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Japan investment trust Nippon Active Value raises £14m in placing offer


Japan focused opportunistic investment trust Nippon Active Value (LSE:NAVF) has raised £14m via an issue of ordinary shares at 139.70 pence, Shore Capital confirmed yesterday. The issue price is at a premium of 1.5% to the NAV.

The capital raise was achieved via an initial placing combined with an offer from PrimaryBid.

Nippon Active Value is one of The Armchair Trader’s favoured investment trusts. The fund focuses on opportunistic and hard to source deals in the Japanese corporate sector. The fact that it managed to get the share issue away at a premium is already testament to the value the market places on the fund.

This is one of the top-ranked Japan equity investment trusts and is advised by Rising Sun Management. It is an activist investor which leverages significant in-house market knowledge in Japan, where the corporate sector is frequently opaque. It specialises in the smaller end of the sector where companies are under-researched, but where companies have rising balance sheet cash reserves.

Activist investors like Nippon Active Value can follow value-enhancing corporate reorganisation strategies that can achieve significant rises in the share price. This is not a strategy pursued by many Japan fund managers, who tend to take a buy and hold approach.

Ultimately Nippon Active Value is able to deploy a wide range of activist tactics that can drive shareholder value.

The fund continues to perform well, recording gains of 22.17% over six months and 38.09% over a year.

Nippon Active Value Top Five Holdings (30 September 2021)

  • Intage Holdings (13.28%)
  • Ebara Jitsugyo (9.49%)
  • Nippon Fine Chemical (8.3%)
  • Mitsubishi Belting (6.64%)
  • Bunka Shutter (6.13%

Currently the investment trust remains heavily exposed in the Japanese industrials sector, with a significant slice in the consulting space.

Rising Sun Management

The investment trust is not managed as a yield earner – it is really looking for capital appreciation. The management team combines its own research and connections in the Japanese market with that of Dalton Investments Japan. Rising Sun also has its own office in Tokyo which we feel is essential.

Nippon Active Value is playing into good circumstances overall in Japan, as an activist investor. When I first started covering Japanese corporates in the 1990s, activism was a dirty word in Japanese board rooms. Japan has, however, just updated its corporate governance code, which brings with it the requirement for independent directors plus further scrutiny of intra-group transactions. This helps the minority shareholders in Japanese companies while also meaning that fund managers have more room to operate.

Nippon Active Value has been able to achieve some very respectable numbers since it came to the market. It has been operating pretty much throughout its public trading history with the cloud of COVID hanging over it, which, as we saw with the Tokyo Olympics, has had the scope to be very disruptive in Japan.

This does not seem to have slowed the trust down that much – as we wrote in September, the trust was able to facilitate the MBO of Sakai Ovex, a Japanese company in the dyeing and textiles sales space. This followed is acquisition of a stake of over 6%.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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