REG - AVI Global Trust PLC - Monthly update

AVI Global TrustAnnouncement

14/06/2022 10:00

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RNS Number : 7970O  AVI Global Trust PLC  14 June 2022

 

AVI GLOBAL TRUST PLC

 

Monthly Update

 

AVI Global Trust plc (the "Company") presents its Update, reporting
performance figures for the month ended 31 May 2022.

 

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

https://www.assetvalueinvestors.com/agt/content/uploads/2022/06/AGT-MAY-2022.pdf
(https://www.assetvalueinvestors.com/agt/content/uploads/2022/06/AGT-MAY-2022.pdf)

 

Performance Total Return

 

This investment management report relates to performance figures to 31 May
2022.

 

                     Month  Fiscal Yr(*)  Calendar Yr

                            to date       to date
 AGT NAV(1)          0.2%    -1.4%        -7.5%
 MSCI ACWI Ex US(2)  0.3%   -2.8%         -4.1%
 MSCI ACWI(1)        -0.3%   -0.5%        -6.3%

( )

1 Source: Morningstar. All NAV figures are cum-fair values.

2 From 1st October 2013 the lead benchmark was changed to the MSCI ACWI ex US
(£) Index. The investment management fee was changed to 0.7% of net assets
and the performance related fee eliminated.

* AVI Global Trust financial year commences on the 1stOctober.  All figures
published before the fiscal results announcement are AVI estimates and subject
to change.

 

Manager's Comment

 

AVI Global Trust (AGT)'s NAV increased +0.2% in May.

 

Markets remain choppy: a number of the laggards from the prior month (Apollo
Global Management, KKR, Sony) rallied and were significant positive
contributors this month, whilst last month's stronger performers (Symphony,
Godrej Industries) detracted this month. We don't expect (or try!) to predict
such short term moves, but remain excited about the long-term prospects for
the companies in which we have invested, and the 32.3% weighted average
discount at which they trade.

 

Aker

 

Aker was the most significant contributor to returns over the month, as the
shares moved +16% higher on account of strong NAV growth (+18%). The key here
was Aker BP, whose shares returned +21% as the oil price continued to rise
(with Brent now $120 per barrel at the time of writing). Continued OPEC
production misses, declining US Strategic Petroleum Reserves, and further
steps toward the re-opening of the Chinese economy have all supported this
last leg up. More fundamentally however it comes down to years of
underinvestment and a structural imbalance between supply and demand. Earlier
this year we wrote that "a pure play, low-cost low-emission producer,
controlled by a thoughtful long-term orientated shareholder, would prosper in
a world starved of oil capex and production growth". We believe this remains
true and that Aker BP and fossil fuels will continue to play an important and
extended role in the energy transition. Meanwhile, as is typical of the best
run family-controlled companies, Aker continues to focus on the even longer
term, with initiatives at Aker Horizons, the renewable energy-focused holding
company, positioning Aker to play an important role in renewable energy in the
years ahead.

 

Oakley

 

Oakley Capital Investments ("OCI") detracted -76bps from returns over the
month as the shares declined -11%. This should be seen in the context of
weakness across the London-listed private equity sector rather than anything
company-specific. Indeed, during the month OCI provided an impressive update
at their investor day.

 

The day involved an update on OCI, as well as presentations on each of the
portfolio's three segments: education, technology, and consumer. We were also
given talks by four of the portfolio companies' CEOs, namely IU Group (13% of
NAV), Grupo Primavera (4%), TechInsights (6%), and Seedtag (1%). The day
served to highlight the attractions of the strategy, with Oakley's unique
origination network and comfort in complexity allowing for uncontested
acquisitions, as well as the evolution and quality of OCI's portfolio
companies. Moreover, it is worth noting the maturity of the portfolio - over
42% of the portfolio is now >3 years old - and the prospect for NAV uplifts
upon realisation, given the average multiple uplift of +60% upon exit. On top
of this we see ample room for discount narrowing, with continued strong NAV
performance and improved standards of corporate governance ameliorating past
sins.

 

FEMSA

 

Portfolio trading activity remained low, however, we added to FEMSA over the
month. As way of reminder FEMSA is a Mexican family-controlled holding
company, the bulk of whose value lies in Oxxo-branded convenience stores in
Mexico and other parts of South America. Oxxo are master operators, with
significant scale advantages, strong unit economics and a long growth runway.
In recent years Oxxo have layered high incremental margin services across
their physical store network, culminating in the launch of Spin by Oxxo, a
digital wallet, last year. The investment thesis is predicated on the prospect
for strong earnings growth at Oxxo, the lowly valuation at which the stub
assets trade, optionality around digital value creation at Spin, and the
potential for the family to unlock value by simplifying the group structure.

 

We have owned the shares for a little over a year and all parts of our thesis
are moving in the right direction. First quarter results - released in May -
showed continued strong performance at Oxxo, where sales and operating profits
are now +21% and +41% above their pre-pandemic (1Q19) level. Meanwhile in less
than a year Spin has scaled to 2m users, with Oxxo store network acting as a
funnel to acquire customers at a very low cost. On top of this, alongside
results, management announced a "comprehensive strategic review" of the group
structure with a focus on unlocking the sum-of-the-parts discount at which it
trades. The stub currently trades at 7.5x forward EBITDA, half of its
historical average and that of peer Walmex. We do not believe the market is
pricing in strong fundamental performance, let alone the potential for
structural simplification

 

Contributors / Detractors (in GBP)

 

 Largest Contributors  1- month contribution  % of NAV

                       bps
 Aker ASA              86                     6.9
 Apollo Global Mgmt.   46                     3.3
 Sony Group            41                     5.3
 KKR                   39                     5.6
 EXOR                  27                     6.8

 

 Largest Detractors                 1- month contribution  % of NAV

                                    bps
 Oakley Capital Investments         -70                    5.8
 Pershing Square Holdings           -54                    8.1
 Symphony International Holdings    -50                    2.9
 Godrej Industries                  -15                    3.2
 Third Point Investors Master Fund  -13                    2.9

 

 

Link Company Matters Limited

Corporate Secretary

 

13 June 2022

 

LEI: 213800QUODCLWWRVI968

 

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