Kempen Oranje Participaties NV

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 2020-09-30 (rebased)

No chart data available

Performance per 2020-09-30

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  Fund
1 month -1.2 %
3 months 6.9 %
This year 3.7 %
2017 42.3 %
2018 -21.1 %
2019 27.6 %
1 year (on annual basis) 19.9 %
3 years (on annual basis) i 2.8 %
5 years (on annual basis) i 17.8 %
Since inception (on annual basis) i 12.9 %
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 795.79 M 2020-09-30
Share class size
EUR 795.79 M 2020-09-30
Number of shares
3,740,258 2020-09-30
Net Asset Value i
EUR 213.26 2020-10-27
Transaction price i
EUR 209.57 2020-10-01
Morningstar rating â„¢

Fund characteristics per 2020-09-30

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  Fund
Number of holdings 22
Dividend yield i 2.20 %
Weighted average market capitalization i EUR 1,045 M
P/E ratio i 23.98
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.

Developments per 2020-09-30

The following texts refer to the third quarter of 2020.

Performance
In the third quarter of 2020, KOP’s Net Asset Value (NAV) increased from €199.02 to €212.76 per participation, bringing the total return over the third quarter to 6.9%. At a return of 3.7% over the first nine months of the year versus a return on the MSCI Europe Small-cap Index of -10%, we are pleased with how the portfolio has performed so far in 2020. KOP has averaged a return of 2.8% per year over the past three years and of 17.8% per year over the past five years, resulting in a performance above our target of an average of 10% per year.

Trading
As of 1 October 2020, the trading price was €209.56, based on the NAV of that date minus a discount of 1.5% caused by net outflow from the fund. The size of the fund was €770 million as of the start of the fourth quarter. For the next trading date of 4 January 2021, an instruction deadline of 4pm on 30 November 2020 applies for orders in KOP (via Euronext) and a few days before that for the holding companies (via the Van Lanschot Kempen transfer agent).

Market review
After the roller coaster first half of 2020, the markets displayed a calmer and generally positive picture in the third quarter (the MSCI Europe Small-cap Index was up by 6.3%). Aided by the easing of lockdown restrictions in May and June, European economies tentatively started to pick up again in the third quarter. Combined with ongoing support from governments and central banks, as well as better-than-expected second-quarter earnings, this created a positive mood among investors over the summer. However, the positive months of July and August were followed by a downturn in the MSCI Europe Small-cap Index of 0.6% in September. In the wake of earlier optimism, a recent increase in the number of new COVID-19 cases and the tightening of government restrictions have made investors more cautious. We expect volatility to remain high while investors are preparing for the coming US presidential election and partly due to the reduction in government support to businesses, which could depress earnings further. Daily news reports of mass redundancies (Disney, KLM, Royal Dutch Shell, Tata Steel) do not bode well.

Portfolio
We came through the second-quarter earnings season (the ‘COVID quarter’) relatively well, with few major surprises. We are fortunate in holding a portfolio of companies with robust business models, solid balance sheets and strong management teams that is the result of a clear and robust investment process. On balance, cyclical companies such as SAF Holland and Kendrion have performed well in the face of low expectations and been well rewarded for it with price gains of 31% and 27% respectively.

If we examine share price performance, the gain in Avon Rubber shares stands out (+33% in the third quarter). The company announced the sale of its Dairy operations (rubber parts for milking machines) to DeLaval and subsequently bought a US helmet manufacturer (Team Wendy) for a similar price. This means that in future Avon Rubber will concentrate entirely on personal protection, such as gas masks, helmets and protective vests. On the back of its strong position it enjoys at its largest customer, the US Department of Defense, Avon Rubber aims to increase its business with other customers, such as European armies and police forces. The Dutch police are already a customer and Avon Rubber is now bidding for a contract for which the Dutch army is inviting tenders in conjunction with a number of NATO partners.

Other strong share price performers were XP Power (+25%), which is profiting from a recovery in the semiconductor market and from the high demand for medical equipment, and Lectra (+25%), which in spite of difficult end markets (clothing, car seats, furniture) is profiting from its defensive business model based on software licences. XP Power in particular is profiting from the sudden demand for ventilators and other medical systems triggered by the COVID-19 pandemic. The company has expanded its production capacity in Vietnam substantially in order to meet demand and to be able to continue supplying the US market without being affected by the high import tariffs imposed on goods from China.

La Doria was one of the companies that profited from COVID-19. Its products include private label tinned tomatoes and beans. La Doria initially profited from consumers hoarding long-life products. Yet even after this one-off effect had dissipated, demand for its products remains high as consumers are eating at home much more than they are eating out. This led to La Doria reporting revenue growth of 23% in the first half of 2020 and its EBITDA rising by nearly 50%. Renewed government restrictions in a number of countries aimed at suppressing the second wave of COVID-19 will also boost La Doria’s revenue growth in the second half of the year.

Those equities that lagged behind in the third quarter included a couple of sizeable names in the context of the portfolio: BESI (-8%), ForFarmers (-4%) and El.En (-4%). BESI’s equity price came under pressure in line with the global chip sector. Sentiment deteriorated in the wake of further measures by the US government to prevent the Chinese government from importing (US) semiconductor technology. BESI is a big player in China, where it supplies local customers. At its recent Capital Market Day, ForFarmers announced its intention to seek growth by means of acquisitions. It is even considering acquisitions outside Europe, even though it currently has few business contacts and little M&A experience for such a move. Investors gave this risky strategy a lukewarm reception, preferring to believe it when they see it, partly because of ForFarmers relatively weak acquisition track record.

Coats is one of the companies in the portfolio that has been hit hard by COVID-19. It has factories in over 50 countries, a number of which were shut down completely in the second quarter. Coats’ threads and yarns are used mainly in discretionary end products such as clothing and shoes. As many clothes shops were also closed in the second quarter, there was little demand for threads and yarns. Prompted by the uncertainty, many customers cancelled orders they had already placed. This led to an organic drop in revenue of 45% in the second quarter, with June ‘only’ down by 25%. The month-on-month recovery continued in the summer, but September, October and November are much more important. In spite of the sharp drop in revenue, Coats earned a positive operating result in the first half of the year. This was partly because 4,000 employees, including members of the Executive and Supervisory Boards, agreed to a temporary cut in salary. Coats did this not just to safeguard its earnings, but above all to spare the more vulnerable groups in the organisation and continue paying their salaries, even though factories were completely closed in some cases. Coats’ global network of locations also gave it an advantage over local competitors that only operate a single factory in a single country. Some of its competitors were unable to manufacture any products at all, while Coats could deliver from other countries. Delivery reliability to customers was high even in these difficult times and we believe that this, together with its strong ESG policy, will allow the company to increase its market share further in the years to come.

After adding to existing participations at lower share prices and announcing a new participation (DiscoverIE) in the second quarter, the third quarter was much quieter.

In a world in which cash yields a negative return in real terms, investors are forced to search for positive returns in order to safeguard their capital. Equities can generate those high returns, but also bring a higher level of risk. Given the low global economic growth and risks that can arise in unexpected places (pandemics, (geo)politics), equity investors are restricting their risk exposure by opting for companies with structural growth profiles (technology) and defensive qualities (food, pharma), and preferably a combination of the two (software, medical equipment). Since the COVID-19 virus outbreak, the difference in valuation between growth/defensive on the one hand and cyclical sectors on the other has widened further. As an illustration of the willingness of investors to pay for defensive growth: the loss-making dialysis equipment manufacturer Outset Medical reports annual revenue of less than US$15 million and yet following its recent stock market flotation now has a market capitalisation of no less than US$2 billion. Investors are paying more than ever for (structural) growth and predictability. Some commentators are even talking of a bubble in these equities and are making comparisons to the internet bubble at the end of the 1990s.

We also seek growth and predictability in our role as managers of KOP, but we are equally alert to equity valuations. In spite of the higher valuations, we are still able to identify companies that score well on both fronts. We continued our accrual of new participations in the third quarter and in September announced a new participation in the UK’s Alliance Pharma. This company focuses on the marketing and sale of pharmaceutical products. It sells over 90 products in more than 100 countries.

Alliance Pharma’s expertise lies in taking over what are often relatively small-scale products from larger pharmaceutical companies that are a low priority when it comes to product development, marketing and regulation. Alliance Pharma buys the rights to these products and subsequently promotes them to create long-term growth.

The product portfolio contains a number of larger international brands, such as creams for scar reduction, medicated anti-dandruff shampoo, eye supplements and head lice treatments. A large number of smaller local brands are used in, for example, treating burns, nappy rash and mouth ulcers. The markets for these products are usually too small to justify product launches by the major pharmaceutical companies, meaning there is a low risk of new entrants to the market.

Alliance Pharma makes use of production partners and sales distributors. This asset light model enables it to generate high free cashflows, which are in turn used to expand the product portfolio via fresh acquisitions.

The participation in Alliance Pharma represents about 3% of the KOP portfolio and is a defensive, high-quality addition to the portfolio.

Valuations
The value of the KOP portfolio increased across the quarter. Given the uncertainty surrounding the short-term profitability of our companies, we have confined ourselves here to examining the reported earnings over 2019. The portfolio’s cash-adjusted price/earnings ratio (EV/EBIT 2019) stands at 13. Based on the assumption that our companies will revert to normal (2019) earnings levels in the medium term, we continue to believe that the portfolio enjoys 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 2020-09-30 (rebased)

No chart data available

Performance per 2020-09-30

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  Fund
1 month -1.2 %
3 months 6.9 %
This year 3.7 %
2017 42.3 %
2018 -21.1 %
2019 27.6 %
1 year (on annual basis) 19.9 %
3 years (on annual basis) i 2.8 %
5 years (on annual basis) i 17.8 %
Since inception (on annual basis) i 12.9 %
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
2020-06-05
Number of distributions per year
1
Dividend calendar

Risk analysis (ex post) per 2020-09-30

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  3 years Since inception
Maximum drawdown i -23.08 % -63.64 %
Tracking error i 9.80 % 9.44 %
Information ratio i -0.12 0.28
Beta i 0.77 0.84
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 (2020-09-30)

24.8 %
Netherlands
24.1 %
United Kingdom
9.2 %
Germany
8.7 %
Switzerland
6.1 %
Singapore
5.8 %
Italy
5.3 %
France
4.7 %
Ireland
3.3 %
Sweden
1.7 %
Norway
6.3 %
Cash
Total
100 %

Top 5 holdings (2020-09-30)

12.7 %
BE Semiconductor Industries
8.2 %
Avon Rubber
6.4 %
Coats
6.1 %
XP Power
5.4 %
Kardex
Total
38.7 %

Sector allocation (2020-09-30)

46.5 %
Industrial Goods & Services
18.0 %
Technology
13.7 %
Food & Beverage
5.4 %
Construction & Materials
4.7 %
Money Market Funds
2.8 %
Health Care
2.6 %
Automobiles & Parts
6.3 %
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.

 

SWING FACTORS

An overview of the current swing factors are available here.

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 2019.

Other costs

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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.

Risks

For more information about the mid and long term risks associated with the investments:

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*

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 ESG research
Screening MSCI ESG research
UN global impact
ESG integration in the investment process
ESG integration in the investment process
Bron EN
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.