Monthly Factsheet

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

Performance Total Return

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

Total Return (£)	Month	Calendar Yr to date	1Y	3Y	5Y	10Y
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, 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 bps	% Weight
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 bps	% Weight
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

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