AVI Global Trust's (AGT) NAV increased by +0.9% in July. News Corp (+49bps) was the most significant contributor over the month. The shares have now risen nearly 25% from the February 2026 AI-induced sell-off lows (where we added) and the stub has re-rated from 3x to 6x forward EBITDA - leading us to trim the position. Other strong performers included shipping / energy vessel company Mitsui O.S.K (+42bps) and Japanese entertainment company, Toho (+41bps). Vivendi, Samsung C&T and last month's write up - Rohm - were the three largest detractors, shaving off -156bps, -137bps and -68bps apiece. The latter two were afflicted by the broad market sell off in AI/memory companies, whilst Vivendi's weakness was more idiosyncratic in nature and warrants specific comment. Universal Music Group ('UMG', 82% of Vivendi's NAV) reported results at the end of July which sent the shares -25% in one day. Despite a headline revenue beat this was a weak set of results - both in terms of growth and margins, with EBITDA coming in -5% below consensus. The key miss was Subscription growth of +6.7% (excluding the acquisition of Downtown) vs. consensus of c. +9.3%, and a deceleration from 7.9% in Q1. On the call, management were unequivocal that no industry trend change has occurred and this reflects temporary fluctuations in market share and year-on-year comparables/accruals. Moreover, looking ahead, they enter Q3 with better share momentum, full Apple price rises, and a stronger frontline release schedule. We believe this to be largely true and revenue growth will re-accelerate out of the noise. However, we are less confident on margins meeting their potential as this seems more culturally ingrained by management and a board that has not been sufficiently demanding. A poor set of results at a time when sentiment is rock bottom has been met with capitulation. We understand and share the market's frustration, but do not think now is the time to follow suit and throw in the towel, even if our poor experience with the stock, and management's best efforts, makes it hard to remember the many merits of the company. Seemingly, others have also all but forgotten these too - with the shares now at c.11x 2027 PE ex-ex-listed stakes. Combined with the exceptionally wide -50% Vivendi discount we believe there are multiple layers of extreme undervaluation, and we see considerable fundamental upside. 'What changes' is the hardest question to answer, and this has tempered our enthusiasm to add to the position, with UMG still one of our largest look-through exposures.
