Monthly update

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

Performance Total Return

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

	Month	Fiscal Yr* to date	Calendar Yr to date
AGT NAV1	0.2%	- 1.4%	-7.5%
MSCI ACWI Ex US2	0.3%	-2.8%	-4.1%
MSCI ACWI1	-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 bps	% of NAV
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 bps	% of NAV
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

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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