BGFD May update - Vegetating?

Baillie Giff's Japan Trust BGFD considered

Dear reader,

A new holding at #10 for BGFD in its May 2025 update where GA Technologies slips below #10.

The Trust remains good value where the top 13 account for £17.2bn of net income (based on latest quarterly results) relative to a combined £317.8bn market cap. Strip out £118.6bn Cash and the businesses are on 11.6X earnings. Based on their NAV (or EV), net of cash, and they are generating 6.9X earnings.

Since many are engaged in buy backs stripping out cash is precisely what these are doing, alongside disposal of cross holdings and loss-making aspects. Japanese corporate reforms is driving this.

#10 Largest - New Holding - Oisix

Oisix is a vegetable vendor. Like a “Riverford Organics” meets “Ocado”. Vegetables are big business in Japan. 6m households receive regular orders.

The strategy can be summed up as “Farm for Tomorrow, Table for Tomorrow”

Oisix provide services that enable better culinary lives for people, by creating systems where good farmers are rewarded and take pride in their work.

Oisix helps to realise a sustainable society by building frameworks that continuously link farm and table or “farm to fork” we might say in the UK.

Oisix operates via various divisions that provide prepared meals, vegetable boxes, organic food, contract food services (“meals on wheels” and “cafeterias”).

FY24 delivered largely pleasing results. Increases thanks to latest acquisistion Shidax helped but there was organic growth too. Forecast net income was exceeded even though that was also a y-o-y drop from FY23 due to extraordinary costs and gains.

Strong B2B performance for sales and profit were offset by some level of B2C weakness. Inflation in food prices has unnerved consumers in Japan since for 30 years prices have been nearly static. Recent food price rises particularly in some areas like rice (a Japanese staple) has caused some shoppers to downgrade to cheaper options. Out goes “Ocado” and in comes “Aldi”. So long as you drive home fast enough the downgraded fresh food doesn’t rot too much.

Meanwhile looking forwards forecast sales growth in FY25 is for 5.5% growth translating to 10% higher net profits.

With safety, reliability, and deliciousness as top priorities, Oisix is committed to providing services and products that cater to both premium needs for food experiences customers cannot easily replicate themselves, and time-saving needs for those with limited time or mental energy, based on a concept of “premium time-saving.”

Its 5 year plan is to achieve 13.7% CAGR at slightly higher margins. This would double net profits.

A large move being undertaken is to integrate what have historically been separate B2C and B2B businesses and to integrate procurement (greater stability and economies of scale), manufacturing and logistics and systems.

Oisix has spent the past 10 years on a buy-and-build strategy so the scope for synergies is huge!

Other BGFD updates

Softbank - it was very interesting to see this program hosted by the Queen of business interviews Emily Chang. The scale and breadth of Softbank’s big bet on AGI (Artificial General Intelligence) and its (part ownership of and) collaboration with Sam Altman’s Open AI is breathtaking.

Stargate.

Put that name down in your books said Trump.

Worth a watch:

Previous #10 Nintendo is enjoying “the most successful debut in the company’s history” with its Switch 2 selling out within minutes of hitting the shelves. The shortage is proving to keep gamers keen and has created a strong buzz.

Nintendo is up one third YTD.

Conclusion

BGFD continues to aggressively buy back shares. 79,211,440 on the 17th May drops to 78,581,440 as at 11th June. 0.75% of all shares bought back in less than the past 4 weeks.

The Cum Fair NAV of 871.12p contrasts with a ask price of 781p so a >10% discount which historically did not exist as this 10 year chart shows.

Companies like Nintendo, Sony, Softbank, Rakuten are world-class businesses while others like Oisix are domestic Japanese only. The fund fishes in all sectors hunting for companies with growth opportunities domestic and foreign.

Regards

The Oak Bloke

Disclaimers:

This is not advice - make your own investment decisions.

Micro cap and Nano cap holdings might have a higher risk and higher volatility than companies that are traditionally defined as "blue chip"