Monthly Factsheet

AVI Global Trust PLC

09 November 2023

 

AVI GLOBAL TRUST PLC

Monthly Update

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

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

https://www.assetvalueinvestors.com/content/uploads/2023/11/AGT-OCTOBER-2023.pdf

Performance Total Return

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

Total Return (£)	Month	Calendar Yr to date	1Y	3Y	5Y	10Y
AGT NAV	-5.3%	4.0%	6.6%	37.9%	48.2%	126.7%
MSCI ACWI	-2.4%	5.8%	4.8%	29.4%	51.0%	155.8%
MSCI ACWI Ex US	-3.6%	0.1%	6.3%	16.6%	24.8%	70.2%

Manager's Comment

AVI Global Trust (AGT)'s NAV declined -5.3% in October.

Performance was weak across the board, with eight holdings detracting between -44bps (Hipgnosis Songs Fund) and -95bps (Schibsted). Godrej Industries and FEMSA were rare bright spots (+38bps and +20bps).

We contend that it is a challenging and uncertain environment for equities. It is, however, an environment we relish. Discounts, as evidenced by the 37% portfolio weighted average discount, have widened considerably to levels comparable to those observed in the global financial crisis and the Eurozone crisis. We believe that stock picking, active engagement, and a focus on investments with explicit catalysts stand us in good stead to drive healthy absolute and relative returns. So, whilst the near-term is uncertain, we are increasingly enthused about long-term prospective returns.

Hipgnosis Songs Funds

During the month we declared a 5.0% stake in Hipgnosis Songs Funds ("SONG") ahead of the company's AGM and EGM that were held on the 26th October. We also published a public letter (which can be found here) urging fellow shareholders to vote against the proposed asset sale to a related party of the Manager and against the continuation resolution. Both the resolutions were opposed by shareholders (by 84% and 83% of shareholders, respectively).

We continue to engage with all stakeholders and believe a reconstituted board can drive significant upside.

Bollore

Over the last few months, we have started to build a new position in Bollore SE ("Bollore"), the French holding company controlled by the mercurial Vincent Bollore. It is currently a 2.0% weight.

Bollore trades at a 45% discount to our estimated NAV, which is principally comprised of listed stakes in Universal Music Group (28% of NAV) and Vivendi (10%), cash (23% pro-forma of the sale of Bollore Logistics) and self-ownership loops (32%) given the companies' notoriously complex Breton Pulley ownership structure.

We have invested in both Bollore SE and Vivendi at various points over the last 15-plus years (and indeed, UMG more recently). However, we contend that we are now at a particularly interesting juncture. Having extracted the crown jewel asset (UMG) from Vivendi and monetised both Bollore Africa Logistics and Bollore Logistics for >€10bn, we are entering a period of value harvesting.

Pro-forma for the completion of the sale of Bollore Logistics, Bollore is sitting on €6bn of net cash. It is our expectation that over time, Bollore will look to own more of Vivendi, the French media conglomerate. This had been something of a crowded hedge fund trade, however - as he is prone to - Mr Bollore upset the apple cart earlier this year, partially reducing his stake in Vivendi to stay below the 30% threshold that would require a mandatory offer and allocating capital toward buying back Bollore shares.

This has sent Vivendi shares nearly 20% below their April peak, with the company now trading at a 43% discount to NAV. Indeed, at current prices the market is ascribing Vivendi's unlisted stub assets, the largest of which are Canal + and Havas, a value of just €3.3bn (net of debt & other liabilities). This equates to a little over 4x 2024e operating profits.

We expect Bollore to exploit Vivendi's lowly valuation - much to the benefit of Bollore's NAV. Importantly, is often his modus operandi, this can be done with relatively minimal capital outlay. There are many different forms this can take, but the most obvious one to us is a monetisation of Vivendi's €4.2bn stake in UMG, which accounts for 48% of Vivendi's market cap (gross of any taxes). The proceeds of this could be used to launch a tender offer, thereby significantly reducing the remaining free float for which Bollore would be mandated to make an offer. Vivendi's NAV excluding UMG stands at -€11bn, and there are scenarios where Bollore can own 100% of this for an incremental capital outlay <€3.5bn (assuming a 25% premium).

When investing in Vivendi historically we always viewed these assets as the ugly duckling alongside the swan that was UMG. That said, the earnings power has proved relatively stable, and the businesses have ridden secular and cyclical challenges better than we would have expected. In particular, Canal+ is in much better shape than it was 5-6 years. The French pay TV business has entrenched its position as an aggregator and is growing its subscriber base once again with a sticky offering of sports and films; and outside of France, particularly in Africa but also in other parts of Europe and Asia, the business has built a subscriber base that looks increasingly strategically valuable.

Of course, as this year evidences, Mr. Bollore is famously difficult to predict and he has a history of dumbfounding investors and taking the opposite path to the one assumed. We are under no illusions that we are any different and are very open to the fact the above might well not occur. However, we believe that being invested higher up the holding company structure at the Bollore - not Vivendi - level gives us the alignment of interest and patience required when events invariably take longer to come to fruition than initially anticipated.

Moreover, the significant net cash position at the Bollore level raises the prospect of capital returns and structural simplifications. In 2023 we have already seen a tender offer and some tinkering transactions at other parts of the structure. Exactly what the endgame is remains to be seen but further tender offers and eventual share-based transactions between the different holding levels seem quite plausible. Given the wide levels of discount involved, such moves would be highly accretive.

Vincent Bollore has shown himself to be an astute capital allocator compounding shareholder returns at +12.5% p.a. since the turn of the millennium, outstripping the MSCI Europe (+3.6%) and the MSCI AC World (+4.9%). The prospect of aligning capital with such an operator, at a time where there are numerous corporate catalysts, makes for an attractive investment.

Contributors / Detractors (in GBP)

Largest Contributors	1- month contribution bps	% Weight
Godrej Industries	38	3.7
FEMSA	20	6.1
Shiga Bank	14	1.3
News Corp	11	4.4
Fuji Soft	9	0.0

Largest Detractors	1- month contribution bps	% Weight
Schibsted 'B'	-95	8.1
Apollo Global Mgmt	-71	4.7
KKR	-53	5.1
Princess Private Equity	-53	6.1
IAC	-50	3.0

Link Company Matters Limited

Corporate Secretary

09 November 2023

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.

 

END