TIDMAGT
RNS Number : 8670Z
AVI Global Trust PLC
15 January 2020
AVI GLOBAL TRUST PLC
Monthly Update
AVI Global Trust plc (the "Company") presents its Update,
reporting performance figures for the month ended 31 December
2019.
This Monthly Newsletter is available on the Company's website
at:
https://www.aviglobal.co.uk/content/uploads/2020/01/AVI-Global-Trust-2019-DEC.pdf
Performance Total Return
This investment management report relates to performance figures
to 31 December 2019.
Month Financial Calendar
Yr * Yr
to date to date
AGT NAV(1) 2.8% 3.4% 18.1%
MSCI ACWI Ex US(3) 1.9% 1.3% 16.8%
MSCI ACWI Ex US Value(1) 2.1% 0.7% 11.3%
MSCI ACWI(1) 1.1% 1.4% 21.7%
Morningstar Global Growth(1) 1.5% 2.3% 19.7%
* AVI Global Trust financial year commences on the 1(st)
October. All figures published before the fiscal results
announcement are AVI estimates and subject to change.
1 Source: Morningstar. All NAV figures are cum-fair values.
2 Source: Morningstar. Share price total return is on a
mid-to-mid basis, with net income re-invested.
3 From 1st October 2013 the lead benchmark was changed to the
MSCI ACWI ex US (GBP) Index. The investment management fee was
changed to 0.7% of net assets and the performance related fee
eliminated.
Manager's Comment
AVI Global Trust (AGT)'s NAV rose +2.8% in December, driven by a
combination of underlying NAV growth and a tightening portfolio
discount (from 32.1% to 31.6%). Currencies detracted from returns
over the month, with Sterling strengthening against most major
currencies. Contributors for the month included Oakley Capital
Investments, Cosan Ltd, Symphony International and Eurocastle
Investment. Detractors included Jardine Strategic and Tetragon
Financial.
Oakley Capital Investments (OCI) was the largest contributor
over the month, adding 95 basis points (bps) to returns. OCI's NAV
increased by +8% which, together with a tightening of the discount
from 24% to 20%, resulted in share price total returns of +13%. The
key event driving NAV growth in December was Oakley's sale of
WebPros (9% of NAV prior to sale) to CVC Capital Partners at a +92%
uplift to carrying value, adding +8% to its NAV. We estimate that
the deal took place at 16-17x EV/EBITDA. OCI will retain exposure
by re-investing part of the proceeds into WebPros through Fund IV,
keeping exposure at 6% of NAV.
WebPros is a provider of web-hosting software solutions to SMEs.
Its genesis lies in Oakley's 2017 acquisition - via a corporate
carve-out - of Plesk, the number 1 provider of web-hosting
solutions in Europe. Plesk had been a product line within a larger
group, neglected, starved of capital, and without even a separate
set of accounts; part of Oakley's due diligence involved
reverse-engineering accounting records from bank statements. As a
result of the deal's complexity and unique nature, Oakley was one
of the only bidders for the asset and paid a lowly 7x EV/EBITDA
multiple. WebPros was the name given to the holding company formed
to hold Plesk and several other bolt-on acquisitions.
2018 saw a significant development when Oakley backed WebPros'
acquisition of a majority stake in cPanel, Plesk's competitor in
the US, forming a single company with a commanding share of the US
and European markets. The cPanel deal was sourced by two
Oakley-associated entrepreneurs who became acquainted with the CEO
of cPanel. Both of these examples highlight Oakley's unique
approach to private companies: a focus on complex transactions, and
the power of an entrepreneurial network to source deals.
Overall, Oakley earned a multiple on cost 6.7x, and an IRR of
140% on WebPros - an excellent result for a 2.5-year holding
period.
Cosan Ltd (CZZ) contributed 61bps to returns, as the NAV rose by
+17% and the discount tightened from 15% to 6%, resulting in share
price returns of +31%. Underlying holding companies Cosan SA (72%
of CZZ's NAV) and Cosan Logística (31%) both performed well,
returning +12% and +8% respectively over the month.
We initiated our investment in CZZ in July 2017, with a thesis
predicated on the quality of the underlying assets, the strong
management team in place, and the potential upside from group
simplification. It is clear to us that the ultimate intention of
CZZ's Board and Management is to directly own its underlying
investments through a collapse of its holding structure. In January
2019, CZZ started this process by taking Comgás - a listed
subsidiary of Cosan SA - private.
The market reacted positively to this transaction, as evidenced
by the tightening of the discount from 26% to 6% over the past
year. Discount tightening was also supported by share buybacks
amounting to 9% of outstanding shares - a move which we applaud
given the risk-free accretion to NAV per share it generates for
remaining shareholders. Aligning AGT's capital with capital
allocation-savvy managers is always an attractive opportunity.
Over its lifetime, the CZZ position has been a successful one
for AGT's portfolio, with a multiple on cost of 1.7x and an IRR of
36% (local currency). Returns have been driven by a combination of
NAV growth (+80%) and a tightening of the discount from 33%
(weighted average across purchases) to 6% currently. With the
discount at increasingly tight levels, we have been trimming the
position on share price strength over the past year, such that CZZ
now accounts for 2% of AGT's NAV.
Eurocastle Investment (ECT) added 32bps to returns in December,
making it one of the largest contributors to AGT's returns. As we
discussed in last month's newsletter, ECT announced a de facto
liquidation of its portfolio, which involved selling its Italian
NPL portfolio and returning the cash proceeds to shareholders,
along with its stake in Italian-listed NPL servicer doValue, via a
tender offer. In other words, AGT would be receiving the majority
of its investment back at a zero discount to NAV. This process was
completed in late December, with AGT receiving a mixture of cash
and shares.
We are pleased with this outcome, having worked with the board
of ECT to negotiate an outcome that was beneficial for all parties.
The fruits of this effort can be seen in the excellent returns to
date, with the position generating a 1.2x multiple on cost and a
31% IRR (using the latest doValue share price) since March 2019. We
continue to see scope for further upside from the doValue shares
which we now own directly (c3% of AGT's NAV), with earnings growth
set to accelerate from its recently-announced acquisition of FPS,
the NPL servicing platform owned by Greece's Eurobank. The
acquisition positions doValue as the market leader in what will be
the most active market for NPL disposals over the next couple of
years, and further diversifies doValue outside of Italy (now just
under 50% of doValue's Gross Book Value pro-forma for the
deal).
There were few major detractors over the month, with Jardine
Strategic (JS) the only one of note, reducing returns by 34bps as a
widening discount (from 37% to 40%) overwhelmed +2% NAV growth.
Contributors / Detractors (in GBP)
Largest Contributors 1 month contribution Percent of
bps NAV
OAKLEY CAPITAL INVESTMENTS 95 8.0
COSAN LTD 61 2.0
Largest Detractors 1 month contribution Percent of
bps NAV
JARDINE STRATEGIC HLDGS
LTD -34 5.7
TETRAGON FINANCIAL -15 3.6
Link Company Matters Limited
Corporate Secretary
15 January 2020
LEI: 213800QUODCLWWRVI968
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END
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