Newsletters - Asset Value Investors

AJSS

TSI Holdings • March 2025

TSI Holdings, was the largest detractor, reducing performance by -62bps as its share price fell -7%.

The apparel holding company, with a diversified collection of brands, had enjoyed a period of very strong share price performance to start 2025. Since TSI Holdings announced the sale of its former HQ building for a value equal to 30% of the market cap on 14th January, the share price remains up +16%.

During the month, TSI Holdings announced sales in February were down -11% YoY due to the temporary site closure before the launch of a new e-commerce platform. The company also discontinued certain brands, which weighed on sales, as part of the restructuring of its brand portfolio.

Our investment thesis was predicated on valuation of their real estate assets, investment securities and net cash exceeding the market cap at the time of investment, as well as their diversified brand portfolio and diminishing founding family influence. Pleasingly, in line with our suggestions, in April 2024 the company announced a mid-term plan focusing on improving EBIT margin as well as optimising non-operating assets to improve capital efficiency.

As the largest shareholder, owning more than 8% of the shares, AVI will continue to engage extensively with management on ways to enhance operations, capital efficiency, governance and shareholder communications.

TSI Holdings accounted for 6.8% of the portfolio at month-end as the third-largest holding. We see significant upside to the current share price, and to month-end, our investment has generated an ROI of +20% for an IRR of +36%.

AJSS

TSI Holdings • January 2025

TSI Holdings, now the largest position in the portfolio accounting for 7.5% of NAV, was the largest contributor over the month, adding +151bps to performance as its share price rose +17%.

TSI Holdings is an apparel holding company with a diversified collection of brands including Pearly Gates, HUF, and Margaret Howell. AVI have provided several suggestions to management across all engagement areas including enhancing business operations and capital efficiency.

Our investment thesis was predicated on valuation of their net assets exceeding the market cap at the time of investment, as well as their diversified brand portfolio and diminishing founding family influence. Pleasingly, in line with our suggestions, in April 2024 the company announced a mid-term plan focusing on improving EBIT margin as well as optimising non-operating assets to improve capital efficiency.

During this month of January 2025, TSI Holdings disclosed the sale of its former HQ building located in central Tokyo, for a price higher than the company’s appraisal value and equivalent to c. 30% of the market cap. Accordingly, this sent the share price +30% higher on the following day of trading. The company also announced its Q3 earnings results, with operating income growing +41% YoY.

As the largest shareholder, owning more than 10% of the voting rights, AVI will continue to engage extensively with management.

TSI Holdings has been in the portfolio since fund inception in April 2024. We see attractive upside remaining to the current share price, with TSI Holdings 7.5% position in AJSS reflective of our conviction.

AJSS

TSI Holdings • Q2 June 2024

TSI Holdings, our second largest position, announced a new transformative mid-term plan in April. For the first time, TSI disclosed a quantified shareholder return policy, aiming for a 4% dividend on equity target by FY27/3, coupled with an ambitious cost improvement plan to elevate operating margins to 6% (from the current 1%). The plan was initially met with excitement; however, the share price quickly fell back again. It took a few weeks for the market to digest the significance of the plan, but by the end of the quarter, the share price had appreciated by +20%.

As TSI’s largest shareholder, holding 10% of the vote across AVI funds, we were pleased to see that the Company had actioned many of our suggestions. TSI has likely received the most engagement from us this year of any portfolio company, and we commend management for their proactive approach in listening to shareholders. However, we remain frustrated by the lack of concrete answers to several of our recommendations and we are continuing our intense engagement.

We see a further +100% upside to the current share price, which underscores the enormous upside potential of our investments, which is not unique to TSI. We do not believe the market fully comprehends the scale of TSI’s transformational program and its commitment to improving capital efficiency. Full credit from investors for the mid-term plan and cost reform will only happen once TSI demonstrates improvements over the coming quarters. In the meantime, we are happy to wait.