Last checked at 10 May 2023 15:50
AVI GLOBAL TRUST PLC
Monthly Update
AVI Global Trust plc (the "Company") presents its Update, reporting performance figures for the month ended 30 April 2023.
This Monthly Newsletter is available on the Company's website at:
https://www.assetvalueinvestors.com/agt/content/uploads/2023/05/AGT-April-2023.pdf
Performance Total Return
This investment management report relates to performance figures to 31 March 2023.
Total Return (£) | Month | Calendar Yr to date | 1Y | 3Y | 5Y | 10Y |
AGT NAV | 0.2% | 0.5% | -0.6% | 61.0% | 41.6% | 119.1% |
MSCI ACWI Ex US | 0.1% | 4.1% | 2.9% | 32.6% | 24.0% | 82.8% |
MSCI ACWI | -0.2% | 4.2% | 1.9% | 41.2% | 53.9% | 165.1% |
Manager's Comment
AVI Global Trust (AGT)'s NAV increased by +0.2% in April.
Oakley Capital Investments (+4%) and Godrej Industries (+11%) were the most significant contributors to returns, whilst Symphony International (-8%) and Aker (-1%) were the largest detractors.
News Corp:
Over the last few months, we have built a position in News Corp - the Murdoch family-controlled holding company.
Whilst the current structure was established in 2013, the relevant history dates back to 1952, when a 21-year-old Rupert Murdoch returned to Australia from Oxford to take over what was left of his father's newspaper business, which had been much diminished by death duties and taxes. From this he built one of the most dominant media empires of the 20th - and indeed 21st - century, amassing vast wealth and notoriety in the process.
Today we believe that News Corp is one of the most misvalued and misunderstood companies in our investment universe, trading at a 52% discount to our estimated NAV. The NAV is principally comprised of the following assets: a 62% listed stake in REA Group (36% of NAV), the Australian real estate classified marketplace, and unlisted assets Dow Jones, HarperCollins and Move accounting for 37%, 13%, and 8%, respectively.
In particular, Dow Jones is a crown jewel asset that has successfully evolved the Wall Street Journal into a thriving digital consumer business, whilst both organically and inorganically building a high-quality Professional Information business that warrants a premium multiple, reflective of its sticky growing revenues, high margins, and minimal capex requirements. The 2021 acquisition of OPIS for $1.1bn marks a step-change in the importance and materiality of Dow Jones' Professional Information business. The value and quality of this business is misunderstood by the sell side and ignored by the market.
We estimate that Dow Jones alone is worth 2.5x News Corp's stub value. The stub trades at just 3.1x EBITDA, with EBITDA expected to grow at high single-digit to low double digit rates in the years ahead. This compares to the S&P Communication Services sector median multiple of 10.1x, the New York Times at 16.7x and Information Services peers at 22.3x.
Management is highly aware of, and dissatisfied with, the current valuation. Although not consummated, the recent proposed sale of Move (8% of NAV) indicates a willingness to make structural changes to unlock value, with multiple potential levers. These include the sale of Move, a monetisation of Foxtel, increased disclosure at Dow Jones - or, most tantalisingly, some form of value unlock at REA Group, which accounts for 75% of News Corp's market cap. Whilst timing is uncertain, the attractive underlying nature of the NAV means that we can afford to be patient and makes time our friend. Returns from NAV growth and discount narrowing appear attractive.
VNV Global:
During the month we exited VNV Global.
As way of reminder, we initially built the position in 2020 following the COVID selloff when the company was trading on an excessively wide discount. In turn we exited c.98% of the holding over the course of late 2021 and early 2022 at prices north of 100 SEK per share, when the company was on a narrow discount / premium. We then rebuilt the position in the summer of 2022 when the share price was in the SEK 20s and the discount had blown back out, as part of our PE/VC-basket.
Our decision to sell comes following the announcement of a rights issue at a ~65% discount to NAV, with the intended proceeds being used to buy a secondary stake in BlaBlaCar. Notwithstanding the extent to which they are buying BlaBlaCar on a discount to its reported carrying value, an unforced discounted rights issue alters what we consider to be the fair level of discount and should be penalised. Over the course of our investment, we were impressed by VNV's management team, however the rights issue raises questions of judgement, and we did not feel adequate explanations for their actions were given.
Overall, it was a relatively successful investment for AGT, with a +38% ROI / +61% IRR. This compares to an ROI of +12%/+10% for the MSCI ACWI ex-US and MSCI ACWI respectively (all figures in Sterling).
Contributors / Detractors (in GBP)
Largest Contributors | 1- month contribution bps | % Weight |
Oakley Capital Investments | 31 | 8.8 |
Godrej Industries | 25 | 2.7 |
Princess Private Equity | 17 | 3.3 |
Pantheon International | 16 | 2.7 |
Digital Garage | 11 | 2.1 |
Largest Detractors | 1- month contribution bps | % Weight |
Symphony International Holdings | -30 | 2.8 |
Aker ASA | -29 | 5.9 |
Wacom | -14 | 3.1 |
Pershing Square Holdings | -12 | 6.0 |
D'Ieteren | -12 | 2.4 |
Link Company Matters Limited
Corporate Secretary
10 May 2023
LEI: 213800QUODCLWWRVI968
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