QV Equities Limited Investor Update - 1 - March roadshow 2015
QV Equities Limited Intro & Business Update Managed by Investors Mutual Focused on Ex-20 stocks Listed 22 August 2014 Quality and experienced Independent Board Dedicated to developing a robust long term dividend stream for clients - 2 -
About IML Boutique manager established in 1998 Circa $5.8b FUM- retail and institutional clients Disciplined true to label value style Large investment team with experienced leadership Consistent performance over 16 years - 3 -
IML: Australia s most awarded value manager Awards 2015 Domestic Equities 2012 Domestic Equities 2008 Domestic Equities Small Caps 2002 Emerging Australian Equities Fund Manager of the Year Nominations 2015 Overall Fund Manager of the Year 2015 Domestic Equities- Small Cap 2013 Domestic Equities Awards 2012 Australian Equities Large Cap Nominations 2013 Australian Equities Large Cap 2011 Australian Equities Small Cap Awards 2012 Australian Equities (Broad Cap) 2002 Golden Calf Award 2010 Australian Equities Small Cap 2009 Australian Equities Small Cap 2003 Rising Star Award 2002 Domestic Equities Awards 2012 Australian Equities Large Cap Firm-wide 12 Awards + many other nominations 2009 Australian Equities Small Cap - 4 -
Retail Investor Needs Capital preservation Reasonable capital growth Income focused - 5 -
Investment Philosophy: focus on quality We seek to buy and own: Companies with a competitive advantage, with recurring earnings, run by capable management, that can grow,...at a reasonable price. - 6 -
Top 20 sector composition The S&P/ ASX 20 Index is heavily concentrated amongst the financial and resource sectors which represent approximately 69% of the Index Breakdown of S&P/ ASX 20 Index by Industry Property 4% Healthcare 4% Industrials 2% Telco & IT 8% Staples 9% Fin ex Property 55% Energy & Resources 18% - 7 - Source: IRESS as at 28 February 2015 Note: Based on free float adjusted market capitalisation, Industrials include basic materials
The ASX Ex-20 segment investment opportunity In comparison, Ex-20 entities are more diversified by industry and companies and offer greater investment opportunities Breakdown of S&P/ ASX Ex-20 Index by Industry Telco & IT 6% Utilities/Infra. 5% Staples 3% Industrials 17% Fin ex Property 8% Healthcare 9% Discretionary 14% Non Resource Materials 10% Property 14% Energy & Resources 14% - 8 - Source: IRESS as at 28 February 2015 Note: Based on free float adjusted market capitalisation, Industrials include basic materials
Why focus on an ex 20 managed portfolio? More diverse entities in terms of market capitalisation and industry sectors Less researched opportunities Clients typically underweight in this segment Solid yields on offer IML has a long record of significant value add in this segment - 9 -
QVE Portfolio Strategy Buying quality stocks Buying on weakness Focus on industrial stocks patiently building a portfolio that can deliver consistent dividends - 10 -
Where are we today? US economy continuing to expand Japan & EU still sluggish China slowing sharply Interest rates at record lows Many share markets at record highs - 11 -
Australia Consumer sluggish high debt and no real wage growth. Mining sector struggling Interest rates at record lows $A has fallen significantly from its peak.australia muddling through - 12 -
What is happening with earnings? HY Dec EPS growth 20% 20% 20% 15% 15% 15% 10% 10% 10% 5% 5% 5% 0% 0% 0% -5% -5% -5% -10% -10% -10% -15% -15% -15% -20% -20% -20% -25% ASX200-25% -25% Industrials -30% HY Dec EPS growth Resources - 13 - Source: Deutsche Bank as at 28 February 2015
Portfolio Update Over 60% invested Disciplined & prudently selecting stocks Many stocks trading at a premium to IML s assessed valuation Six month extension granted by the Board - 14 -
Taking time to prudently invest the portfolio QVE: Proportion of the portfolio invested 70.00 60.00 50.00 % 40.00 30.00 20.00 10.00 0.00 15/08/2014 15/09/2014 15/10/2014 15/11/2014 15/12/2014 15/01/2015 15/02/2015 QVE Portfolio - 15 - - Source: IML as at 6 March 2015
Portfolio positioning - company specific Cost-outs Orora Acquisitions Ansell Contracted growth Energy Developments Market share gains Trade Me Restructuring GWA - 16 -
Ansell (ASX: ANN) Key Highlights Leader in industrial hand safety, surgical gloves and condoms globally Strong branding and innovation Growing in emerging markets due to increasing OH&S standards Ansell trades on 15.1x FY16-17 - Source: Investors Mutual Limited beliefs compiled by historical research & analysis. PE estimates based on IML forward looking estimates
Ansell (ASX: ANN) 1.200 EPS DPS 1.000 0.800 0.600 0.400 0.200 0.000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-18 - Source: Investors Mutual Limited, beliefs and historical research as at 31 January 2015
Ansell purchase chart 27.00 Ansell (ANN) 25.00 $ 23.00 21.00 19.00 17.00 Ansell Share Price QVE Entry Points - 19 - - Source: IRESS and Investors Mutual Limited, as at 09 March 2015
Bank of Queensland Growth opportunities through broker distribution of mortgages Queensland economy improving Acquired on a P/E of 11 ½ ~ 12x with 6% yield - 20 - -
15-Aug-14 22-Aug-14 29-Aug-14 5-Sep-14 12-Sep-14 19-Sep-14 26-Sep-14 3-Oct-14 10-Oct-14 17-Oct-14 24-Oct-14 31-Oct-14 7-Nov-14 14-Nov-14 21-Nov-14 28-Nov-14 5-Dec-14 12-Dec-14 19-Dec-14 26-Dec-14 2-Jan-15 9-Jan-15 16-Jan-15 23-Jan-15 30-Jan-15 6-Feb-15 13-Feb-15 20-Feb-15 27-Feb-15 6-Mar-15 BOQ purchase chart 15 Bank of Queensland (BOQ) 14 $ 13 12 11 10 9 BOQ Share Price QVE Entry Points - 21 - - Source: IRESS and Investors Mutual Limited, as at 09 March 2015
IML Stock picks: Sonic Healthcare (ASX: SHL) Key Highlights Largest pathology player in Australia & Germany, no. 3 in the US Defensive growing earnings and solid yield Scale advantage provides opportunities for accretive acquisitions Very strong and capable management team Currently trading on FY15 PE of 16.9x & Dividend yield of 3.7% Source: Investors Mutual Limited Beliefs & forward looking estimates - 22 -
Sonic Healthcare: growing earnings and dividends Sonic Healthcare (SHL) $1.20 $1.00 $0.80 $0.60 DPS $0.40 EPS $0.20 $0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014-23 - Source: Investors Mutual Limited, beliefs and historical research as at 31 st January 2015
15-Aug-14 22-Aug-14 29-Aug-14 5-Sep-14 12-Sep-14 19-Sep-14 26-Sep-14 3-Oct-14 10-Oct-14 17-Oct-14 24-Oct-14 31-Oct-14 7-Nov-14 14-Nov-14 21-Nov-14 28-Nov-14 5-Dec-14 12-Dec-14 19-Dec-14 26-Dec-14 2-Jan-15 9-Jan-15 16-Jan-15 23-Jan-15 30-Jan-15 6-Feb-15 13-Feb-15 20-Feb-15 27-Feb-15 6-Mar-15 SHL purchase chart 20 Sonic Healthcare (SHL) 19.5 19 $ 18.5 18 17.5 17 16.5 16 SHL Share Price QVE Entry Points - 24 - - Source: IRESS and Investors Mutual Limited, as at 09 March 2015
Top 10 stocks KEY EQUITY INVESTMENTS P/E 2015 YIELD 2015 P/E 2016 YIELD 2016 AGL Energy 16.4 4.2% 13.5 4.2% Orica 12.5 4.9% 12.1 5.5% Sonic Healthcare 19.4 3.6% 16.9 3.7% Bank of Queensland 15.2 5.0% 14.4 5.7% ASX 21.4 4.2% 20.0 4.5% Ansell 16.2 2.2% 15.3 1.7% Fletcher Building 15.7 5.0% 14.5 5.0% Energy Developments 15.2 6.3% 14.5 6.5% Steadfast Group 15.7 3.5% 13.4 4.6% Chorus 11.7 N/A 11.2 N/A - 25 - - As at 28 February 2015
QVE Sector Weights QVE as at 12 March 2015 Cash Health Care 7.43% Energy 4.06% LPT 4.60% Telecommunication Services 2.15% 35 Stocks in the Portfolio Cash 36.50% Utilities Financials Ex. LPT Industrials Consumer Discretionary 7.69% Materials Consumer Discretionary Health Care Materials 7.85% LPT Industrials 8.26% Energy Financials Ex LPT 10.24% Utilities 11.21% Telecommunication Services - 26 - Source: IRESS and Investors Mutual Limited, as at 12 March 2015
Performance & NTA- February NET TANGIBLE ASSETS (NTA) AMOUNT *NTA before tax $1.0715* *NTA after tax $1.0463* *pre option exercise PERFORMANCE QVE s NTA BENCHMARK 1 Month +2.7% +7.1% Since Inception** +7.5% +7.4% **Inception date: 22 Aug 2014 Performance calculated after tax - 27 - - As at 28 February 2015
Interim Result QV Equities operating profit before tax of $1.97m Operating profit after tax of $1.56m Inaugural fully franked interim dividend of 0.5 cents per share Interim dividend dates Ex Dividend Date 16 th March 2015 Payment Date 2 nd April 2015-28 -
QVE Options: QVEO 184.7m issued at IPO Exercised at any time up until & including 15th March 2016 at $1.00 per option 3.5m exercised to date* Option exercise forms available on the website - 29 - *as at 13 March 2015
Shareholder engagement - focus on communication Monthly communication schedule monthly videos and updates IML sales team supporting adviser and broker relationships QVE shareholder roadshow across all capital cities Website communication & information portal for shareholders We want informed and engaged shareholders - 30 - -
QVE Summary Relevant for investors (ex20) Competitive fees Buy & hold proven strategy Consistent dividends Transparent with investors No extra expenses - 31 -
QVE Summary key competitive strengths Delivers much needed diversification - focused on ex20 stocks The Board high quality and independent The Manager IML solid experience and track record Focused on shareholder outcomes Informed shareholder base - 32 -
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