More consolidation in the Japan trust sector, strong annual results from Baillie Gifford US Growth and a “transformational” £100m UK acquisition for Sirius Real Estate. Plus updates from Derwent London, Baker Steel Resources, Partners Group Private Equity and a 1pm deadline for acceptances in the bid battle for Assura.
The £231m Fidelity Japan Trust (FJV) has opted for an all-share merger with the £239m AVI Japan Opportunity (AJOT) after concluding its strategic review launched after shareholders voted against the continuation of the company in May following AJOT’s unsolicited merger approach the previous month. FJV shareholders who do not want to swap their quality growth approach to Japan’s larger companies for AJOT’s smaller company, value-style activism will be able to sell half their stakes at a 1% discount to asset value. City of London Investment Management, FJV’s largest shareholder with a 23.2% stake and also a 17% holder of AJOT, supports the transaction which should expand the latter’s net assets to at least £370m. AJOT says FJV shareholders should benefit from an uplift to their holdings given its shares trade closer to net asset value (NAV), on a current 3% discount compared to FJV’s historic 9% average discount, which reflects its stronger investment performance. AVI will also cut its annual management fee from 1% based on the lower of market capitalisation or NAV to a tiered structure on assets above £300m. The merger will leave just four trusts in the Japan sector with a further two, including AJOT and rival Nippon Active Value (NAVF), in the Japanese Smaller Companies grouping.
James Carthew, head of investment company research at QuotedData, said: “I’m really pleased to see that AVI Japan Opportunity was picked as the merger partner for Fidelity Japan. The trust has had a great run of performance this year, but we think that the Japanese corporate governance revolution has a long way to go yet and AVI Japan should continue to thrive. The trust tends to trade fairly close to NAV. If you are a Fidelity Japan investor and you still want Japanese exposure, my suggestion would be to roll into AVI Japan rather than take the cash option.”
Baillie Gifford US Growth (USA), the £757m investment trust whose board survived a challenge from 29% holder Saba Capital in January, reports a strong set of annual results with a 22.1% investment return in the year to 31 May that smashed the 7.2% gain in the S&P 500 index. You can read the full story here about how USA is belatedly responding to the damaging 2022 share price crash.
Sirius Real Estate (SRE), last month’s best-performing real estate investment trust, completes the deployment of the capital raised in the past two years with the £101.1m acquisition of Hartlebury Trading Estate in Worcestershire. The Anglo-German business park investor says the transaction is “transformational” for its UK BizSpace business, increasing the portfolio by 18% to 8.3 million sq ft, while growing the gross asset value by approximately 20% and immediately boosting revenues by 10%.
Derwent London (DLN) reports positive momentum in its office portfolio with half-year results showing £13.8m of leasing activity with open-market transactions achieving 10.5% more than estimated rental value and with underlying capital growth of 1.2% compared to a 1.7% fall a year ago. Property yields are stable, down slightly at 5.69% from 5.73% at 31 December. Vacancy rates have risen to 3.7% from 3.1% in December but are still low. Nigel George, an executive director who has served on the board for 27 years and been involved in many of its investments, will retire next March 2026.
Primary Health Properties (PHP) has received acceptances from 36.28% of Assura (AGR) shareholders for its recommended cash and shares offer ahead of the formal deadline of 1pm today. KKR has received just 5.95% support for its rival cash offer.
Baker Steel Resources Trust (BSRT) says it will update investors on plans to narrow its 36% discount at interim results next month. The £71m mining fund saw net asset value rise 2.6% to £114m last month with NAV per share of 107.1p at 31 July. This was largely due to increases in the listed share prices of Blue Moon Metals Inc, Metals Exploration and Silver X Mining Corp “coupled with a not inconsiderable rally in the US dollar against sterling”. The company also received $5.16m cash following the previously announced disposal of the Prognoz Royalty by Polar Acquisition Limited for US$11m. This increased the investment company’s cash holdings to £5.8m or 5.1% of NAV. The shares rose 1.7% to 67.6p in early trading.
Partners Group Private Equity (PEY) says net asset value declined 0.1% last month to €953.5m with NAV per share at €13.79 leaving shares in the private equity fund at €10.25 on a 26% discount. The company said the weak dollar eroded most of the 1.7% valuation gains it made. “Besides the listed holdings, International Schools Partnership (ISP) continues to contribute, reflecting its continued robust financial performance, both organically and via acquisitions,” it said. PEY received €28.4m in distributions, €22m from a block trade in Vishal Mega Mart, an Indian retailer, and invested €4.8m in the month. Deutsche Numis said that the current discount, the board should allocate around half of the company’s cash flow to share buybacks.
Custodian Property Income REIT (CREI) bought back another 250,000 shares on 8 August at 78.4p per share at a cost of £195,875 under the share buyback programme begun last month. The shares will be held in treasury taking the total held there for potential re-issue to 660,000.
