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Top 3rd-Quarter Buys of the Royce International Premier Fund

Small-cap international fund puts business software in the spotlight

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Margaret Moran
Oct 21, 2021

Summary

  • The Royce International Premier Fund focuses on non-U.S. small caps with strong moats and growth potential.
  • The top buys for the quarter were BML , OBIC Business Consultants, Douzone Bizon, NICE Information Service and GVS.
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The

Royce International Premier Fund (Trades, Portfolio) recently released its 13F portfolio updates for the third quarter of 2021, which ended on Sept. 30.

The fund operates under the umbrella of Royce Investment Partners, the firm founded by

Chuck Royce (Trades, Portfolio) in 1972. It aims to build a portfolio of high-quality, world-class, non-U.S. small-cap businesses that are a-cyclical growers, can generate plenty of free cash and have a “genuine and defensible” moat. The portfolio is managed by Mark Rayner and Mark Fischer.

Based on the firm’s latest 13F, its top buys for the quarter were BML Inc. (

TSE:4694, Financial), OBIC Business Consultants Co. Ltd. (TSE:4733, Financial), Douzone Bizon Co. Ltd. (XKRX:012510, Financial), NICE Information Service Co. Ltd. (XKRX:030190, Financial) and GVS SpA (MIL:GVS, Financial).

BML

The fund established a 413,100-share position in BML (

TSE:4694, Financial), giving the company a 1.30% weight in the equity portfolio. During the quarter, shares traded for an average price of 4,214.92 Japanese yen ($37.01).

BML, or Bio Medical Laboratories, is a Japanese company that operates medical laboratories and develops software for clinical testing. It operates Japan’s largest nationwide laboratory services network, leveraging its scale to gather data and improve processes.

On Oct. 21, shares of BML traded around 4,100.00 yen for a market cap of 165.03 billion yen. According to the GuruFocus Value chart, the stock is fairly valued.

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The company has a financial strength rating of 8 out of 10 and a profitability rating of 8 out of 10. No long-term debt helps the company achieve a Piotroski F-Score of 8 out of 9, which represents a very healthy financial situation. The return on invested capital is consistently higher than the weighted average cost of capital, meaning the company is creating value as it grows.

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OBIC Business Consultants

The fund increased its investment in OBIC Business Consultants (

TSE:4733, Financial) by 248,300 shares, or 79.08%, for a total of 562,300 shares. The trade had a 1.05% impact on the equity portfolio. Shares traded for an average price of 5,855.08 yen during the quarter.

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OBIC Business Consultants is a Japanese business solutions software developer. Its products include accounting software, the “Bugyo Series” of PC business package software, computer supplies and peripheral equipment such as PCs and communication devices.

On Oct. 21, shares of OBIC traded around 5,830.00 yen for a market cap of 411.52 billion yen. According to the GF Value chart, the stock is fairly valued.

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The company has a financial strength rating of 9 out of 10 and a profitability rating of 9 out of 10. The Piotroski F-Score of 7 out of 9 and Altman Z-Score of 10.83 show a fortress-like balance sheet. The operating margin of 44.24% and net margin of 33.06% are outperforming 95% of industry peers.

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Douzone Bizon

The fund picked up 136,800 shares of Douzone Bizon (

XKRX:012510, Financial), giving the company a 0.92% weight in the equity portfolio. During the quarter, shares traded for an average price of 90,243.10 South Korean won ($76.55).

South Korea-based Douzone Bizon is a leading information, communication and technology (ICT) company that develops software for e-business solutions, strategic enterprise management and customized software solutions for small and medium-sized enterprises.

On Oct. 21, shares of Douzone Bizon traded around 94,800.00 won for a market cap of 2.88 trillion won. According to the GF Value chart, the stock is fairly valued.

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The company has a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 0.25 is lower than 88% of industry peers, but the Altman Z-Score of 5.58 indicates the company is not in danger of bankruptcy. The ROIC is typically higher than the WACC, meaning the company is creating value for shareholders.

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NICE Information Service

The fund upped its stake in NICE Information Service (

XKRX:030190, Financial) by 553,400 shares, or 67.6%, for a total of 1,372,000 shares. The trade had a 0.79% impact on the equity portfolio. Shares traded for an average price of 22,846.90 won during the quarter.

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NICE Information Service is a South Korean provider of credit information services. It is primarily engaged in the businesses of credit ratings, debt collection, personal credit, corporate information, asset management, data analysis and other financial services.

On Oct. 21, shares of NICE traded around 19,950.00 won for a market cap of 1.20 trillion won. According to the GF Value chart, the stock is fairly valued.

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The company has a financial strength rating of 8 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 144.49 and Altman Z-Score of 10.05 show the company should have no problems paying off its debt. The company has a three-year revenue per share growth rate of 7.4% and a three-year Ebitda per share growth rate of 16.5%.

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GVS

The fund added 416,677 shares, or 41.73%, to its holding in GVS (

MIL:GVS, Financial) for a total of 1,415,112 shares. The trade had a 0.49% impact on the equity portfolio. During the quarter, shares traded for an average price of 13.87 euros ($16.12).

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GVS is an Italian manufacturer and distributer of filters and components for a variety of industries, including health care, life sciences, automotive, appliances, safety and industrial filtration. In addition to its pre-made customizable solutions, it also offers tailormade product development services.

On Oct. 21, shares of GVS traded around 11.39 euros for a market cap of 1.99 billion euros. According to the Peter Lynch chart, the stock is trading above its intrinsic value but below its median historical valuation.

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The company has a financial strength rating of 7 out of 10 and a profitability rating of 5 out of 10. The cash-debt ratio of 1.32 and Piotroski F-Score of 8 out of 9 indicate a very healthy financial situation. The operating margin of 32.72% and net margin of 21.42% are outperforming 96% of industry peers.

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Portfolio overview

As of the quarter’s end, the fund’s equity portfolio consisted of 61 stocks valued at a total of $1.21 billion. The top holdings were IPH Ltd. (

ASX:IPH, Financial) with 3.86% of the equity portfolio, TKC Corp. (TSE:9746, Financial) with 2.92% and Meitec Corp. (TSE:9744, Financial) with 2.64%.

In terms of sector weighting, the firm was most invested in industrials, technology and basic materials.

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Disclosures

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the SEC filings for the quarter in question and may not include non-U.S.-listed international stocks or changes made after the quarter ended.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com
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