CC Japan Income & Growth

Offering the highest yield in the sector, CCJI focusses on quality Japanese companies capitalising on corporate reforms...

Add to watchlist Request a meeting Download View key data

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by CC Japan Income & Growth. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

CC Japan Income & Growth

Coupland Cardiff Japan Income & Growth Trust (CCJI) is the only equity income trust focussed on Japan. CCJI has been run by Richard Aston since its inception, and he runs a concentrated portfolio of typically 30 to 40 stocks.

CCJI yields 3.5% and has been able to grow its dividend since inception, with revenues comfortably exceeding its dividend each year. Despite the pandemic, Richard notes that the vast majority of positions in his portfolio have been able to maintain or grow dividends. Some holdings have faced greater challenges, notably REITs focussed on hotels, and CCJI has seen some dividend cuts in its portfolio. Nonetheless, Richard expects portfolio-level income to remain covered, and dividends on a look-through basis to remain well covered by underlying company earnings.

As we outline in the Portfolio section, CCJI’s portfolio is constructed through a combination of quantitative and qualitative analysis. A key trend underpinning many of CCJI’s holdings is the ongoing improvements to corporate governance in Japan and the associated dividend culture.

CCJI has outperformed its benchmark index, the TOPIX, over five years, generating a five-year NAV return of 67.1% over the period compared to the benchmark’s 66.4%. While the trust suffered during the initial impact of the pandemic, not helped by significant structural gearing, it showed clear signs of recovery in the latter months of 2020, as we discuss in the Performance section.

CCJI currently trades at a 13.5% discount, one of the widest in the peer group, after a period in which strategies with a tilt towards value (as an income fund naturally has) have been out of favour. Prior to 2019 CCJI had typically traded at a premium.

Kepler View

We view CCJI’s offering as being somewhat unique within the Japanese trust space. Not only does it offer the highest yield of any Japan trust but it also offers a quality bias with a valuation-sensitive process. This leads the trust to not only offer diversification benefits, but also a resilience to its performance given the defensive characteristics of many of its high-dividend-paying stocks despite the structural gearing (which has helped support upside capture).

Much like Richard, we also believe that the Japanese equity market offers the likelihood of exceptional reliability in dividend payments going forward, certainly more than is the case with its Western peers. This is something we have seen with COVID-19, in the form of the relatively small reduction in dividend payments from both CCJI’s underlying holdings and the wider Japanese market compared with the mass reductions seen in the UK, Europe and the US.

While CCJI has lagged its peers in 2020, we view there as being potentially strong tailwinds supporting a reversal of fortunes. A post-pandemic economic recovery could favour many value-orientated companies as investors flock back to more economically sensitive sectors, reversing the growth-over-value trade which CCJI has unfortunately been disadvantaged by. This would be in addition to the country-specific tailwinds supporting Japanese equities, i.e. increased demand from overseas investors and corporate governance reforms. All of these are factors which could simultaneously be catalysts for the narrowing of CCJI’s current anomalous discount.

Bull
Bear
Trades at wider discount than its historical average, offering a good entry point
Has underperformed peers as a result of the current COVID-19-related market dynamics
Post-COVID-19 economic recovery could favour CCJI’s valuation-sensitive allocation
21% gearing can amplify losses during market downturns
Highest dividend yield of the AIC Japan sector, and above its benchmark’s
Often unable to capitalise on ‘new Japan’ trends due to valuation sensitivity
David Johnson
David is an investment trust analyst and joined Kepler in September 2020. Prior to this he ran multi-asset model portfolios at a discretionary fund manager, and has worked in both asset management and investment banking during his career. He holds a Masters in Finance from the University of Warwick and is a CFA charterholder.

Fund History

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm’s internal rules. A copy of the firm’s Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 9/10 Savile Row, London W1S 3PF with registered number OC334771.



Welcome to Kepler Trust Intelligence

Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority.
Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
Kepler Trust Intelligence is authorised in the UK by the Financial Conduct Authority. To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.