I can’t say I was surprised by the news that listed student accommodation provider GCP Student Living has been approached by a bunch of big institutional investors. More here: https://www.thetimes.co.uk/article/student-housing-group-reveals-takeover-approach-t7863f8c7

The investment trust market has changed fundamentally over the last few decades and we now have a large segment of alternative listed funds that are hybrid business structures. They combine the following features:

  • An established and diversified book of cashflow rich alternative real assets
  • Structured within a fund but which operate closer to an operating company model which has also
  • Slowly but surely built up a brand name which has sector value

I think we will see many more deals over the next five years and I would identify the list below as potential candidates for a takeout by big institutional players. With each bullet point I have attached a probability percentage for takeover in the next five years

  • Music royalty (Hipgnosis and Round Hill). Well rounded portfolio of media assets perfect for the acquisitive media buyer plus in house brand names moulded into the opco. 70% (valuations might be a rich)
  • Life Sciences VC – Syncona. Want a well regarded VC with experienced internal management taking a big punt on genomics data rich platforms. Look no further. 95% (unless welcome stops a deal)
  • Residential property funds – Resi and PRS REIT. Why bother working hard to roll out a geographically diversified new build portfolio when you can buy existing portfolios producing steady, inflation backed income for large institutional asset owners. 90% (might need to wait a few years for the portfolios to mature then a no brainer)
  • Renewable Infrastructure – Bluefield, Next Energy, US Solar and Greencoart. I never really understood why all those huge energy combines pivoting towards renewable leases thought the easy router was to spend years building up operational assets. Why not just buy the afore mentioned. 60% (as with music funds, valuations might be a bit stretched)
  • Digital Infrastructure – D9 and Cordiant. These are opco/fund hybrids par excellence, slowly amassing diversified assets with EBITDA EV multiples of 11 to 15 versus multiples of 25 plus for listed Digital Infra REITs. 99% (but may have to wait for five years)
  • Energy infrastructure assets and battery funds such as SDCL, Triple Point EE, Gore Street and GRID.. As a NED at GRID I’ll refrain from saying anything more than that this is a nascent asset class full of relatively boring opco assets that are steadily maturing with new entrants entering the market looking for useful, diversified portfolios.

Next up, an amazing account of the opening weekend for Black Widow and revenues form streaming – cited by ben Thompson of Stratechery but quoting the Hollywood Reporter.

Proving the might of the Marvel brand, Black Widow set a new benchmark for the pandemic era in opening to $80 million at the domestic box office [emphasis added by me]. The female-led superhero pic snared the biggest North American start since the COVID-19 crisis commenced, and the largest since Disney/Lucasfilm’s Star Wars: The Rise of Skywalker in Dec. 2019. Overseas, the film earned $78.8 million from 46 territories for a worldwide theatrical debut of $158.8 million.

Additionally, Black Widow made at least $60 million from Disney+ Premier Accessa household has to pay $30 to watch the film — for a global start of $218.8 million, according to Disney. It’s unprecedented for a studio to announce a premium VOD or streaming viewership number on a film’s opening weekend, and Disney’s decision to do so prompted a flurry of conversations across Hollywood on Sunday as to whether this will lead to more transparency.”

I own shares in Disney but have no interest in owning shares in Netflix.

Lastly two fascinating political-related observations. The first is on UK trade unions (?!)

The first is the election that no one except boring centre-left types like me are following. It’s the Unite General Secretary election. I have mentioned before that I think one of the single biggest obstacles to a more equitable settlement between Labour and Capital in the UK is the trade union movement and its institutional capture by the Hard Left. It has made many very important unions powerless and seem disconnected to ordinary working-class voters. If masses of working-class voters have abandoned the Labour Party because of its institutional failings, just think how many more have abandoned the unions because they are run by a bunch of Marxists. In many countries in Europe, we have a multiplicity of politically oriented unions including conservative and even fascist unions. In the UK we are lucky to have a few centre-left unions and then a bunch of huge hard left dinosaurs.

Anyway, McCluskey is going – thank god – and there’s a decent chance we might have a sensible replacement in the shape of Gerard Coyne. The Centre Left Blog by Rob Marchant has an excellent summary here : http://thecentreleft.blogspot.com/2021/07/in-most-important-union-election-in.html

I’m sure most investors will roll their eyes at this but trust me when I say having sensibly run unions makes a huge difference.

Last but by no means least I recommend reading an excellent article about the Great Financial Uncoupling by China from Wall Street – and its likely impact on Hong Kong.

The article is on the excellent Supchina website and is entitled Hong Kong: Brace for incoming! By Anthony Lawrence. You can read it here : https://supchina.com/2021/07/09/hong-kong-brace-for-incoming/

Here’s the key conclusion:

“Then the CCP was founded a century ago, its headquarters in Shanghai was surrounded by the kings of global finance, much like those who are working from home in Hong Kong today. Thirty years later, they were all gone. Since then, the CCP has only once made a decision against its own interests to lure them back, which led to regime-threatening instability. It is unlikely to do so again. From here on out, the global financial community is likely going to have to accept investing in Chinese companies on China’s terms, or not at all. 

It is hard to be sanguine about the U.S. side, too. Xinjiang has become like Jerusalem was to the Crusaders in 1099. The Biden administration added more Chinese names to the Entity List today. Could defiance on Chinese NYSE listings be allowed to go unpunished much longer? And once engaged, which U.S. president could survive at the polls if Fox News decided to take up the cause of U.S. pensioners being exposed to the CCP’s clutches on the HKSE?

Not to sound overly melodramatic, but the Great Financial Decoupling is on its way. It’s time for Hong Kong to brace for impact.”

On this theme, I’ll finish rather counterintuitively with a chart showing the share price of Prosus, the Dutch listed investment company that owns a massive slug of Tencent. Clearly there are massive challenges facing this Chinese mega leviathan but maybe they are already in the share price of Prosus, which continues to slide lower on Chinese regulatory fears. My guess is we could see 75 euros per share tested and possibly even 65. At that point, I’d start quietly buying in again.

Share price chart for Prosus

Green line – 200 day MA

Red line – 20 day MA