What is the Agathis Fund?

Transcription

1 September, 2016

2 What is the Agathis Fund? Agathis is a bottom-up long only, absolute return fund The Fund is an exempted company incorporated in the Cayman Islands as a mutual fund. The Fund is structured as an openended investment company with limited liability. Registered with Cayman Islands Monetary Authority (CIMA). The investment manager to the fund is Swiss-Asia Financial Services Pte. Ltd.

3 Portfolio manager background 20 years experience in Asian capital markets of which 18 years in Southeast Asia Previously employed with CLSA ( ) Head of research Indonesia (2000/2001 and 2006/2011) and Thailand ( ) Country Head Thailand (2003/2004) and Indonesia ( ). Group Head of Asian Sales-Research Co-Ordination (2004/2005) based in Hong Kong Started broking career in 1997 with Hoare Govett in Manila as a financials analyst. Started in Asia in 1994 as a financial journalist for Asiamoney New Zealand citizen

4 Why choose Agathis? Fund manager with 20 years experience in Asian cash equity capital markets. Focus on Southeast Asia. Southeast Asia does not face demographic decline and has a fast-growing young middle class but is under represented in global equity indices. Fund has a concentrated consumer bias. We are not benchmark index trackers. We are bottom up investors. Stock picking is based on conviction. Fund manager co-invests alongside investors.

5 Investment Objectives The Fund is an absolute return, long only fund We seek long term capital appreciation through owning a portfolio of companies. The Fund will primarily, but not exclusively, be focused on Southeast Asia. There are few investment restrictions, although we intend to focus on cash equities. We do not mirror any benchmark. There can be no assurance that the Fund s investment objective will be achieved, or that its investment strategy will be successful.

6 Principles The portfolio manager co-invests in the fund. A significant share of my own personal wealth is in the fund. The fund is an investor not a trader. The fund is long only, no leverage, no use of derivatives. The fund is concentrated, typically with less than 20 stocks. We prefer to hold fewer positions but with a much deeper understanding of the business. We don t churn frequently. We typically hold shares in terms of years; our longest holding dates back to We have a bias towards consumer companies benefitting from Southeast Asia s long term demographic trends

7 Our investment process We believe markets in Southeast Asia are not efficient We take a bottom-up approach to stock picking We look at industry structure, prospects, competition, management and overlay that with valuation We undertake company visits to understand and test business models. We like firms that can steadily improve returns on capital over time We only invest in businesses that we understand.

8 Risk management A typical holding is 5% of the portfolio Maximum of 20% per one stock Maximum of 50% per country Two stocks are presently >10% of the portfolio Cash is used to minimize volatility We do not hedge currency risk We would be able to divest of most positions within two days

9 Portfolio Overview as of 31 August, 2016 Portfolio composition Portfolio by country Portfolio by industry Portfolio by market capitalisation

10 What went wrong in 2015 We launched the fund fully invested. Cash was <1% of assets at launch. We were excessively concentrated. Indonesia was 75% of the portfolio and the largest stock was 38% of the fund (at launch). The rupiah depreciated 22% in the 13 months since launch. Currency weakness was 45% of last year s drop. We had one stock drop 75%. The cause was a slowing economy, high valuations, regulatory interference and management incompetence.

11 Fund details Structure Structure Share Classes Investment Manager Administrator Custodian Auditor Offshore Legal Advisor Cayman Islands Exempted Company Class A and Class B USD Swiss-Asia Financial Services Pte Ltd Portcullis Trust (Singapore) Ltd BNP Paribas Ernst & Young Ltd Conyers Dill & Pearman Pte Ltd Terms and Conditions Minimum Initial Investment USD 100,000 Subscription Redemption Redemption Notice Management Fee Performance fee Redemption fee Lockup Period Monthly. Subscription Day: 1st Business Day of every month. Monthly. Redemption Day: 1st Business Day of every month. 1 calendar month prior to the Redemption Day. 2% pa for A shares; 1.0% pa for B shares None for A shares; 15% with HWM for B shares 1.5% for the first year None other than soft lockup above CIMA Registration

12 Supplementary notes What Agathis means Why Southeast Asia Portfolio valuation Largest holdings Indonesia overview Philippines overview Fees & charges Contact details

13 What does Agathis mean? Agathis is the genus for a relatively small group of long-lived evergreen trees These trees are only found in the Southern Hemisphere. There are 21 subspecies of Agathis. The Agathis Australis, the New Zealand Kauri, is most well-known. The Kauri grows to a height of 50m, has a diameter of 5m and has a lifespan of more than 600 years. Some trees have been dated to over 1,000 years. We have Kauri planted on our family property back in NZ. Agathis trees can also be found in Australia, the Philippines, Indonesia and elsewhere in Southeast Asia.

14 Why Southeast Asia Large, young population with rapidly expanding urban and middle class Population of 630m today rising to 760m by That s 8.5m more every year for the next 14 years. Rapid urbanization. The region has three cities over 10m people, 20 cities over 1.0m, 16 cities with more than 500k people and 152 cities with a population between 100k and 500k people. And getting bigger. Every year, 8.0m people migrate to live in urban areas. Southeast Asia has a combined GDP of US$2.5tn with >3,500 companies listed around the region. 900 Asean capital markets are largely under researched and under owned. Population of Southeast Asia (m) 550 Urban population of Southeast Asia (m) F 2030F 2040F F 2030F 2040F

15 Portfolio snapshot As of 31 August, Revenue growth (%) 12.4 EPS growth (%) 30.1 ROE (%) 8.4 ROA (%) 3.5 P/E (x) 12.1 Leverage (%) 23.3

16 Largest holdings (As of 31 August, 2016) Stock Country Industry Bloomberg Catur Sentosa Indonesia Building materials CSAP IJ Xero New Zealand Cloud accounting XRO AU Megawide Philippines Construction/ tourism Tiga Pilar Indonesia Branded consumer staples MWIDE PM AISA IJ Vista Land Philippines Property VLL PM

17 Catur Sentosa (CSAP IJ) Started 1966 as a paint shop, today CSAP is the largest building materials supplier in Indonesia. Revenue mix - 1H16 Plans to expand the Mitra10 chain from 23 stores today to 50 by 2020, cementing leadership. Massive multi-year opportunity from shift to formal from informal economy. CSAP market share estimated at 5%. FMCG 19% Atria 2% Chemical 3% Mitra10 27% Home improvement spending can also only rise at US$11 per capita in Indonesia compared with $29 in Thailand. Margins will expand as Mitra10 share of group revenue grows and through more usage of private label brands. Building materials 49% Capital raising complete 1H16; no funding issues to growth On our model, the stock trades on 12x 2017 earnings, less than half that of peers. Stock is up 13.7% last 12 months

18 Xero (XRO NZ) Xero is the largest cloud-based accounting provider in the world ex- USA. We believe cloud technology is a game changer for small business. TAM is enormous. Only 1% of firms globally have cloud accounting but in ANZ 15% of firms are already cloudbased. We expect XRO will reach 1.0m subs by March Subs will double again by ARPU of $30. Scale will result in a high margin model XRO is creating a massive competitive moat with significant barriers to entry. The average retention rate is already 8 years. Only four firms in the market globally. Stock is up 32% last 12 months '(000) Subscriber growth A 2017F 2018F 2019F

19 Megawide Construction Largest building contractor in the Philippines. Total construction book has doubled in two years. Cebu airport passenger traffic Also the largest private airport operator. Well placed for new airport contracts. Firm will participate in the governments PPP infrastructure plans This will shift focus towards recurring income. Cebu airport handled 8m passengers last year; passenger growth has accelerated to 15%. Airport capacity will double by Plenty of room to also grow non-aero revenue. Very little sell side coverage; not (yet) in any index. Stock is up 165% last 12 months (m) A 2016F 2017F 2018F

20 Indonesia overview The tax amnesty is a success. Tax penalties already equal 0.5% of GDP, second highest in the world Total assets declared already exceed US$150bn Indonesia s 265m people increases by 3.0m/year with forecast GDP growth of 5.5% in 2017 Inflation and interest rates have eased; tax cuts are on the agenda There is plenty of room to leverage infrastructure investment; public debt/gdp is only 26%. Economy is shifting from resources driven to more diverse driven by urbanisation which stands at 53% increasing by c. 1% per annum. Indonesia s equity market is now the second largest in Southeast Asia

21 Philippines overview The Philippines is Asia s only service sector economy driven by OFW remittances and the BPO industry This is a competitive advantage in a world of producer price deflation. Duterte is a strongman in the classic Asian sense; this makes him incredibly popular domestically Growth should continue at 7% for the next few years. The Philippines economy is now larger than Malaysia and Singapore; by 2020 it could be the second largest in Southeast Asia. The government plans to spend large on infrastructure ; from 4% to 7% of GDP within two years. Tax cuts are on the agenda Attractive demographics; labour market growth of 2% pa for the next ten years. The sharemarket is still only 1.5% of the MSCI Asia ex-japan.

22 Contact Details Swiss-Asia Financial Services Pte Ltd 8 Shenton Way #25-02 AXA Tower Singapore Tel: Fax: info@swissasia-group.com Website : Portfolio Manager Nicholas Cashmore nick.cashmore@swissasia-group.com Tel: Website :

23 Risk Disclosures This document is for information purposes only and does not constitute solicitation for investment in the company described herein, nor does it constitute an offer for sale of shares issued by the company or of those issued by any such fund or company. Any securities offered to investors by the fund will be speculative in nature and involve a high degree of risk. They are suitable only for investors who can afford to lose the entire amount of their investment. There is no guarantee that actual performance will resemble past trading performance or back-tested trading results. Simulations and projected performance may not necessarily be a guide to future results. This brief document cannot disclose all the risks and other factors necessary for evaluation of any potential investment. Any decision to invest should take into account the entirety of this document, additional documentation to be supplied to potential investors by the fund, and the individual s financial goals and risk tolerance. An investment in these securities should be viewed as a medium to long-term investment.