Presentation to Shareholders March 2012

Transcription

1 Presentation to Shareholders March 2012

2 Disclaimer This material has been prepared by BKI Investment Company Limited. The information within this document is not intended to provide advice to investors or take into account an individual s financial circumstances or investment objectives. This is general investment advice only and does not constitute advice to any person. The opinions within this document are not intended to represent recommendations to investors, they are the view of BKI Investment Company Limited as of this date and are accordingly subject to change. Information related to any company or security is for information purposes only and should not be interpreted as a solicitation of offer to buy or sell any security. The information on which this presentation is based has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy or completeness. Investors should consult their financial adviser in relation to any material within this document. 2

3 Agenda 1. BKI Background - Group Profile, Investment Strategy, History, Directors and Management 2. 1H 2012 Results - Highlights, Dividends, MER, Performance 3. Macro Snapshot - Investor Confidence, Valuations, Yields 4. Taking Advantage - Investment Opportunity, Diversification, Value, Income, Portfolio Movements 3

4 BKI Background 4

5 Group Profile and Investment Strategy BKI s investment portfolio has been built on a philosophy of long term investment with a focus on Australian equities. BKI primarily seeks to invest in well-managed businesses with a profitable history and with the expectation of sound dividend and distribution growth. An investment in BKI gives shareholders access to a diversified portfolio across most sectors of the market. BKI aims to generate an increasing income stream in the form of fully franked dividends, to the extent of available imputation tax credits, through long-term investment in a portfolio of assets that are also able to deliver long term capital growth to shareholders. 5

6 History 1980 s Brickworks Limited (BKW) Establishes Share Portfolio Acquires BKW s Share Portfolio BKI lists on the ASX Merges with Pacific Strategic Investments (Mkt Cap ~$26m) Renounceable Rights Issue raises $57.0m Placement raises $49.3m Becomes internally managed Takes over Huntley Investment Company (Mkt Cap ~$93m) BKW divests shares WHSP becomes substantial shareholder Share Purchase Plan raises $24.1m 2011 Awarded Listed Investment Company of the Year 6

7 Washington H. Soul Pattinson In 2009 WHSP increased their shareholding in BKI to become the largest shareholder (currently holding 13.7% of BKI shares). Listed in 1903, WHSP is the second oldest listed company on the ASX and holds investments worth in excess of $4.6bln. As an investment group WHSP has a window on the business world through the operating companies it controls and the investment companies where it has board representation. WHSP s long term, patient investment philosophy is dispersed across many sectors including, Building Products, Property, Coal, Telecommunications, Financial Services, Pharmaceuticals, Retail and Agriculture. 7

8 Directors and Management Name Position Special Responsibilities Mr Robert Millner Mr David Hall Non-Executive Director and Chairman Independent Non-Executive Director Investment Committee Remuneration Committee Chairman Audit Committee Remuneration Committee Mr Alex Payne Non-Executive Director Chairman Remuneration Committee Investment Committee Audit Committee Mr Ian Huntley Independent Non-Executive Director Investment Committee Remuneration Committee Audit Committee Mr Tom Millner Chief Executive Officer Investment Committee Mr Jaime Pinto Company Secretary 8

9 Fund Manager of the Year Awards BKI awarded 2011 Listed Investment Company of the Year. The award is a great endorsement of an LIC whose major focus is to invest in quality companies, enabling it to generate a growing dividend stream and capital growth. Exciting future for the LIC sector.

10 1H 2012 Results 10

11 BKI Result Highlights 1H H 2011 Growth Ordinary Dividend Income $14.34m $12.46m 12.4% Net Operating Result $14.16m $12.81m 10.5% Net Operating Profit $16.42m $15.60m 5.2% Earnings Per Share 3.33cps 3.03cps 9.3% Dividend Per Share 3.20cps 3.00cps 6.7% 11

12 Dividends Paid cps cps cps cps cps cps cps cps cps Ordinary Dividends Special Dividends 12

13 Management Expense Ratio 0.80% 0.70% 0.69% 0.71% 0.60% 0.50% 0.56% 0.46% 0.46% 0.40% 0.30% 0.20% 0.31% 0.19% 0.18% 0.18% 0.10% H

14 BKI Performance as at 29 February 2012 BKI Performance 6 Mths 1 Year 3 Years 5 Years 7 Years as at 29 February 2012 (pa) (pa) (pa) BKI Portfolio Returns are measured after all operating expenses, provision and payment of income and capital gains tax. S&P/ASX 300 ACC INDEX (XKOAI) 2.6% -6.8% 13.8% -1.7% 4.9% BKI Total Shareholder Returns 8.7% 2.1% 17.6% 1.8% 5.7% BKI Share Price Outperformance V's XKOAI 6.1% 8.9% 3.8% 3.5% 0.8% BKI Portfolio Performance 5.4% 0.1% 14.5% 1.6% 5.9% BKI Portfolio Outperformance V's XKOAI 2.8% 6.9% 0.7% 3.3% 1.0% Source: BKI Investment Company Limited, IRESS. Portfolio Returns are measured by change in pre tax NTA and are after all operating expenses, provision and payment of both income and capital gains tax and the reinvestment of dividends. Total Shareholder Returns include reinvestment of dividends. Past performance is not indicative of future performance. 14

15 Macro Snapshot 15

16 Low Investor Confidence Inappropriate cash rates Global funding pressures affecting variable mortgage rates Uncertainty on the future cost of living and household affordability House price decline Commodity price decline Negativity surrounding weak global economies Unstable federal government Rising unemployment Slow GDP growth Low credit growth 16

17 Investors Defensive Reaction Domestic Changed risk appetite to investing in Australian shares Record consumer savings Hybrid issues putting pressure on ordinary shares International High Australian Dollar Unfavorable federal government policies; Carbon Tax Mining Resources Rent Tax Leading to a reduced exposure to Australian shares 17

18 Historical PE Multiples (X) - Global Markets Valuation PE Ratios Australia US Euro UK Australia Average Australian Historical PE Ratios (X) Source: Credit Suisse 18

19 7% 6% Income Dividend Yields Historical Dividend Yields (%) - Global Markets 5% 4% 3% 2% 1% Australia US Euro UK 0% % 6% Australia Average 5% 4% Australian Historical Dividend Yield (%) 3% 2% Source: Credit Suisse 19

20 Taking Advantage 20

21 Investment Opportunity Balance sheets of quality companies are robust and dividend distributions have continued to improve. Cautious of companies exposed to: Retail, Media and Manufacturing Focused on our Stock Selection Criteria: 1. Income Dividend Yields, Franking, Pay Out Ratios. 2. Principal Activity Sustainable Business Model, Competitive Advantage. 3. Debt Levels Gearing Ratios, Net Interest Coverage. 4. Management & Board Ownership, Board Meeting Attendance, History of creating shareholder wealth. 5. Earnings/Valuations Earnings Profiles, PE Multiples, EV/EBITDA Multiples. 21

22 1H 2012 Portfolio Movements Major Investments FY 2012 Dividend Yield Industry Group (Sub-Sector) FY 2012 Gearing (%) FY 2012 Interest Cover (X) Board and Management Ownership FY 2012 PE Multiple (X) FY 2012 EPS Growth (%) 1. Westpac Bank 8.1% Banks n/a n/a ~$36.1m National Aust Bank 7.4% Banks n/a n/a ~$71.5m Fleetwood Corp 5.3% Auto -5.0 n/a ~$129.3m Wesfarmers Limited 5.3% Food ~$64.2m Telstra Corporation 8.7% Teleco ~$5.4m Commonwealth Bank 6.8% Banks n/a n/a ~$31.8m QUBE Logistics 2.4% Transport ~$107.0m Source: IRESS, BKI, Credit Suisse, CCZ, Company Data 22

23 1H 2012 Portfolio Movements Divestments FY 2012 Dividend Yield Industry Group (Sub-Sector) FY 2012 Gearing (%) FY 2012 Interest Cover (X) Board and Management Ownership FY 2012 PE Multiple (X) FY 2012 EPS Growth (%) 1. BlueScope Steel 0% Materials ~$2.6m Consumer 2. Echo Entertainment 1.8% Discretionary ~$1.8m Suncorp Prefs (SBKPB) 5.7% Insurance n/a n/a n/a n/a n/a 4. Westpac Prefs (WBCPA) 5.0% Banks n/a n/a n/a n/a n/a 5. Orica Prefs (ORIPB) 0% Materials n/a n/a n/a n/a n/a Source: IRESS, BKI, Credit Suisse, Company Data 23

24 Diversification Top 20 Investments - As at 29 February New Hope Corporation 14.3% 11 ANZ Banking Group 2.5% 2 BHP Billiton Limited 8.4% 12 Woodside Petroleum 2.5% 3 Commonwealth Bank 7.9% 13 Metcash Limited 1.9% 4 National Australia Bank 7.7% 14 Coca Cola Amatil 1.7% 5 Westpac Banking Corp 5.2% 15 Westpac Pref Shares 1.6% 6 Telstra Corporation 4.1% 16 QBE Insurance Group 1.5% 7 Campbell Brothers 3.9% 17 Invocare Limited 1.3% 8 Wesfarmers Limited 3.8% 18 ARB Corporation 1.3% 9 Woolworths Limited 3.1% 19 TPG Telecom Limited 1.2% 10 AGL Energy Limited 2.7% 20 ASX Limited 1.1% Cash & cash equivalents 5.9% 24

25 12 Month Total Shareholder Returns as at 29 February Diversification S&P/ASX300 Acc Indices Larger portfolio holdings V s Index returns; diversification delivering performance. 40% CPB 30% TLS 20% NHC 10% 0% -10% WOW WES CBA NAB WBC BKI WPL -20% Telco Services Consumer Staples Industrials Financials S&P/ASX 300 Acc Index Energy Materials BHP Source: BKI Investment Company, IRESS 25

26 Value After adjusting BKI s closing share price as at 29 February 2012 for the Ordinary Interim Dividend of 3.2cps, BKI is currently trading at a 12% discount to the Pre Tax NTA. $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $0.80 $0.70 $0.60 $ % 20.0% 10.0% 0.0% -10.0% -20.0% Prem/Disc % Pre Tax NTA BKI Share Price 26

27 Income Rates offered by banks and other financial institutions will negatively impact the level of income received by some investors. BKI believe that the lower levels of income received from cash and other fixed interest products could be a catalyst for retail investors to search for income within the equities market. BKI has a strong dividend payout ability with abundant franking credits % 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% BKI s historical grossed up dividend yield was 8.7% as at 29 February % 2.00% 1.00% 0.00% BKI Grossed Up Dividend Yield 90 Day Bank Bill 27

28 Low Cost Low Risk Office Level 2, 160 Pitt Street Sydney NSW 2000 Telephone Fax Web ABN High Yield all through BKI.ASX