Fund Research

AVI Japan Opportunity Trust

Last update 10 April 2019

AVI Japan Opportunity Trust is a client of Kepler Trust Intelligence. Material produced by Kepler Trust Intelligence should be considered as factual information only and not an indication as to the desirability or appropriateness of investing in the security discussed.

Please see the important information by following this link or at the bottom of the page.

Investment objective

To achieve capital growth through investing in a focussed portfolio of over-capitalised small-cap Japanese equities.

As at:

08/04/2019

Group/Investment

AVI Japan Opportunity Ord

Ticker

AJOT

Management Company

Asset Value Investors

Manager Name

Joe Bauernfreund;Daniel Lee;Darren Gillen;Scott Beveridge;Tom Treanor;Wilfrid Craigie;

Association of Investment Companies (AIC) Sector

Japanese Smaller Companies

12 Mo Yield

0.0%

Dividend Distribution Frequency

Annually

Latest Market Capitalisation

£83,000,000

Latest Net Gearing (Cum Fair)

-2%

Latest Ongoing Charge Ex Perf Fee

0.00%

Turnover Ratio

0.0%

Shares Outstanding

80,000,000

(Discount)/ Premium % (Cum Fair)

3.2%

Daily Closing Price

103.75p

AVI Japan Opportunity (AJOT) invests in Japanese small-cap stocks, aiming to generate high long-term returns by taking advantage of extremely cheap valuations in that part of the market but also using shareholder activism to supercharge returns.

The £78m trust, launched in October 2018, is run by Joe Bauernfreund, also manager of the £900m British Empire Trust. Joe looks for asset-backed companies on low valuations where he can see a catalyst for a re-rating. In small cap Japan he has found what he believes is an outstanding opportunity. On a look-through basis, the companies in the portfolio have 78% of their market cap in cash or transferrable securities and are trading on 3.9 times EV/EBIT, compared to 8.7 times on the MSCI Japan Small Cap and 18.5 times on the S&P 1500 all-cap index.

AJOT is an activist investor and aims to take advantage of the political and regulatory pressure on Japanese companies to increase the efficiency of their balance sheets. One of the “three arrows” of Abenomics is policies for growth, and in part this means a determined push to put idle corporate cash and cross-shareholdings to more productive use and thereby boost shareholder returns.

In their view, AVI is therefore increasingly pushing on an open door. In the first six months of the trust’s life it has seen nine of its 29 portfolio companies make shareholder friendly moves, be that paying or increasing a dividend, buying back shares or other measures. NAV performance has also been solid, with the trust up 0.3% compared to a 1.6% loss for the MSCI Japan Small Cap index, to the end of March. Although it was aided by it not being fully invested during the global market downturn in November and December, most of the outperformance came when it was fully invested, illustrating the success of the stock-picking.

Following the encouraging start, and to take full advantage of the current opportunity, the company drew down £10.4m in borrowings in April 2019, amounting to gearing of 12.5% of NAV.

The trust has been trading on a premium since launch, in part helped by not being fully invested in the Q4 2018 market slump. The trust is now on a 3.2% premium. The board is yet to seek to address this, but the prospectus does allow for further share issuance if the trust is trading above NAV. AJOT will offer a liquidity option after four years and every two years thereafter, meaning that if returns are disappointing investors can redeem at close to NAV.

There is no specific income objective. However, AJOT’s portfolio currently yields 2.1% (at NAV) and, to retain investment trust status, the board will have to pay out 85% of that after costs. Through 100% charging costs to capital, the majority of the portfolio yield will flow through to shareholders as dividends.

Thomas McMahon

Important information

AVI Japan Opportunity Trust is a client of Kepler Trust Intelligence. Material produced by Kepler Trust Intelligence should be considered as factual information only and not an indication as to the desirability or appropriateness of investing in the security discussed.

Please see the important information by following this link or at the bottom of the page.

Kepler Trust Intelligence is a website owned and managed by Kepler Partners LLP. Material produced by Kepler Trust Intelligence should be considered a marketing communication, and is not independent research.

This report has been issued by Kepler Partners LLP for communication only to eligible counterparties and professional clients as defined by the Financial Conduct Authority.  Its contents are not directed at, are not to be communicated to, may not be suitable for and must not be relied on by retail clients

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country.  Persons who access this information are required to inform themselves and to comply with any such restrictions. 

The information contained herein has not been prepared in accordance with legal requirements designed to promote the independence of investment research. The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. 

Past performance is not necessarily a guide to the future. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. Independent financial advice should be taken before entering into any financial transaction. This website is published solely for informational purposes and has no regard to the specific investment objectives, financial situation or particular needs of any person.  

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

A copy of the firm’s conflict of interest policy is available on request.

Kepler Partners LLP is a limited liability partnership registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority.

Fund History: AVI Japan Opportunity Trust

More Research

Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please select a range
{{item.msg}}
Please enter a trust
{{item.msg}}
View an example
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase. We do not share your personal information and your answers are not linked to your identity for marketing purposes.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.