, with revenue
forecast to grow by +8% YoY and operating profit to increase by +2%. The share
price rose +14% in the day following the announcement.

 

In line with our suggestions, Rohto announced its first mid-term plan in
March, which indicated management now views the core skincare and eye-drops
businesses as long-term growth drivers. Positively, corporate governance is
improving, and with a diverse Board in terms of experience, age, tenure and
gender, we look forward to engaging further with the company on constructive
suggestions to rectify the undervaluation.

 

Jardine Matheson

 

In April, we reinitiated an investment in Jardine Matheson (JM), now 2.6% of
AGT NAV, the Hong Kong based holding company of the Keswick family, which
currently trades at a -27% discount. Longer-term followers of AGT will
remember that we have invested in JM and other parts of the group structure at
various points over the last 25 years, and it is a name we know well.

The company's history dates back to 1832 as a leading trading house, heavily
involved in goods like cotton, tea, and silk. Almost 200 years later, and now
on the fifth generation of family control, the company has vastly expanded,
with interests spread across property, hotels, retail, autos and financial
services. Much of these are through controlling stakes in listed asset such as
Hongkong Land (30% of NAV), Astra (via Jardine Cycle & Carriage (28% of
NAV)), DFI Retail (14% of NAV) and Mandarin Oriental (9% of NAV).

 

The company, and wider Jardine group, are currently undergoing gradual but
significant changes in their path to modernising as a holding company - in
many ways aping changes we saw in European holding companies some twenty or so
years ago - moving away from an owner-operator model, to one of an engaged
shareholder.

 

Since Ben Keswick took over as Chairman in 2019, the owner-operator approach
has changed with multiple portfolio companies appointing external candidates
to senior leadership positions, with JM wanting to bring in highly experienced
sector specialists to run the businesses, replacing long standing JM
employees.

 

JM will move away from the direct, day to day management of the portfolio
companies, focussing instead on board representation, reviewing growth
strategies and capital allocation policies of the portfolio companies while
allowing the experienced, professional management to run day-to-day
operations.

 

With the new CEOs looking dispassionately at their businesses, we are starting
to see positive developments, with strategic reviews initiated at Hongkong
Land and Mandarin Oriental, focussing on simplifying their structures, and
asset realisations at DFI.

 

At Hongkong Land, a pivot into asset management and a focus on mixed use
projects in Asian gateway cities, while planning an exit from their build to
sell residential business, should lead to a more stable, higher quality
earnings stream and be rewarded with a higher multiple (and thus narrower
discount). Execution is key here, with plans to recycle c. $10bn of assets
already underway with the partial sale of Exchange Square in Hong Kong at a
reported cap rate of 3.1%. The company has earmarked 20% of recycled capital
for buybacks.

 

Mandarin Oriental's new CEO is turbo charging change, with a long string of
new management contracts announced as they move to a capital light model,
undertaking sale-leaseback transactions, with the first significant asset sale
announced last year as they sold their Paris hotel for $383m.

 

We believe much of the real estate portfolio is available for sale-leaseback,
none more so than the famous Causeway Bay site which nears practical
completion. This was last valued at c. US$2bln vs Mandarin's US$2.6bln market
cap, with JM being very clear this mixed-use commercial building has no place
in Mandarin Oriental's portfolio.

 

As they sell off their valuable real estate and hit their aim of 100 hotels
under management, the company should screen much better on a return-on-equity
basis, which we believe should lead to significant share price improvement.

 

DFI Retail has been through a process of portfolio realisations under the new
CEO, Scott Price. Stakes in companies in which they did not have significant
influence have been jettisoned such as Robinsons Retail and Yonghui, with the
proceeds paying down debt and distributed to shareholders via a special
dividend of US$600m of which JM received c. US$465m.

 

Further portfolio improvements are expected with Astra International embarking
on a strategic review in the next year as they review their conglomerate
structure and decide which assets (which range from autos, to property to
mining) belong under the same roof.

 

There have also been significant and exciting changes at JM itself. Lincoln
Pan has been appointed as incoming CEO from December, replacing the outgoing
John Witt who oversaw many of the positive steps outlined above. Lincoln
provides a wealth of private equity experience joining from PAG, where he
built up their non-China business. Lincoln's appointment has been further
bolstered by the hire of Ming Lu, formerly of KKR, to the Board to enhance
their private equity and portfolio management capabilities.

 

We expect JM to be debt free in the short term, giving the new hires a clean
slate to better align the portfolio to the new model and we expect Lincoln Pan
and team to communicate their views in the coming months.

 

To date, it has been a successful investment for AGT, generating a total
return of +36% in a little over four months. Looking ahead, with many
portfolio companies undertaking measures that should lead to positive share
price movements, we believe prospects for NAV growth are compelling.

 

Korea

 

Following on from our June
(https://www.assetvalueinvestors.com/content/uploads/2025/07/AGT-JUNE-2025.pdf)
and July
(https://www.assetvalueinvestors.com/content/uploads/2025/08/AGT-JULY-2025.pdf)
newsletters, where we outlined the positive developments in Korea, in August
we travelled to Seoul to engage with portfolio companies, meet potential new
ideas, and discuss the Korean opportunity set with likeminded investors.

 

Our takeaway from the trip is that the direction of travel for Korea's
corporate reform remains clear and the momentum will be difficult to stop.
Corporate governance reform is continuing at pace and the third Commercial Act
amendment for the mandatory cancellation of treasury shares is to be discussed
during the September regular session.

 

Using AVI's proprietary screen, our Korea universe is both deep and
over-capitalised, with over 600 companies that have a median NFV (cash +
listed securities) of 71%. This universe is also under-researched and
undervalued, with 81% of the universe completely uncovered by the sell-side,
trading at a median PB of 0.7x.

 

Taken together with Korea's low foreign ownership levels, the market has an
abundance of mis-priced opportunities that suit AVI's approach to investing
and engagement. While we have learnt from Japan that progress is never linear
and there will be bumps along the road, we remain excited by the opportunity
in Korea.

 

Korean names currently make up 6.8% of AGT NAV, with a weighted average
discount of -55%.

 

Contributors / Detractors (in GBP)

 

 Largest Contributors  1- month contribution  % Weight

                       bps
 Rohto Pharmaceutical  59                     4.2
 D'ieteren             45                     7.2
 Kyocera Corp          26                     2.8
 Partners Group PE     25                     4.8
 Jardine Matheson      24                     2.6

 

 Largest Detractors     1- month contribution  % Weight

                        bps
 Vivendi                -58                    6.7
 Entain                 -56                    3.7
 Chrysalis Investments  -32                    8.0
 Third Point Investors  -27                    1.9
 Amorepacific Holdings  -21                    1.4

 

 

MUFG Corporate Governance Limited

Corporate Secretary

 

9 September 2025

 

LEI: 213800QUODCLWWRVI968

 

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