AVI Japan Opportunity (AJOT), the £400m smaller companies activist, has celebrated the end of a 17-month “drought” in corporate actions with a tender offer for its biggest holding perking up the investment trust’s shares after a challenging first half.
Last week MBK Partners, an Asian private equity firm, launched a tender offer for Sharingtechnology with the intention of taking the online home services platform private.
The offer was at a 55.8% premium to Sharingtechnology’s share price in June when a potential takeover was first reported, helping to push the holding to 11.1% of AJOT’s assets.
AJOT invested in the company in July 2024 and estimates it will make a return of over 40% once the tender offer completes.
This was welcome news for AJOT which had not seen a transaction of this kind since February 2025, weighing on the performance of a fund that relies on corporate transactions for its returns.
Half-year results yesterday showed the net asset value (NAV) of its investments slipped 2.2% in the six months to 30 June, also partly hampered by the decline in Synchro Food which recently reported a big fall in profits. This saw AJOT underperform the 18% return in sterling from the MSCI Japan Small-Cap index.
The trust’s shares dropped from 172p to 166.5p in the first half but have rallied to 183.5p, buoyed by the news on Sharingtechnology. This leaves the shares up 59.6% over five years.
Joe Bauernfreund, chief executive of AJOT’s fund manager Asset Value Investors (AVI), said in the first half of the year Japan’s stock market rally had been driven by a narrow band of AI and semiconductor-related companies that AJOT did not own.
“As a portfolio focused on undervalued businesses with company-specific catalysts rather than high-growth technology stocks, AJOT lagged the broader market over much of the period. While this resulted in disappointing performance over the six months, we remain confident that the underlying investment case across the portfolio has strengthened rather than weakened. Encouragingly, the latter part of the period saw signs that market leadership was beginning to broaden beyond the technology sector,” Bauernfreund said.
The trust’s chair, Norman Crighton, added: “We recognise that the absence of such events has been frustrating, and we hope that Sharingtechnology’s performance and contribution to the portfolio serves to highlight how quickly and dramatically transactions like this can affect the overall direction of the strategy.”
Crighton said the board expected several initiatives undertaken by AVI would yield results at portfolio companies over the coming months.
Their optimism on prospects was buoyed by two forthcoming developments that will extend Japan prime minister Sanae Takaichi’s push on corporate reform: the first revision to the Japan Corporate Governance Code in five years and a two-year revamp of the TOPIX index which the Tokyo Stock Exchange is starting next month.
AJOT’s merger with Fidelity Japan last November has strengthened it and AVI’s role as an activist investor, enabling the trust to bulk up positions. Two thirds of the portfolio is now in 14 companies where AJOT holds more than 5%, meaning the position is announced to the market. Combined with stakes in the manager’s other funds, most notably AVI Global Trust (AGT), AVI in some cases owns 20-30% of inefficient companies sitting on excess cash, enabling it to exert more pressure on their boards to return more of it to shareholders.
“These significant ownership stakes provide us with a level of access and influence that few minority shareholders can achieve. We believe this concentrated ownership model is a key competitive advantage and significantly enhances our ability to unlock long-term value,” said Bauernfreund.
Following the absorption of Fidelity Japan, AJOT increased its borrowing facility in April from ¥6.6bn to ¥12.7bn with its total debt rising from ¥6.6bn to ¥9.2bn (£42.7m) to leave net gearing at 5.6% of assets.
AVI has also been the subject of a takeover, agreeing to the acquisition by Pacific Asset Management, a London-based multi-boutique asset manager that is part of the Pinnacle Investment Management Group.
AJOT declared an interim dividend of 1.6p per share, unchanged from last year, but anticipated an increase in the final dividend for the year to reflect the growth in income the board had seen.
Our view
James Carthew, head of investment company research at QuotedData, said: “AJOT’s results underscore the need for patience with its investment approach. Focused portfolios and a tendency for corporate events to drive returns inevitably make for lumpy performance. The period under review may have been quiet, but the tender offer for Sharingtechnology just after the period end illustrates the portfolio’s potential.”
