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Small cap positions help CC Japan Income outperform

Small cap positions help CC Japan Income outperform – CC Japan Income & Growth reports that, over the financial year to 31 October 2017, and expressed in pounds sterling on a total return basis, the share price rose by 27.2% while the Net Asset Value  per share increased by 20.7%. The Topix Total Return Index returned 10.1% over the year.  10,008,000 new shares were issued over the year to meet investor demand.  The Board  has declared total dividends for the year of 3.45p, representing a 15% increase over the 3.00p for the previous financial period.

The managers say that “the structural gearing of 20% has made a substantial contribution given the positive return of the market. However, the main driver has been the performance of individual portfolio holdings. 

Smaller company stocks have had a particularly strong year in Japan and many feature in the top contributors for the Trust.  Noevir (cosmetics manufacturer), Yamada Consulting (corporate advisory), Trust Tech (engineering outsourcing), Shoei (motorcycle helmets) and Solasto (medical employee outsourcing) all performed extremely well, complementing their strong earnings growth with improving prospects for dividends. Tokyo Electron benefitted from healthy demand for semiconductor equipment and the announcement of a clear shareholder return policy; and Tsubaki Nakashima, a manufacturer of precision steel balls used in ball bearings, has confirmed its global leadership through contract gains and acquisition.  Conversely, Daito Trust and Japan Tobacco have been weak, affected by short term trends in the domestic market which do not impact either company’s long term commitment to improving shareholder returns. 

The transactional activity in the fund has resulted from the successful issuance of equity at various times during the year, a reconsideration of a single company’s valuation or a fundamental reassessment of the long term potential for growth of shareholder returns. A total of 10,008,000 new shares in the Company were issued during the year and the funds raised have been used to bolster positions in small cap holdings such as Shoei and Yamada Consulting and more recently to large cap holdings such as Toyota Motor and Tokio Marine Holdings, given their more attractive valuation profile.  The positions in Aoyama Trading, Matsui Securities and Kaken Pharmaceutical were sold due to longer term concerns regarding their ability to deliver sustained dividend growth, while Otsuka Holdings and Solasto were sold following strong share price performance leading to over extended valuations.”

CCJI : Small cap positions help CC Japan Income outperform

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