Nippon Active Value (NAVF) launched on 21 February on the London Stock Exchange, raising £103m (click here to read more). The company is an activist investor in smaller Japanese companies. It has released its first set of results this morning, with NAV per share increasing by 5.5% to 105.5p. As at 31 August, the company’s shares were trading at a (4.7%) discount.
NAVF was 65% invested as of June 30
NAVF had invested over 65% of its IPO proceeds, up to 30 June 2020, the period up to which the results cover. Chair, Rosemary Morgan, noted that “At the end of June, a little over four months after listing, the company was over 65% invested. Shortly after the listing, global markets fell sharply in response to evidence that infections of COVID 19 were rapidly spreading from Asia, initially to Europe, then throughout the world. At that point, we had only just begun investing the proceeds of the IPO and Rising Sun Management, the company’s manager, were able to take advantage of market volatility to achieve some very attractive entry points.
As we indicated in the prospectus, we anticipated that the company would be fully invested after approximately six months. We are broadly on track, although during June our rate of purchases had slowed, partly because of lower than average trading volumes, particularly in the small and mid-cap stocks that are our targets, and also because of recent price movements which we believe are unsustainable. Softer markets and some pricing revisions have helped partially alleviate this in July.
While we are continuing to build positions, we do not feel able to give concrete examples of our investment targets or Rising Sun Management’s discussions with them. It is our intention to give more information through our monthly factsheets as well as future interim and annual reports once the full holdings have been purchased and engagement has progressed beyond the present introductory phase.”
Foreign Exchange and Foreign Trade Act
On the Foreign Exchange and Foreign Trade Act, Rosemary notes: “At the end of 2019, the Japanese Government announced its intention to make changes to FEFTA, which require foreign investors to file pre- and post-purchase notification of trades to the Ministry of Finance. If the target listed company conducts business in certain “Designated Business Sectors”, which may impact Japan’s national security or public welfare, foreign investors must file a post-trade notification of stock purchase after purchasing 1% and 10% of shares in issue. Foreign investors must also file a prior notification if they intend to file a shareholder proposal to nominate a closely related person as a director of the company or make certain proposals relating to disposal of businesses at shareholders’ general meetings. The amendments took effect on 7 June 2020.
Although several of our initial target investments have been classified as Designated Businesses we do not expect that the new regulations will constrain our engagement process in any significant way and are confident that the case for active investment in Japan remains intact.”
NAVF: Maiden interim results from Nippon Active Value sees 5.5% NAV increase