Future Generation Investment Forum

Size: px

Start display at page:

Download "Future Generation Investment Forum"

Richard Knight
6 years ago
Views:

1 Future Generation Investment Forum 16 May pm 3.00pm Wesley Centre Auditorium 220 Pitt Street Sydney

2 Disclaimer This presentation has been prepared for use in conjunction with a verbal presentation and should be read in that context. The information in this presentation is only intended for Australian residents. The purpose of this presentation is to provide information only and the contents of the presentation does not purport to provide investment advice. We strongly suggest that investors consult a financial adviser prior to making any investment decision. The presentation does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making investment, financial or other decisions. The information is selective and may not be complete or accurate for your particular purposes and should not be construed as a recommendation to invest in Future Generation Investment Company Limited, Future Generation Global Investment Company Limited Eley Griffiths Group Pty Ltd, Noni B Limited, PWR Holdings Limited, Telstra Corporation Limited, Morphic Asset Management Pty Ltd, Haseko Corporation Co Limited, Iluka Resource Limited, Mineral Deposits Limited, Zayo Group International Limited, Ellerston Capital Limited, Office Depot International Limited, Apple Inc, Magellan Asset Management Limited, Australian Printing Industry Association, DiaSorin Limited, Cooper Investors Pty Limited, Nextstar Media Group, Avenir Capital Pty Ltd, Whole Foods Market Inc, Jd Sports Fashion Plc, Neuberger Berman Australia Pty Limited, Reckon Limited, Wilson Asset Management Limited. The information provided in the presentation is given in good faith and is believed to be accurate at the time of compilation. Neither Future Generation Investment Company Limited, Future Generation Global Investment Company Limited nor its directors or employees make any representation or warranty as to the accuracy, reliability, timeliness or completeness of the information. To the extent permissible by law, Future Generation Investment Company Limited, Future Generation Global Investment Company Limited and its directors and employees disclaim all liability (whether arising in contract, tort, negligence or otherwise) for any error, omission, loss or damage (whether direct, indirect, consequential or otherwise). Neither Future Generation Investment Company Limited, Future Generation Global Investment Company Limited nor its directors or employees guarantee or make any representation as to the performance of Future Generation Investment Company Limited, Future Generation Global Investment Company Limited, the maintenance or repayment of capital, the price at which shares may trade or any particular rate of return. 2

3 Noni B Limited From Swansea Belmont to >600 Stores Revered woman's fashion retailer in metamorphosis Noni B / Rockmans / W. Lane / BeME brands New CEO Scott Evans (retail toe cutter, ex Blundy lieutenant) CODB overhaul: Integration / synergies Supply chain refinements Organic Growth (online growth) Amazon Impact: Discerning client service, value conscious customers, big regional presence, touch and feel retailer 3

PWR Holdings Limited QLD based designer / manufacturer of world leading car cooling systems / radiators for: Formula 1 NASCAR V8 Supercars World Rally Championships OEM s (eg.

4 PWR Holdings Limited QLD based designer / manufacturer of world leading car cooling systems / radiators for: Formula 1 NASCAR V8 Supercars World Rally Championships OEM s (eg. Ford) NPAT -30% FY17 but reflects opex investment in business and GBP weakness Upside ~ OEM contract wins, US aftermarket sales channel and stabilisation / bottoming of GBP. 4

5 Future Generation Investment Forum

6 Telstra Some significant challenges NBN Margin collapses as they become a reseller Cost to reconnect customer Do receive significant payments from the government Mobile competition Lead over Optus and Vodafone has shrunk as they have reinvested in their network Entry of TPG as a fourth operator Upside exists Even if dividends are cut, there will still be a solid fully franked dividend which will be defensive in a market downturn NBN payments can be used to buy back stock and minimise the necessary dividend cut Cost out opportunity Significant investment in the mobile network will help to maintain its strong position and good margins Dividends May need to be cut This is known and is largely in the price 6

7 Future Generation Investment Forum

Haseko Corporation Too cheap even for zero growth Context Largest Tokyo condo builder with 30% market share - has built one tenth of all Japanese condos in history Low

8 Haseko Corporation Too cheap even for zero growth Context Largest Tokyo condo builder with 30% market share - has built one tenth of all Japanese condos in history Low risk business model Strong brand value Change Drivers Rerating from present 6x PE Continued population and economic growth in Tokyo Recognition rent is 3x higher than home loan interest Global Insight edge Tokyo a very cheap city 2% p.a. condo price rise since 2010 not a bubble Haseko Share price In JPY, between Feb 2012 and May Feb 12 Jul 12 Dec 12 May 13 Oct 13 Mar 14 Aug 14 Jan 15 Jun 15 Nov 15 Apr 16 Sep 16 Feb 17 Source: Bloomberg Focussed Vigilant Agile 8

9 Future Generation Investment Forum

Iluka Resources (ASX: ILU) A major global producer of mineral sands cycle is turning Owns an iron ore royalty associated with BHP Billiton s Mining Area C BHP announcements suggest royalty might

10 Iluka Resources (ASX: ILU) A major global producer of mineral sands cycle is turning Owns an iron ore royalty associated with BHP Billiton s Mining Area C BHP announcements suggest royalty might double in value in next decade Sandon Capital believes the royalty is undervalued by the market ILU should consider a spin off Value Excess working capital Iron ore royalty (ex-south Flank) 1, ,869.4 Enterprise Value 2, ,431.9 Implied value of mineral sands 'stub' 1, ,342.1 CY17 'stub' EBITDA Source: Sandon Capital analysis, BHP Billiton Implied EV / EBITDA multiple 5.4x 4.3x 10

Value of US$272m 1 compares favourably to its current market capitalisation of US$80m

11 Mineral Deposits (ASX: MDL) Mineral Deposits Ltd owns 50% of TiZir, TiZir is a mineral sands company with a mine in Senegal and a titanium slag furnace in Norway MDL s Book Value of US$272m 1 compares favourably to its current market capitalisation of US$80m (Market price ~A$0.54) 1. Pro forma for the equity raising undertaken in March

12 Future Generation Investment Forum

13 Zayo Group Today s World Runs on Fiber North America Internet Traffic Petabytes (PB) per Month Zayo Fiber Map 2

14 Future Generation Investment Forum

15 Irrational extrapolation Fears of disruption by Amazon Paper industry in decline (3-5% p.a.) Multiple ways of winning Confidential / 15 EV/Sales 0.25x, PE 7x, 12.5% FCF Yield Office Depot Low growth duopoly priced for extinction 9 th largest U.S. online retailer; ~65% of sales online Ongoing store closure and supply chain rationalisation saving US$1bn p.a. Duopoly with ~1,400 points of presence across the country Amazon s buying power in office products ~10% of Office Depot s and will remain sub-scale Category expansion to leverage platform Management buying back shares with excess FCF M&A optionality in Staples merger Margin of safety Office Depot price matches Amazon, i.e. Amazon effect largely in the profits $m $750m+ OfficeMax Add'l Cost Integration Saving Programs Source: Office Depot EV/EBITDA vs. World (R) Source: Factset Multi-year cost reductions Price (L) $250m+ $1b+ Potential Total Benefits 1.6x 1.4x 1.2x 1.0x 0.8x 0.6x 0.4x 0.2x 0.0x

16 Future Generation Investment Forum Session 2

17 Apple [17] Gross Margin Mix, FY16 Services Other Products iphone Volumes ipad 200 Mac iphone 0 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E FY20E iphones Sold to New Users* Replacement iphones Sold* The iphone price is akin to a recurring subscription payment to access the ios ecosystem of apps and services Source: Left - Company reports, Magellan Asset Management Limited estimates. Apple has a September year end. Apple generates most of its earnings from the iphone ecosystem (replacement iphones and Services). The iphone installed base continues to grow, while its popularity and engagement remain high, and the expanding middle class globally is expected to benefit Apple over the long term. Source: Right - Apple filings, Magellan Asset Management Limited estimates. * iphone volumes are disclosed by Apple while iphones Sold to New Users and Replacement iphones Sold are Magellan Asset Management estimates.

18 Future Generation Investment Forum

Australian Printing Industry PMP Limited 2019F Current

flow ($m) $ 83 EV/EBITDA 3.4x Free cash flow yield 25.

19 Australian Printing Industry PMP Limited 2019F Current Share price $ 0.64 Market Capitalisation ($m) $ 321 Debt ($m) $ - Enterprise Value ($m) $ 321 EBITDA ($m) $ 95 Free cash flow ($m) $ 83 EV/EBITDA 3.4x Free cash flow yield 25.8% PE 7.4x Dividend yield (fully franked) 13.5% Source : Company forecasts / Lanyon STRICTLY PRIVATE AND CONFIDENTIAL

20 Future Generation Investment Forum

22 Future Generation Investment Forum

Regulatory relief Why we like it: Traditional revenue = stable; critical to skinny bundle Every $1 revenue generates $0.

23 Nexstar Media (NXST:US) Current Price: US$60 Market Cap: US$2.9 billion Misunderstood business Hugely cash generative Dominant market share Improving quality of business History of shareholder value creation Regulatory relief Why we like it: Traditional revenue = stable; critical to skinny bundle Every $1 revenue generates $0.20 free cash flow Covers 39% of all households in the US 45% of revenue is recurring and growing double digits 30% annualised shareholder return over past 10 years Trump! What is it worth: Current Price $60 5x free cash flow Target Price $120 10x free cash flow

24 Future Generation Investment Forum

of mix) and Texas (~7% of mix) Customer base that over indexes to higher education and higher income.

25 WHOLE FOODS MARKET INC ( WFM ) COMPANY OVERVIEW Mid Cap: US$11.6 billion WFM is the largest natural and organics U.S. supermarket with 464 stores, with an estimate of 87,000 team members WFM has over 460 stores with greatest concentration in the states of California (~20% of mix) and Texas (~7% of mix) Customer base that over indexes to higher education and higher income. Headwinds: increased competition, slowing store sales Opportunities: activist engagement, management restructure, exceptional brand awareness, improved data driven decision making; potential acquisition target STOCK PRICE LAST 5 YEARS $70.00 $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Source: Bloomberg. All information as of May For illustrative purposes only. The inclusion of any individual security in this document does not constitute a recommendation to invest.. FUTURE GENERATION INVESTMENT FORUM For Future Generation Investment Forum Use Only 25

JD SPORTS FASHION PLC ( JD ) COMPANY OVERVIEW Market Capitalization: GBP4.

opened first Australian store INVESTMENT THESIS Quality - High Momentum High Value - low STOCK PRICE LAST 5

Berman, Bloomberg. All information as of May 2017. For illustrative purposes only.

26 JD SPORTS FASHION PLC ( JD ) COMPANY OVERVIEW Market Capitalization: GBP4.4billion JD operates retail stores selling brand name sports and leisure wear Over 800 stores across the UK Just opened first Australian store INVESTMENT THESIS Quality - High Momentum High Value - low STOCK PRICE LAST 5 YEARS NB QUANTITATIVE SCORING Quality Value Momentum Source: Neuberger Berman, Bloomberg. All information as of May For illustrative purposes only. The inclusion of any individual security in this document does not constitute a recommendation to invest. FUTURE GENERATION INVESTMENT FORUM For Future Generation Investment Forum Use Only 26

27 Future Generation Investment Forum

28 Reckon (ASX: RKN)

29 Contact us E: T: (02) F: (02) Facebook: facebook.com/futuregenerationfgxfgg LinkedIn: Future Generation Investment Companies

Investment Forum. 30 November pm 3.00pm Melbourne Convention & Exhibition Centre

Investment Forum. 30 November pm 3.00pm Melbourne Convention & Exhibition Centre Investment Forum 30 November 2017 1.30pm 3.00pm Melbourne Convention & Exhibition Centre May 2017 Investment Forum stock performance Fund Fund manager Company Code Logo Annualised total return Wilson Asset