Sarasin & Partners Spring Investment Seminar

Transcription

1 Sarasin & Partners Spring Investment Seminar Imbalancing Act: Resilient returns in an imbalanced world March 2017

2 Pricing stocks: Finding Resilience in Technology Josh Sambrook-Smith March 2017

3 Finance / Insurance Agriculture Education / Health Services Wholesale Mining Manufacturing Retail Construction Utilities Information Technology A Low Survival Rate PERCENTAGE OF STARTUPS OPERATING AFTER 4 YEARS 58% 56% 56% 55% 54% 51% 49% 47% 47% 45% 37% Source: StatisticBrain 42

4 The Franchise of its Era GLOBAL PC SHIPMENTS (000 UNITS) 180, , , , m units shipped at peak 100,000 80,000 60,000 40,000 20,000 - Source: Gartner 43

5 Mar-90 Nov-90 Jul-91 Mar-92 Nov-92 Jul-93 Mar-94 Nov-94 Jul-95 Mar-96 Nov-96 Jul-97 Mar-98 Nov-98 Jul-99 Mar-00 Nov-00 Jul-01 Mar-02 Nov-02 Jul-03 Mar-04 Nov-04 Jul-05 Mar-06 Nov-06 Jul-07 Mar-08 Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12 Nov-12 Jul-13 Mar-14 Nov-14 Jul-15 Mar-16 Nov-16 The Franchise of its Era WINTEL - RETURN ON CAPITAL 35% Growth Phase Recession Maturity 30% 25%??? 20% 15% 10% 5% 0% -5% Source: Bloomberg 44

6 Smartphone Revolution 23 Moon landers 45

7 3bn Smartphone Users SMARTPHONE SHIPMENTS (MILLIONS) 1.5bn Smartphones sold in m 1,265m 1,428m 1,554m 700m 491m 10m 40m 80m 120m 146m 170m 291m Source: Strategy Analytics 46

8 Platform Companies 1.8bn 210m 400m >1bn monthly average users iphones shipped in m active accounts monthly average users 443m active accounts >900m monthly average users 47

9 Platform Revenues tracked Smartphone Growth PLATFORM COMPANY REVENUE ($ BILLIONS) $462.3bn $507.3bn $282.9bn $324bn $371.6bn $79.7bn $93.6bn $56.6bn $18.5bn $28.7bn $40.9bn $134.6bn $204.1bn Source: Bloomberg 48

10 Top 20 US Companies by Market Cap Source: Bloomberg Source: Bloomberg 49

11 How did we get here? 50

12 Intrinsically different type of Scale PLATFORM VS WINTEL REVENUES ($M) 700, , , , ,000 Platform Companies 4x the scale of Wintel How?! 200, ,000 - YR 1 YR 2 YR 3 YR 4 YR 5 YR 6 YR 7 YR 8 YR 9 YR 10 Wintel YR YR Platform YR 13 YR 14 YR 15 YR 16 YR 17 YR 18 YR 19 YR 20 YR 21 Source: Company reports, Bloomberg Intelligence 51

13 Q1-00 Q3-00 Q1-01 Q3-01 Q1-02 Q3-02 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07 Q1-08 Q3-08 Q1-09 Q3-09 Q1-10 Q3-10 Q1-11 Q3-11 Q1-12 Q3-12 Q1-13 Q3-13 Q1-14 Q3-14 Q1-15 Q3-15 Q1-16 Q3-16 Capital Spending as a Barrier AMAZON CUMULATIVE OPEX + CAPEX ($M) 200, ,000 = GDP of Portugal 160, , , ,000 80,000 60,000 $200bn cumulative investment = China s Defence Budget = Vladimir Putin s Personal Fortune 40,000 20,000 - Source: Company Reports 52

14 Innovator s DNA 53

15 Networks Josh Sambrook-Smith 54

16 Data = Power INGEST IMPROVE ANALYSE 55

17 It s How Amazon Maximise Revenue PRICE CHART FOR THE WEALTH OF NATIONS Source: Camelcamelcamel.com 56

18 It s How Facebook Sell Advertising 57

19 Entry Barriers Matter 58

20 Growth without Entry Barriers NOKIA - RETURN ON CAPITAL 50% 40% 30% 20% 10% 0% -10% -20% Source: Bloomberg 59

21 Feb-00 Jun-00 Oct-00 Feb-01 Jun-01 Oct-01 Feb-02 Jun-02 Oct-02 Feb-03 Jun-03 Oct-03 Feb-04 Jun-04 Oct-04 Feb-05 Jun-05 Oct-05 Feb-06 Jun-06 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Entry Barriers without Innovation ORACLE - RETURN ON CAPITAL 60% 50% 40% 30% 20% 10% 0% Source: Bloomberg 60

22 Entry Barriers + Innovation + Growth FACEBOOK - RETURN ON CAPITAL 30% 25% 20% 15% 10% 5% 0% -5% Source: Company Reports, Sarasin 61

23 Fuel for Growth KEY ADDRESSABLE MARKETS $2.5 Tn Target Market $1,500bn $500bn $500bn Advertising Spend Cloud Spend ecommerce Source: MagnaGlobal, Gartner 62

24 Winner takes all? HOW MUCH INCREMENTAL SPEND GOES TO THE PLATFORM COMPANIES? THE REST THE REST THE REST 5% 49% Digital 46% 30% 34% Advertising Cloud E-Commerce 66% 70% Source: *Company reports, MagnaGlobal, **Gartner, Sarasin, ***BAML, Sarasin 63

25 Market Rewards The Winners FACEBOOK VS TWITTER 80% 60% 40% 20% 0% -20% -40% -60% -80% -100% Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Source: Bloomberg 64

26 Technology Valuations MSCI IT SERVICES INDEX - PE RATIO 50x 16x Source: Bloomberg 65

27 Finally: Concept Stocks No Longer 2016 CASH FLOW $40bn $94bn Cash Flow in 2016 $26bn $18bn $10bn Source: Company Reports 66

28 Long Term Cash Generation CASH FLOW OUTLOOK FACEBOOK / AMAZON / GOOGLE $82bn $71bn $61bn $42bn $48bn Source: Sarasin

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