Kempen Oranje Participaties N.V.

Profile

Kempen Oranje Participaties N.V. (KOP) offers the opportunity to invest in small-sized European companies. KOP invests in shares of undervalued companies and aims to hold 5% or more of the paid up nominal capital of each company. The environmental, social and governance (ESG) criteria are incorporated in the investment process.

KOP positions itself as an engaged shareholder and aims to generate a long term total return of 10% on an annual basis (on the basis of capital gains and dividends).

Management team

Michiel van Dijk, Erwin Dut, Sander van Oort, Ingmar Schaefer

Performance per 2019-10-31 (rebased)

No chart data available

Performance per 2019-10-31

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  Fund
1 month 4.7 %
3 months 4.9 %
This year 15.6 %
2016 32.8 %
2017 42.3 %
2018 -21.1 %
1 year (on annual basis) 4.1 %
3 years (on annual basis) i 11.7 %
5 years (on annual basis) i 18.1 %
Since inception (on annual basis) i 12.8 %
As of 1 July 2015 the investment policy of Kempen Oranje Participaties N.V. has changed. In addition to Dutch and Belgian companies it is now also allowed to invest in other European companies. Performance is shown after deduction of ongoing charges and including the reinvestment of dividend that has been paid out. The value of your investments may fluctuate. Past performance provides no guarantee for the future.
More information can be found on the documents page of this fund

Key figures

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Total fund size
EUR 687.02 M 2019-10-31
Share class size
EUR 687.02 M 2019-10-31
Number of shares
3,628,229 2019-10-31
Net Asset Value i
EUR 202.53 2019-12-06
Transaction price i
EUR 181.72 2019-10-01
Morningstar rating â„¢

Fund characteristics per 2019-09-30

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  Fund
Number of holdings 21
Dividend yield i 3.55 %
Weighted average market capitalization i EUR 972 M
P/E ratio i 17.98
Kempen Capital Management N.V. (KCM) is the management company of Kempen Oranje Participaties N.V. (the “Fund”). KCM is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of KCM at the Dutch Authority for the Financial Markets (AFM).

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (available in Dutch and English) and the prospectus (available in English). These documents are available on the website of KCM (www.kempen.com/en/asset-management). The information on the website is (partly) available in Dutch and English. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Market developments per 2019-09-30

The following texts refer to the third quarter of 2019.

Performance
In the third quarter of 2019, KOP’s Net Asset Value (NAV) decreased from €186.46 to €180.81 per participation, translating into a return of -2.9%. This brings the return over the first nine months of the year to +10.4%. The return has averaged +9.9% per year over the past three years.

Trading
As of 1 October 2019, the trading price was €181.72, based on the NAV as of that date and including a premium of 0.5% as a result of net inflow into KOP. The number of issued shares in KOP increased by 1.8%, bringing the size of the fund to about €650 million. For the next trading date of 2 January 2020, an instruction deadline of 4pm on 29 November 2019 applies for orders in KOP (via Euronext) and a few days before that for the holding companies (via the Kempen transfer agent).

Market review
The MSCI Europe small cap index rose by 1.6% in the third quarter. Equity markets are being batted back and forth between the negative impact of the global economic slowdown (China, Europe and to a lesser extent the US) and the positive impact of further interest rate cuts by almost all the central banks. The economic weakening in Europe was corroborated by a very poor German PMI of 41.7 in September and a number of profit warnings this summer from German industrial companies, such as Jungheinrich (forklift trucks), Dürr (paint shops for vehicle production facilities, machinery for the woodworking industry) and Krones (filling lines for beverage manufacturers), all of which saw a sizeable drop in orders. On the equity markets this is triggering clear sector rotation from cyclical and financial equities to more defensive sectors and infrastructure. Nestlé’s equity price, for instance, reached an all-time high this quarter with a price/earnings (P/E) ratio of 25, while the prices of ING and Daimler fell to all-time lows and P/E ratios of just 7 and 9 respectively. The economic and political uncertainty has led investors around the world to ignore Europe for some time now, as is illustrated by the underperformance of European equities versus their US counterparts of 20% (in US dollars) since May 2018. Within Europe, small caps are lagging 3% behind large caps this year. Moreover, the return on micro caps (market capitalisation of less than €1 billion) is substantially lower than that on small caps this year (+10% versus +20%).

Portfolio developments per 2019-09-30

In relation to the portfolio, no new participations were reported in the third quarter, although we do have a number under construction. As noted in previous reports, liquidity continues to be a challenge and we hope to be able to announce a new participation in the next few months.

As to our current participations, BESI, El.En and Avon Rubber are the companies exceeding growth expectations this year.

BESI is by far our largest and most important participation at a weight of 18% in the KOP portfolio. Since the second quarter of 2018, it has found itself in a (normal) downward semiconductor cycle that is expected to recover in 2020. Yet BESI has achieved impressive earnings growth during the current weak cycle and this confirms our belief that BESI is one of the best managed companies in its sector. This is underlined by a gross margin of 56% and operating margin of 27% in the second quarter of 2019, in which revenue was down 42% on a year earlier. Investors have a marked preference for technology and as a result the expected recovery in the semiconductor cycle in 2020 is already partly reflected in the upturn in BESI’s equity price (+66%).

As expected, the medical laser division of El.En is profiting from the innovations the company launches each year. However, we are chiefly impressed by the growth of its industrial laser division, which at a time of general economic uncertainty noted excellent revenue growth of 12.8% in the first half of 2019. El.En is also focusing more and more on single-use consumables in its medical activities, increasing the portion of recurring revenue and predictability of these. Following weak price growth in the second half of 2018, when political and economic risks in Italy adversely affected its equity price, El.En has seen a price hike of 93% this year.

Avon Rubber used its strong balance sheet to acquire an attractive North American personal protection business (bulletproof vests and helmets) that is a good fit with its gas mask products. Avon Rubber’s equity price is up by 36% this year.

The profitability of our participations Acomo, Oeneo, LaDoria, Coats, Interroll and Suess has generally developed in line with our expectations. Acomo, LaDoria and Coats have noted steady earnings this year, Interroll continues to grow fast and as expected Oeneo’s earnings are up in the wake of a temporary weakness last year caused by a sudden hike in cork prices. With the exception of Coats (Brexit-related fears at UK small caps), these companies are seeing equity price gains that are a reasonable reflection of their earnings growth. The 7% drop in the Coats equity price this year is remarkable because the company has no exposure to the UK and even reports its results in US dollars.

There are also a number of companies in the portfolio performing below expectations this year, whereby we distinguish between weak end markets and company-specific challenges. The participations facing weak demand in their end markets are Washtec, Kendrion and Lectra. These are well-organised, innovative and excellently-positioned companies. However, the global automotive industry (Kendrion, Lectra) is seeing a decrease in volumes, Washtec is experiencing weak demand from a number of large accounts this year and the clothing industry (Lectra) is exhibiting restraint in its investment decisions at the moment due to the trade war. In spite of this slowdown, Lectra continues to be highly profitable as a significant portion of its revenue is software-related.

The economic uncertainty is also causing transport companies to adopt cautious investment policies on new trailers and this means SAF Holland needs to significantly enhance its flexibility and automation in order to structurally improve profitability in future. The abrupt drop in demand in Europe has led SAF to adjust its forecasts sharply downwards for the whole of 2019. During a meeting at SAF’s head office, we discussed in detail the ongoing reorganisations in both North America and China. We believe that the new SAF management has made a good start but there is still a great deal to do. This was also confirmed in a call with the chair of the SAF Supervisory Board. In addition to discussing current developments, we also set out our wishes relating to the strategy for 2025, in which we expect much better capital discipline from the Executive and Supervisory Boards. The sentiment surrounding German industrial companies is negative and they are being expressly avoided on the markets. German industrial production has slumped throughout the year, not least as a result of the problems in the German car industry, which is dealing with the combined effects of the US-China trade war and the shift towards electrification. This is placing additional pressure on the equity prices of SAF Holland (-40%), Washtec (-19%) and Kendrion (-8%) this year.

In the case of ForFarmers, our concerns are of a more fundamental nature. The original investment case is based on a robust company with low growth but high cashflows, some of which are paid out to shareholders and some used to achieve logical consolidation of the livestock feed industry in North West Europe. Over the past few years, ForFarmers has earned high cashflows but struggled to find attractive acquisition candidates abroad, and for this reason 75% of its earnings still depend on the Netherlands.

The company initially suffered from unfavourable stock positions caused by erroneous estimates of future commodity prices. On top of this, this year’s debate in the Netherlands on nitrogen emissions caught us (and ForFarmers) off-guard, and in particular the extreme nature of the measures being considered by the Dutch government and their potential structural consequences on the country’s livestock. For some time now there has been a voluntary restructuring programme in which the Dutch government buys up ‘pig rights’, which will reduce the pig population by a maximum of 15% in the next two to three years and has already led ForFarmers to close a number of factories. It currently looks as if the agricultural sector will be part of a package of measures aimed at reducing nitrogen emissions. The debate points to possible region-specific (close to nature areas) and farmer-specific (out-of-date infrastructure) measures that will not affect the entire sector. In the meantime, ForFarmers is drawing up plans to make its cost structure more flexible and optimise its network of factories, whereby the research budget will be used to develop emission-reducing feed. All the uncertainty has pushed the ForFarmers equity price down by 25% this year.

Valuations
On balance, the valuation of the KOP portfolio remained unchanged in the third quarter. The portfolio’s cash-adjusted price/earnings ratio (EV/EBIT 2020E) stands at 11. We believe that the portfolio continues to enjoy interesting long-term price potential.
Kempen Capital Management N.V. (KCM) is the management company of Kempen Oranje Participaties N.V. (the “Fund”). KCM is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of KCM at the Dutch Authority for the Financial Markets (AFM).

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (available in Dutch and English) and the prospectus (available in English). These documents are available on the website of KCM (www.kempen.com/en/asset-management). The information on the website is (partly) available in Dutch and English. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Performance per 2019-10-31 (rebased)

No chart data available

Performance per 2019-10-31

Slide to see more
  Fund
1 month 4.7 %
3 months 4.9 %
This year 15.6 %
2016 32.8 %
2017 42.3 %
2018 -21.1 %
1 year (on annual basis) 4.1 %
3 years (on annual basis) i 11.7 %
5 years (on annual basis) i 18.1 %
Since inception (on annual basis) i 12.8 %
As of 1 July 2015 the investment policy of Kempen Oranje Participaties N.V. has changed. In addition to Dutch and Belgian companies it is now also allowed to invest in other European companies. Performance is shown after deduction of ongoing charges and including the reinvestment of dividend that has been paid out. The value of your investments may fluctuate. Past performance provides no guarantee for the future.

Dividends

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Distributing
Yes
Last dividend
EUR 3.80
Ex-date last dividend
2019-05-20
Number of distributions per year
1
Dividend calendar

Risk analysis (ex post) per 2019-10-31

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  3 years Since inception
Maximum drawdown i -21.14 % -63.64 %
Tracking error i 8.91 % 9.40 %
Information ratio i 0.02 0.25
Beta i 0.91 0.85
Kempen Capital Management N.V. (KCM) is the management company of Kempen Oranje Participaties N.V. (the “Fund”). KCM is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of KCM at the Dutch Authority for the Financial Markets (AFM).

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (available in Dutch and English) and the prospectus (available in English). These documents are available on the website of KCM (www.kempen.com/en/asset-management). The information on the website is (partly) available in Dutch and English. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Geographic allocation (2019-09-30)

35.5 %
Netherlands
16.2 %
United Kingdom
10.9 %
France
7.5 %
Germany
7.1 %
Luxembourg
6.9 %
Italy
6.1 %
Switzerland
4.1 %
Singapore
1.6 %
Norway
4.2 %
Cash
Total
100 %

Top 5 holdings (2019-10-31)

19.6 %
BE Semiconductor Industries
9.4 %
Coats
6.1 %
Interroll
5.7 %
Lectra
5.4 %
Washtec
Total
46.2 %

Sector allocation (2019-09-30)

44.0 %
Industrial Goods & Services
25.3 %
Technology
17.9 %
Food & Beverage
4.4 %
Money Market Funds
2.7 %
Automobiles & Parts
1.1 %
Retail
0.5 %
Media
4.2 %
Other
Total
100 %
Kempen Capital Management N.V. (KCM) is the management company of Kempen Oranje Participaties N.V. (the “Fund”). KCM is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of KCM at the Dutch Authority for the Financial Markets (AFM).

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (available in Dutch and English) and the prospectus (available in English). These documents are available on the website of KCM (www.kempen.com/en/asset-management). The information on the website is (partly) available in Dutch and English. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Ongoing charges

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Management fee i
0.75 %
Service fee i
0.20 %
Expected ongoing charges i
0.95%
Ongoing charges last financial year i
0.95 %
The Ongoing Charges Figure of the last financial year relates to 2016.

Other costs

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Upward swing factor i
0.50 %
Downward swing factor i
1.50 %
Kempen Capital Management N.V. (KCM) is the management company of Kempen Oranje Participaties N.V. (the “Fund”). KCM is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of KCM at the Dutch Authority for the Financial Markets (AFM).

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (available in Dutch and English) and the prospectus (available in English). These documents are available on the website of KCM (www.kempen.com/en/asset-management). The information on the website is (partly) available in Dutch and English. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Share class details

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Investor type
Institutional & Private
Distributing
Yes
Objective
To generate a long term return of 10% a year (on the basis of capital gains and dividends)
Investment category
Small-caps
Universum
European small-caps
Inception date
1985-08-29
Domicile
The Netherlands
May be offered to all investors in
The Netherlands
May be offered to professional investors only in
United Kingdom
UCITS status i
No
Status
Open-end i
Base currency
EUR
Share class currency
EUR
Management company
Kempen Capital Management N.V.
Depositary and custodian
BNP Paribas Securities Services S.C.A.
Morningstar rating â„¢

Tradability

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Listed
yes, listed on the NAV Trading Facility of Euronext
Subscription/Redemption Frequency
Quarterly, on the first business day of January, April, July en October
ISIN i
NL0000440675
Entry period purchase order
Approximately 32 calendar days before the start of each quarter
Entry period sell order
Approximately 32 calendar days before the start of each quarter
Details
Orders must be sent by the bank or broker to the NYSE Euronext Trading Facility on the last business day of November, February, May and August, no later than 04.00 PM Amsterdam time in order to be executed on the next dealing day.
Kempen Capital Management N.V. (KCM) is the management company of Kempen Oranje Participaties N.V. (the “Fund”). KCM is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of KCM at the Dutch Authority for the Financial Markets (AFM).

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (available in Dutch and English) and the prospectus (available in English). These documents are available on the website of KCM (www.kempen.com/en/asset-management). The information on the website is (partly) available in Dutch and English. The value of your investment may fluctuate. Past performance provides no guarantee for the future.
Kempen Capital Management N.V. (KCM) is the management company of Kempen Oranje Participaties N.V. (the “Fund”). KCM is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of KCM at the Dutch Authority for the Financial Markets (AFM).

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (available in Dutch and English) and the prospectus (available in English). These documents are available on the website of KCM (www.kempen.com/en/asset-management). The information on the website is (partly) available in Dutch and English. The value of your investment may fluctuate. Past performance provides no guarantee for the future.

Kempen's vision & mission

Kempen Capital Management is an asset manager that believes in stewardship and investment focusing on the long-term for the benefit of all stakeholders. Value creation is at the heart of the services we provide to our clients. We believe that being an engaged shareholder on environmental, social and governance (ESG) issues and retaining a long-term focus, is critical to helping our clients to preserve and create sustainable wealth that has positive real world impact and economic returns.

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Kempen wide approach to responsible investment

We are committed to create sustainable alpha. The four pillars of our ESG-policy are:

  • ESG integration: Ensuring sustainability risks and opportunities are adequately considered in our investment analysis and processes.

  • Exclusion & avoidance: Not investing in companies involved in controversial activities or conduct.

  • Active ownership: Being responsible stewards of our clients’ capital and using our influence through engagement and voting to improve corporate behaviour on specific ESG issues and achieve positive change

  • Positive impact: Investing with an objective to achieve positive real world outcomes and impact, such as contributing to the UN Sustainable Development Goals.

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To put our mission and vision into practice we engage with our investee companies on a wide array of strategic, financial, and ESG topics. As an active owner we use our influence to improve our investee companies’ ESG performance.  This helps us address some of the most pressing and important sustainability issues facing business and the world. Our focus themes for engagement are: human rights, labour rights, climate change and governance.

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Through collaboration with other investors and industry think tanks we contribute to the development of principles and standards of corporate responsibility both at sector levels, as well as investee company level.

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Our full voting records are available here.

Our fund approach to responsible investment

Kempen’s ESG policy is fully implemented in our fund’s investment process across the three relevant pillars of: Exclusion, ESG integration and Active ownership.

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Kempen Oranje Participaties N.V. (KOP) offers the opportunity to invest in small-sized European companies. KOP invests in shares of undervalued companies and aims to hold 5% or more of the paid up nominal capital of each company. KOP positions itself as a long-term engaged shareholder. We typically engage with our investee companies on a regular basis. The close relationships with investee companies in combination with our ownership level in each company enable us to influence the agenda of the annual meetings. Furthermore, we always vote and comment on annual meetings.

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The figure 'ESG-integration in the investment process' is a step-by-step representation of how Kempen’s ESG policy is integrated into the investment process.

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1.Exclusion

KOP excludes investment in entities involved in the production tobacco and of controversial weapons, such as cluster munitions, anti-personnel mines, nuclear warheads, chemical and biological weapons. We use MSCI ESG Research data to automatically screen and remove companies from our universe.

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The next step in our process, the ‘Quick Scan’ phase, helps us to avoid companies that do not meet our sustainability screening criteria based on their activities and conduct. We apply a checklist to screen each company using MSCI ESG Research and Sustainalytics data.

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2. ESG integration

In the fundamental analysis phase of the process, we dive deeper into the ESG characteristics of a company. During the process we look at each company on a case by case basis identifying the material risks in that industry and their exposure, practices and disclosure. In this phase we use various data sources, including MSCI ESG Research and Sustainalytics. If our opinion deviates from the external ESG research providers we explain why. Furthermore we look into the company’s exposure to controversies and opportunities which could reduce or increase the ESG score.Based on the above analysis we form an opinion on the quality of a company’s ESG profile and give each firm a score (1-5). A lower score would require a higher upside potential to be included in the portfolio.

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3. Active ownership

As active long-term investors we perform comprehensive engagements with our portfolio companies. We strongly believe that our level of engagement with our portfolio companies is much deeper than that of our competitors. We frequently speak with the management teams of our portfolio companies. Each controversial item, as well as every individual engagement, is well-documented. We monitor the progress the company is making and continue to use our influence to create positive change.

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Exercising our voting rights is also an essential part of our responsible investment philosophy. We are actively engaging with our portfolio companies and make remarks on the agendas of annual and extraordinary meetings. The fund’s close relationships with investee companies in combination with our ownership level in each company enable us to influence the agenda of the annual meetings. We always vote the shares of investee companies and if necessary attend annual meetings to stress our discussion points to management, potentially in collaboration with other stakeholders.

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Kempen’s ESG Team also performs a quarterly screen on our portfolio and may propose engagement with low ESG performers. The results of this screening are discussed in a separate meeting and an action list is created based on the outcomes of this meeting.

*

Although Kempen Capital Management N.V.’s information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness of any data herein. None of the ESG Parties makes any express or implied warranties of any kind, and the ESG Parties hereby expressly disclaim all warranties of merchantability and fitness for a particular purpose, with respect to any data herein. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein. Further, without limiting any of the foregoing, in no event shall any of the ESG Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

ESG Report
Screening MSCI research
Screening MSCI research
UN
Carbon intenity
ESG integration in the investment process
ESG integration in the investment process
Source
disclaimer
Kempen Capital Management N.V. (KCM) is the management company of Kempen Oranje Participaties N.V. (the “Fund”). KCM is authorised as a management company and regulated by the Dutch Authority for the Financial Markets (AFM). The Fund is registered under the license of KCM at the Dutch Authority for the Financial Markets (AFM).

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (available in Dutch and English) and the prospectus (available in English). These documents are available on the website of KCM (www.kempen.com/en/asset-management). The information on the website is (partly) available in Dutch and English. The value of your investment may fluctuate. Past performance provides no guarantee for the future.