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.

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

Performance per 2018-12-31 (rebased)

No chart data available

Performance per 2018-12-31

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  Fund
1 month -6.5 %
3 months -14.9 %
This year -21.1 %
2015 25.7 %
2016 32.8 %
2017 42.3 %
1 year (on annual basis) -21.1 %
3 years (on annual basis) i 14.2 %
5 years (on annual basis) i 14.7 %
Since inception (on annual basis) i 12.6 %
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 569.47 M 2018-12-31
Share class size
EUR 569.47 M 2018-12-31
Number of shares
3,404,125 2018-12-31
Net Asset Value i
EUR 177.63 2019-01-22
Transaction price i
EUR 168.13 2019-01-02
Morningstar rating â„¢

Fund characteristics per 2018-12-31

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  Fund
Number of holdings 21
Dividend yield i 4.13 %
Weighted average market capitalization i EUR 807 M
P/E ratio i 13.79
Kempen Capital Management NV (KCM) is the management company of Kempen Oranje Participaties N.V. (the Fund). KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Fund is registered under the license of KCM at the The Netherlands Authority for the Financial Markets.

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

Market developments per 2018-12-31

The following texts refer to the fourth quarter of 2018.

Performance
In the fourth quarter of 2018, KOP’s Net Asset Value (NAV) declined by 14.9% from €196.48 to €167.29 per participation. This brings the return over 2018 to -21.1%. The average return over the past three years is 14.2% per year. Following a number of strong years, the market prices of most of our companies succumbed to the negative global market sentiment and fell in 2018.

Trading
As of 2 January 2019, the fund’s trading price was €168.13, based on the NAV as of that date and including a premium of 0.5% as a result of net inflow into the fund. This brings the size of KOP to about €600 million, with the number of issued KOP shares increasing by 2% as a result of trading on 2 January. We were again able to welcome new participants to the fund, including in the new holding company Loire. We continue to see interest from prospective and existing clients, especially now that prices are being squeezed. For the next trading date of 1 April 2019, an instruction deadline of 4pm on 28 February 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
Macro-economic and political news caused sharply negative results on the financial markets in the fourth quarter. The main triggers for a fresh sell-off came from the US. Although Fed chairman Powell raised interest rates by 0.25% to 2.5% in line with the consensus, his comments regarding two forecast interest rate hikes in 2019 did not go down well with investors. This is due to the risk of the sound economic recovery in the US and the fragile upturn in Europe reversing and becoming a slowdown. The comments clearly also touched a sore spot with President Trump, who alluded to firing the Fed chairman, exacerbating the situation further. Later, more conciliatory remarks and reassuring comments about the good progress being made in negotiations on the trade agreement with China ultimately led to a brief rally at the end of 2018.

The poorer market sentiment had a particularly adverse effect on the prices of European small caps. In times of risk aversion among investors, small caps perform worse in relative terms than the more liquid large caps. On top of this, international institutional investors turned their backs on Europe, as can be seen from the substantial outflow that European equity funds faced in 2018. Finally, cyclical equities performed relatively poorly due to the (expected) slowdown in economic growth in Europe, China and to a lesser extent the US. This led to companies in the automotive, business services, semiconductor and constructions sectors coming under pressure.

The above also squeezed the prices of equities in the KOP investment universe (European small caps, often with a cyclical nature) and the companies held in KOP saw their market prices fall as well.

Portfolio developments per 2018-12-31

In talks with participants and prospects we regularly discuss the volatile nature of the market prices of ourparticipations and in turn the volatility inherent to the value of KOP shares. In the less liquid portion of the market in which KOP invests, market prices can deviate sharply from the fundamental trends at the companies in which we invest and this can sometimes last for several months or even quarters. The prices in our investment universe therefore have a tendency to overreact upwards or downwards, while we cannot always take advantage of these movements in our capacity as portfolio managers due to the lower level of liquidity in these equities. That is why it is important to focus our attention on the fundamental trends at our companies and to apply a long-term investment horizon. On a three and five-year basis, KOP has noted sound annual returns of 14.2% and 14.7%.

The fundamental trends at our companies are generally positive. In strategic terms, our companies make the right decisions, although external factors may sometimes temporarily squeeze profitability.

We did not complete any new participations in the fourth quarter. However, we did increase our position in BESI substantially in the wake of the price correction. We made minor adjustments to our positions in other participations on the basis of liquidity and valuation.

We expect Coats, Interroll, AvonRubber, Lectra and Nedap to display a sound increase in earnings in 2019.

Coats continues to increase its market share in threads and yarns for clothing and footwear, as well as in what are known as performance materials for high-end applications. Our visit to the factory in China in October served to confirm our positive impression of the company and its products. Interroll has the highest growth profile in the KOP portfolio thanks to the global trend for automating distribution centres, partly prompted by the rise of e-commerce. The company continues to invest large sums in order to facilitate this growth. Avon Rubber is profiting from the growing global demand for its gas masks and respiratory protection systems, for the military as well as the police and fire service. In the Dairy division, the company continues to increase its market share via its unique Farm Services concept. The launch of new machines and software over the past few years enabled Lectra to enjoy persisting earnings growth in 2018. Finally, earnings at Nedap have been boosted by recent measures relating to cost control, focus and scope.

We expect Washtec to report little earnings growth in 2018; this is linked to its strong earnings in 2017, when it delivered a very high number of large orders in the US. In underlying terms, Washtec’s growth profile remains intact.

A number of companies in the KOP portfolio also faced earnings pressure in 2018 as a result of external or cyclical factors.

For instance, ForFarmers is unlikely to equal its earnings from 2017 due to rising logistics costs (low water levels in rivers) and one-off transaction fees relating to recent acquisitions in Poland, the Netherlands and Belgium. We anticipate a significant upturn in earnings and acquisitions in 2019, funded by a solid balance sheet.

In the course of 2018, BESI saw the semiconductor cycle decline in the wake of several strong quarters. This is a common pattern in the industry in which BESI operates: about six quarters of upward movement followed by six quarters of downward movement. This means that in all probability the cycle will be negative in 2019 and the short-term profitability of BESI will be squeezed as a result. However, we are convinced that BESI is becoming stronger with each cycle, enabling it to continue increasing its market share in the cyclical growth market for semiconductor equipment through a combination of product innovation and cost control.

SAF Holland had a tough year, in which its European and Asian activities flourished but its US earnings were squeezed. This is due to the decision - in hindsight an unfortunate one - to implement a radical reorganisation of its US activities at a time of an unexpected and very sharp upturn in the end market for trailers and trucks. This led to SAF Holland experiencing delivery problems and rising costs and ultimately seeing its US profits evaporate. However, we believe that the (cost) pressure on the company will ease over the course of 2019 and its profitability will recover, assuming that the end markets remain sound. In December, SAF Holland consolidated its management team by appointing a new COO and adding the new role of Chief Procurement Officer.

Oeneo is another company experiencing a temporary squeeze on earnings, driven by the sharp increase in the price of cork. Cork trees are harvested (have their bark removed) once every nine years and 2018 felt the aftermath of the 2008/09 financial crisis when a lack of money saw fewer trees being planted in Spain and Portugal, causing low supplies of cork now. The higher cork price is slowly being passed on to customers by Oeneo and the company recently repeated its forecast that its profitability would normalise in the next few quarters.

El.En experienced a headwind from an unexpected source. Sales of one of its most profitable products (the Mona Lisa machine) were halted by a letter the US Food and Drug Administration (FDA) sent to all players in this specific market segment. Some players were making claims in their marketing material that breached FDA guidelines. Although El.En was not one of the guilty parties, it caused a sharp drop in sales, partly because El.En sells its products via partner Hologic, which had just increased its stocks of Mona Lisa machines in the wake of a difficult merger with Cynosure in 2017. Here, too, we expect sales of Mona Lisa machines to normalise once more over the course of 2019 and El.En’s profitability to recover. In addition, the trade war and uncertainty surrounding economic growth in China are having an impact on industrial activities.

Valuations
The earnings growth at the majority of our companies and the lower equity prices led to a more attractive valuation for the KOP portfolio in the fourth quarter. The portfolio’s cash-adjusted price/earnings growth (EV/EBIT 2019E) decreased from 13 at the end of September 2018 to 11 at the end of December 2018. This translates into an increase in the portfolio’s price potential.
Kempen Capital Management NV (KCM) is the management company of Kempen Oranje Participaties N.V. (the Fund). KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Fund is registered under the license of KCM at the The Netherlands Authority for the Financial Markets.

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

Performance per 2018-12-31 (rebased)

No chart data available

Performance per 2018-12-31

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  Fund
1 month -6.5 %
3 months -14.9 %
This year -21.1 %
2015 25.7 %
2016 32.8 %
2017 42.3 %
1 year (on annual basis) -21.1 %
3 years (on annual basis) i 14.2 %
5 years (on annual basis) i 14.7 %
Since inception (on annual basis) i 12.6 %
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 3.60
Ex-date last dividend
2018-05-21
Number of distributions per year
1
Dividend calendar

Risk analysis (ex post) per 2018-12-31

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  3 years Since inception
Maximum drawdown i -21.14 % -63.64 %
Tracking error i 7.40 % 9.29 %
Information ratio i 1.33 0.30
Beta i 0.97 0.86
Kempen Capital Management NV (KCM) is the management company of Kempen Oranje Participaties N.V. (the Fund). KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Fund is registered under the license of KCM at the The Netherlands Authority for the Financial Markets.

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

Geographic allocation (2018-12-31)

33.1 %
Netherlands
16.5 %
United Kingdom
11.8 %
Germany
10.9 %
France
10.7 %
Luxembourg
6.7 %
Switzerland
5.8 %
Italy
2.5 %
Norway
1.2 %
Ireland
0.7 %
Cash
Totaal
100 %

Top 5 holdings (2018-12-31)

12.7 %
BE Semiconductor Industries
12.3 %
Coats Group
8.3 %
Washtec
8.0 %
Forfarmers
6.7 %
Interroll
Totaal
47.9 %

Sector allocation (2018-12-31)

44.2 %
Industrial Goods & Services
21.9 %
Food & Beverage
18.2 %
Technology
5.4 %
Money Market Funds
5.3 %
Automobiles & Parts
2.3 %
Retail
1.2 %
Personal & Household Goods
0.8 %
Telecommunications
0.7 %
Other
Totaal
100 %
Kempen Capital Management NV (KCM) is the management company of Kempen Oranje Participaties N.V. (the Fund). KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Fund is registered under the license of KCM at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents are available on the website of KCM (www.kempen.com/investmentfunds). 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
0.96 %
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 NV (KCM) is the management company of Kempen Oranje Participaties N.V. (the Fund). KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Fund is registered under the license of KCM at the The Netherlands Authority for the Financial Markets.

The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document and the prospectus. These documents are available on the website of KCM (www.kempen.com/investmentfunds). 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.
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 NV (KCM) is the management company of Kempen Oranje Participaties N.V. (the Fund). KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Fund is registered under the license of KCM at the The Netherlands Authority for the Financial Markets.

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

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

KCM Vision

Kempen Capital Management is an asset manager with a long-term investment approach. We strongly believe in engaged shareholdership that benefits all stakeholders. As a long-term responsible investor, we firmly believe that active ownership and shareholder engagement contribute to positive change across the board.

Our KCM wide approach to responsible investment

To put our vision into action we engage with our investment targets on a wide array of strategic, financial, environmental, social and governance (ESG) topics. Our long-term investment worldview paired with thorough analysis and an experienced and diverse ESG team allow us to use both voting and engagement as means to consistently encourage positive change. Through this process of constructive engagement, we are able to contribute to the development of principles and standards of corporate responsibility within companies that we invest in. Our full voting records are available here.

Our fund approach to Responsible Investment

  • Continuous dialogue with company management through one-on-one meetings. Meetings with division directors, peers and join analyst and client events. If necessary seek dialogue with the supervisory board
  • Actively involved during the AGMs through the use of our voting rights. We make remarks on the agenda if necessary and we stress our discussion points with the company at the AGM
  • Companies themselves also have the ability to seek the dialogue with us. We provide feedback on corporate strategy, governance and communication at AGM's and in one-on-one's
  • We are focused on the creation of shareholder value, where the company of course has to take into account all stakeholders
  • All holdings are screened by MSCI on sustainability items, if necessary we engage with management on sustainability issues with help from our experts in Edinburgh

Kempen Capital Management NV (KCM) is the management company of Kempen Oranje Participaties N.V. (the Fund). KCM is authorised as a management company and regulated by The Netherlands Authority for the Financial Markets. The Fund is registered under the license of KCM at the The Netherlands Authority for the Financial Markets.

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