Investec’s Roussouw predicts Japanese privatisation boom

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The cash-strapped Japanese government will increasingly turn to privatisation in order to raise much needed funds, according to Investec’s Euro Stars A-rated manager Clyde Rossouw.

Rossouw, who runs the $888.9 million Investec GSF Global Franchise fund, made the comments after it emerged the Japanese government intends to raise cash through selling part of its stake in tobacco giant Japan Tobacco.

The Japanese government has filed regulatory papers to sell around one-third of its 50% stake in the formerly state-owned Japan Tobacco, which would help it to raise around $10.4 billion for continued reconstruction efforts.

Speaking to Citywire Global, Rossouw, who currently holds Japan Tobacco as the second largest position in his fund, said this could potentially be the first of many moves to raise money through selling off former or partly state-owned enterprises.

‘The Japanese government needs money to fill the budget deficit, is struggling with low real growth and deflation and given the large gross debt to GDP will probably require further asset sales over the next few years, so we would expect more part privatisations in future,’ he said.

While the deal will not directly affect the tobacco industry as a whole, Rossouw said, it will prove potentially positive for Japan Tobacco.

‘We are still studying the announcement details, but we know that the company is buying back 118 million shares - 6.2% of the company at ¥2119 per share, 26% discount - of the 333 million being sold,’ he said.

‘The buyback is positive for the share price and the company can still improve the dividend pay-out ratio further given the excellent cash generation.’

The Investec GSF Global Franchise returned 39.89% in the three years to the end of January 2013. This compares to its Citywire benchmark, the MSCI World TR USD, which rose 39.6% over the same period.