Macquarie Asia New Stars No. 1 Fund SAM LE CORNU PORTFOLIO MANAGER

Transcription

1 MACQUARIE INVESTMENT MANAGEMENT Teleconference Series Macquarie Asia New Stars No. 1 Fund SAM LE CORNU PORTFOLIO MANAGER July 2013

2 IMPORTANT NOTICE This information has been prepared by Macquarie Investment Management Limited ABN AFS Licence (MIML), the issuer of units in the Macquarie Asia New Stars No.1 Fund ARSN (Fund). This information is confidential and is provided to licensed financial advisers only. It is not to be distributed to, or disclosed to retail clients. The information may be based on assumptions or market conditions and may change without notice. The information in this presentation is provided for general information purposes only and does not take into account the investment objectives, financial situation or needs of any person. It should not be relied upon in determining whether to invest in the Fund. In deciding whether to acquire or continue to hold an investment in the Fund, an investor should consider the Fund s product disclosure statement. The product disclosure statement is available on our website at macquarie.com.au/pds or by contacting us on Past performance information is for illustrative purposes only and is not indicative of future performance. This presentation may include forward-looking statements that represent opinions, estimates and projections, which may not be realised. We believe the information provided herein is reliable, as of the date hereof, but do not warrant its accuracy or completeness. Certain parts of this presentation may have been obtained or are based upon information obtained from third parties which may not have been checked or verified. Investments in the Fund are not deposits with, or other liabilities of, Macquarie Bank Limited or of any other Macquarie Group entity and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of Macquarie Bank Limited or any other member of the Macquarie Group guarantees any particular rate of return or the performance of the Fund, nor do they guarantee the repayment of capital from the Fund. PAGE 2

3 Agenda 01 Quick recap and performance 4 02 Fifth anniversary of the Asia New Stars Strategy 03 Economic and market environment Portfolio positioning 18 7

4 01 Quick recap and performance

5 Macquarie Asia New Stars No.1 Fund Growth potential Asia ex-japan set for sustainable long-term growth, driven by consumption Fastest growing economies in world Investment disciplines Fundamental bottom-up process - 50 stocks out of 4,000 Risk-aware - strong corporate governance hurdles Comparative advantage Substantial company contacts over 500 company meetings each year Local skills and insights with strong local contacts/network Portfolio fit Complements emerging and global equities exposure Exposure to different regions and sectors PAGE 5

6 Macquarie Asia New Stars No. 1 Fund Performance and ratings Post fee as at 30 June months 6 months YTD 1 year 3 years (% pa) Since inception 1 (% pa) Fund MSCI Asia ex Japan Small Cap Index Net excess returns Researcher ratings 2 Lonsec^ Highly Recommended Best Performing Asia Pacific Small Mid Cap Equity Fund over three years Best Performing Asia Pacific Small Mid Cap Equity Fund over three years Zenith + van Eyk* Recommended B Rated Best of the Best Awards for Best Performing Asia Pacific Equities ex Japan Fund over three years Source: Macquarie Investment Management. Past performance is not a reliable indicator of future performance. Refer to Important information on page 30 for further details of the awards. 1 Inception date for the Fund is 27 May Refer to Important information on page30 for further details on researcher ratings. PAGE 6

7 02 Fifth anniversary of the Asia New Stars Strategy

8 Five tips for investing in Asia (ex-japan) From the investment team The greatest risk in investing in Asia is corporate governance. Macro investing and asset allocating from the desktop misses the real opportunity within Asia, step outside and you realise obvious enduring structural trends. In India, bottom-up analysis is the key to avoiding false promises and a healthy dose of scepticism can add a lot of value. We have seen success in China because we understand that China is not one country. Identifying and assessing the risks early in our investment process is the key to producing consistent returns for the strategy. If we can t quantify the downside risks, then we simply just don t invest. PAGE 8

9 The key to our success our disciplined approach Trustworthy management Highest calibre; unquestionable integrity Candid about financial situation Honest about risks in their business Strong cash flows Strong cash flow to support growth without dilution Strong positive working capital without debt burden Straightforward financial accounts Strong accounting controls backed by top-tier auditor Strong earnings history Annual incremental return on capital & equity >15% (especially expansionary capex) Consistent earnings growth History of over-delivering throughout cycles Possesses pricing power Price maker or price taker? Leader in market share Have history of margin improvement Businesses with growth potential Sufficient market potential for product/service Potential to generate minimum 15% CAGR revenue growth for >5 years Low-valuation businesses Current free cash flow multiple/pe reflects timing of cycle Trading below its 10-year average multiple Companies that best expectations Sell side broker estimates realistic vs management forecasts Stock likely to receive continued sell side and EPS upgrades Liquid companies Adequate daily trading turnover PAGE 9

10 Average monthly return (% in A$ terms) Upside capture and downside protection Average monthly returns (A$) to 30 June 2013 Outperformance by Asia New Stars Asia New Stars MSCI AxJ Small Upside capture -4.1 All periods Up markets Down markets Downside protection Source: Macquarie Investment Management and Bloomberg. Performance information for the Asia New Stars Composite (29 May 2008 to current) is Macquarie Asia New Stars GIPS composite in AUD and adjusted to reflect the fees & expenses payable on the Fund. The Fund s benchmark is the MSCI Asia ex Japan Small Caps Index. The Macquarie Asia New Stars No.1 Fund invests directly in to the Macquarie Asia New Stars Strategy Past performance is no indication of future performance and should not be relied upon in determining whether to invest in the Fund. PAGE 10

11 Cons Disc Cons Staple Energy Financials Health Care Industrials Info Tech Materials Telco Utilities China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand Macquarie Asia New Stars Strategy Performance attribution since inception* to 30 June 13 Contributing companies Attribution GREAT WALL MOTOR COMPANY-H 7.14 CHAROEN POKPHAND FOODS PUB 5.65 ST SHINE OPTICAL CO LTD 5.38 DAH CHONG HONG 4.88 CATCHER TECHNOLOGY CO LTD 4.80 SECURITY BANK CORP 3.86 ABOITIZ POWER CORP 3.71 CHINA SHINEWAY PHARMACEUTICA 3.66 CHINA STATE CONSTRUCTION INT 3.50 ANTA SPORTS PRODUCTS LTD % 15% 10% 5% 0% -5% Regional contribution Detracting companies Attribution GLORIOUS PROPERTY HOLDINGS CHINA SHANSHUI CEMENT GROUP ROLTA INDIA LIMITED PEACE MARK HOLDINGS LTD PEAK SPORT PRODUCTS LTD ICSA INDIA LTD LUK FOOK HOLDINGS INTL LTD CNINSURE INC-ADR TCC INTL HLDGS LTD CHINA XINIYA FASHIO-SPON ADR % 15% 10% 5% 0% -5% Sector contribution *Performance attribution since inception of investment strategy (29 May 2008) to 30 June Past performance is not a reliable indicator of future performance. PAGE 11

12 03 Economic and market environment

13 Regional outlook ASEAN is overvalued, developed Asia is undervalued, China is oversold Taking profits in ASEAN, now underweight Excessive valuations Increasing wages and employment Low liquidity in equity markets Government spending well-funded from strong fiscal balances. Market weight Korea and Taiwan Lowest valuations More developed markets, avoid exporters and cyclical companies Buy domestic demand. Overweight China and Hong Kong Core position Uncertainty is producing many opportunities Separate the macro from the micro China now cheaper than it was in GFC. Market weight India Some relief from the political hurdles that have stalled necessary microeconomic reform, macro uncertainty, currency concerns Buy quality companies with highest corporate governance. PAGE 13

14 Asia ex Japan country valuation metrics As at 30 June 2013 Sector P/E EPS growth Prem./(Disc) 10-yr avg P/E Prem./(Disc) all time high P/B Net debt/ Equity ROE China 8.3x x Hong Kong 14.5x x India 13.9x x Indonesia 15.6x x South Korea 7.8x x Malaysia 16.4x x Philippines 19.4x x Singapore 13.8x x Taiwan 14.4x x Thailand 12.5x x MSCI Asia ex Japan Large Cap Index 10.3x x Source: Macquarie Investment Management. Positions are shown for illustrative purposes only and may not reflect future portfolio characteristics. All ratios are 1 year forward unless stated. Net debt (cash)/equity ratio is expressed exfinancials. PAGE 14

15 Asia ex Japan sector valuation metrics As at 30 June 2013 Sector P/E EPS Growth Prem./(Disc) 10-yr avg P/E Prem./(Disc) all time high P/B Net debt/ Equity ROE Energy 8.8x x Materials 12.2x x Industrials 12.2x x Consumer discretionary 10.9x x Consumer staples 20.9x x Health care 22.0x x Financials 9.5x x n/a 11.3 Information technology 9.7x x Telecommunication services 13.6x x Utilities 13.7x x MSCI Asia ex Japan Large Cap Index 10.3x x MSCI Asia ex Japan Small Cap Index 11.8x x Source: Macquarie Investment Management. Positions are shown for illustrative purposes only and may not reflect future portfolio characteristics. All ratios are 1 year forward unless stated. PAGE 15

16 PE ratio China earnings revisions vs historical low valuation Either the earnings or the price has to give EPS MSCI China PE 12m Forward EPS MSCI China Source: Bloomberg, June PAGE 16

17 SMIDs are undervalued with strong EPS growth As at 30 June 2013 Index P/E EPS 1 growth Prem./(Disc) 10-yr avg P/E Prem/(Disc.) all time high P/B Net debt/ Equity ROE MSCI Asia ex Japan Small Cap Index 11.8x x MSCI World Index 13.6x x MSCI Emerging Markets Index 10.0x x S&P/ASX x x MSCI Asia ex Japan Large Cap Index 10.3x x Source: Macquarie Investment Management, 30 June Positions are shown for illustrative purposes only and may not reflect future portfolio characteristics. All ratios are 1 year forward unless stated. Net debt (Cash)/Equity ratio is expressed ex-financials. 1_Earnings per share serves as an indicator of a company s profitability. Defined as the portion of the company s profit allocated to each outstanding share of common stock. PAGE 17

18 04 Portfolio positioning

19 Macquarie Asia New Stars No. 1 Fund Regional exposure As at 30 June 2013 China Hong Kong India Indonesia Malaysia Philippines Singapore South Korea Taiwan Thailand MSCI AxJSmall Caps Asia New Stars 0% 5% 10% 15% 20% 25% Overweight China and Hong Kong Bottom-up fundamentals see compelling opportunity Top-down economics uncertain Valuations are cheap Underweight South-East Asia ASEAN Growth and fiscal position strong Demographics driving strong consumption growth Valuations are stretched Market Weight Korea, India and Taiwan Developed Asia seeing value Source: Macquarie Investment Management, 30 June 2013 Positions are shown for illustrative purposes only and may not reflect future portfolio characteristics. The Fund s benchmark is the MSCI Asia ex Japan Small Caps Index. PAGE 19

20 Macquarie Asia New Stars No. 1 Fund Sector exposure As at 30 June 2013 Energy Materials Industrials Cons. Disc Cons. staples Health care Financials Info tech Telco services MSCI AxJSmall Caps Utilities Asia New Stars Cash 0% 5% 10% 15% 20% 25% 30% 35% Structural preferences Consumer, health care and utilities Quality, demographic support Structural dislikes Info tech, property developers Low quality, poor working capital Speculative companies Loss making businesses Cyclical industries and exporters Buy domestic demand Structural growth Lower risk with higher earnings visibility Source: Macquarie Investment Management, 30 June Positions are shown for illustrative purposes only and may not reflect future portfolio characteristics. The Fund s benchmark is the MSCI Asia ex Japan Small Caps Index. PAGE 20

21 Macquarie Asia New Stars No. 1 Fund Portfolio characteristics As at 30 June 2013 Fund MSCI Asia ex Japan Small Cap Index PE ratio 12.3x 12.1x Price to cash flow ratio 9.9x 8.4x GOOD VALUE EV/EBITDA 10.0x 9.2x EPS growth 20.2% 15.1% EPS growth (2yr fwd) 14.3% 13.9% Dividend yield 2.4% 2.8% Return on equity 21.8% 15.6% Net debt/mkt cap 5.2% 22.3% Consensus 3mth EPS revisions 1.7% -0.9% Market capitalisation $US2,319m $US977m Average daily turnover $US10.5m $US0.8m STRONGER GROWTH HIGHER QUALITY LOWER RISK GOOD LIQUIDITY Source: Macquarie Investment Management, 30 June Positions are shown for illustrative purposes only and may not reflect future portfolio characteristics. All ratios are 1 year forward unless stated. Net debt/mkt cap ratio is expressed ex-financials. PAGE 21

22 Top 10 positions As at 30 June 2013 Name Sector Country Market cap ($US million) St Shine Optical Co Ltd Health care Taiwan 1,179 Yes Bank Ltd Financials India 2,660 Great Wall Motor Co Ltd Consumer discretionary China 14,662 China Taiping Insurance Holdings Financials Hong Kong 2,565 Arwana Citramulia Industrials Indonesia 559 Osim International Ltd Consumer discretionary Singapore 1,101 Lotte Himart Co Ltd Consumer discretionary South Korea 1,560 Glenmark Pharmaceuticals Ltd Health care India 2,487 Sino Biopharmaceutical Health care Hong Kong 2,931 Coway Co Ltd Consumer discretionary South Korea 3,315 Source: Macquarie Investment Management. Positions are shown for illustrative purposes only and may not reflect future portfolio characteristics. PAGE 22

23 Macquarie Asia New Stars No. 1 Fund In a snapshot As featured in Asset magazine, July 2013 PAGE 23

24 07 Contact details

25 Business Development Team NSW ACT Cameron Farrar Head of National Sales P (02) M E cameron.farrar@macquarie.com Benjamin Price Head of National Accounts and Researcher Relations P (02) M E benjamin.price@macquarie.com NSW Jimmy Byrne Business Development Manager P (02) M E jimmy.byrne@macquarie.com VIC TAS Haydn Scott Business Development Manager P (03) M E haydn.scott@macquarie.com QLD Raegan Williams Business Development Manager P (07) M E raegan.williams@macquarie.com VIC SA WA Alana Grist Business Development Manager P (03) M E alana.grist@macquarie.com NSW ACT Jessica Chen Business Development Associate P (02) E jessica.chen2@macquarie.com Joel Lewis Business Development Associate P (03) E joel.lewis@macquarie.com VIC SA WA TAS VIC SA WA TAS Rani Singh Business Development Officer P (03) E rani.singh@macquarie.com QLD Sam Bishop Business Development Officer P (07) E sam.bishop@macquarie.com PAGE 25

26 Thank you Thank you for dialing in to the Macquarie Asia New Stars No. 1 Fund update. We hope you can join us for tomorrow's update on the Macquarie Income Opportunities Fund. Day (10am and 1pm AEST) Monday 15 July Tuesday 16 July Wednesday 17 July Thursday 18 July Friday 19 July Fund Macquarie Diversified Fixed Interest Fund Macquarie Asia New Stars No.1 Fund Macquarie Income Opportunities Fund Macquarie High Conviction Fund Macquarie International Infrastructure Securities Fund Monday 22 July Macquarie Australian Small Companies Fund For more information on Macquarie Investment Management, please visit macquarie.com.au/mim PAGE 26

27 A Appendix

28 Strong FUM growth Funds Under Management (FUM) since inception* to 30 June 2013 Macquarie Asia New Stars Fund SICAV Macquarie Asia New Stars No.1 Fund Macquarie Asia New Stars Fund *FUM since inception of investment strategy (29-May-2008) Source: Macquarie Investment Management, June PAGE 28

29 IMPORTANT INFORMATION Researcher ratings For full explanation of the meanings of the ratings, refer to the relevant researcher website: ; ; + The Zenith Investment Partners (Zenith) ABN rating (assigned September 2012) referred to in this document is limited to General Advice (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product(s), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective. * van Eyk Research Pty Ltd ABN , corporate authorised representative of van Eyk Financial Group Pty Ltd ABN , AFSL (authorised representative number ) (van Eyk) rates investment management capabilities rather than individual products. This rating is valid as at June 2010 but can change or cease at anytime and should not be relied upon without referring to the meaning of the ratings, as well as the full manager reports, available to subscribers at van Eyk has not directed the publication of Macquarie Funds Group's rating. Past performance information is given for illustrative purposes only and should not be relied upon as it is not an indication of future performance. The rating is not intended to influence you and your client's investment decision in relation to any products managed by Macquarie Funds Group and does not take into account your client's individual financial situation, needs or objectives. We recommend that you and your client do not rely on this rating in making an investment decision and instead you seek advice from an appropriate investment adviser and read the product disclosure statement before making such a decision. ^ The Lonsec rating (assigned June 2013) presented in this document is published by Lonsec Research Pty Ltd ABN AFSL The rating is a class service (as defined in the Financial Advisers Act 2008 (NZ)) or is limited to General Advice and based solely on consideration of the investment merits of the financial product(s). In New Zealand it must only be provided to wholesale clients (as defined in the Financial Advisers Act 2008 (NZ)). It is not a recommendation to purchase, sell or hold the relevant product(s), and you should seek independent financial advice before investing in this product(s). The rating is subject to change without notice and Lonsec assumes no obligation to update the relevant document(s) following publication. Lonsec receives a fee from the Fund Manager for researching the product(s) using comprehensive and objective criteria. For further information regarding Lonsec s ratings methodology, please refer to our website at: Awards (current as at the date of this presentation) Awarded to Macquarie Asia New Stars Fund (managed by Macquarie Funds Management Hong Kong Limited), which Macquarie Asia New Stars No. 1 Fund invests directly into & 2011 Lipper Fund Award s Hong Kong, awarded by Lipper, a Thompson Reuters Company, for best performing Asia Pacific small mid cap equity fund over 3 years. Best of the Best Awards 2011, awarded by Asia Asset Management, for best performing Asia Pacific Fund over 3 years and for best performing Asia Pacific equities ex Japan fund over 3 years. PAGE 29