BKI Investment Co. Ltd. · ASX:BKI
BKI Investment — FY2017 Earnings Presentation
27 slides from BKI Investment's earnings presentation, Jul 18, 2017
Slide 1: BKI Investment Company Limited FY2017 Results Presentation
For personal use only BKI Investment Company Limited FY2017 RESULTS PRESENTATION BKI is managed by Contact Asset Management 1
Slide 2: Disclaimer
Disclaimer For personal use only This material has been prepared by Contact Asset Management on behalf of 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 obj
Slide 3: Background and History
Background and History For personal use only Focused on growing and improving the BKI business BKI becomes internally Share Purchase Plan managed $28m BKW Establishes T Millner becomes CEO BKI becomes externally Share BKI merges Share Purchase Plan Share Purchase Plan managed by Contact Portfolio wi
Slide 4: Company Highlights
Company Highlights For personal use only Low Portfolio Management Dividend Yield Turnover Market Capitalisation Expense 6.4% 8% $1.0bn Ratio As at 30 June 2017 Yearly average *Grossed up, as at 30 June 2017 as at 30 June 2017 14,800 0.15% Shareholders As at 30 June 2017 13Yr Total Franking $465m Sha
Slide 5: Externalised Management
Externalised Management For personal use only Preservation of low fee with more investment resources Contact Asset Management has been established by Tom Millner, Will Culbert and Soul Pattinson. The vision of Contact is to act as an External Manager of LIC’s across various asset classes. Board
Slide 6: Investment Process
Investment Process For personal use only BKI is focused on investing in stocks using the 5 basic fundamentals below as part of the stock selection process: 1 Income - Dividend Yields, Franking Credits, Pay Out Ratios 2 Principal Activity - Sustainable Business Model, Competitive Advantage, Barriers
Slide 7: Fee Considerations
Fee Considerations For personal use only Based on $10k investment, 11.2% return p.a. Focused on keeping costs low over 13 years “The thicker the carpet…The thinner the dividend” $45,000 $691 2.00% $40,000 0.15%pa MER 1.0%pa 2.0%pa 1.75% $4,405 MER $8,355 MER $35,000 1.50% $30,000 1.25% $25,000 1.00%
Slide 8: Increased Liquidity & Profile
Increased Liquidity & Profile For personal use only Growing Number of Shareholders • 2003 7,832 • 2008 8,466 • 2013 11,750 • 2017 14,800 shareholders 1,400,000 1,200,000 Growing Average Daily Turnover of BKI Shares • 2003 – 2008 135k shares 1,000,000 • 2008 – 2013 227k shares • 2013 – 2017 332k
Slide 9: FY2017 Result Highlights
FY2017 Result Highlights For personal use only FY 2017 FY 2016 Growth Net Operating Result* $41.8m $41.2m 1% Net Profit Attributable to Shareholders $45.6m $42.3m 8% Earnings Per Share* 6.93cps 7.16cps -3% Earnings Per Share including Specials 7.57cps 7.35cps 3% Total Ordinary Dividend Per Share 7.3
Slide 10: Portfolio Positioning
Portfolio Positioning Exposure by Sector High Conviction For personal use only Benchmark Unaware BKI’s long term strategy of investing in dividend paying stocks means the portfolio is not aligned with an index. 10
Slide 11: Portfolio Positioning: Active Weight by Sector
Portfolio Positioning For personal use only Active Weight by Sector 6.0% 5.0% 4.1% 4.0% 3.2% 2.0% 2.0% 0.8% 1.0% 1.1% 0.4% 0.0% -2.0% -1.4% -1.1% -1.9% -4.0% -6.0% -8.0% -7.3% -10.0% -12.0% -12.2% -14.0% 11
Slide 12: Portfolio Positioning: Banks
Banks PE versus Market PE 18.0 Portfolio Positioning 17.0 16.0 15.0 For personal use only 14.0 Banks Value and Income 13.0 12.0 PE Multiple 13.1X : 16% discount to S&P/ASX300 Index 11.0 10.0 9.0 Dividend Yield 5.8% : 29% premium to S&P/ASX300 Index 30/06/12 30/06/13 30/06/14 30/06/15 30/06/16 30/06/
Slide 13: Portfolio Positioning: Tangible, Physical Assets - Infrastructure
Portfolio Positioning For personal use only Tangible, Physical Assets - Infrastructure Australia is undergoing a significant transformation thanks to federal and state government spend on major infrastructure projects. The beneficiaries of this spend is captured through long term passive infrast
Slide 14: Portfolio Positioning: Retail - The arrival of Amazon
Portfolio Positioning For personal use only Retail - The arrival of Amazon Market Opportunity in Australia is $80bn. • Relatively high disposable income • High internet penetration / smart phone use Source: Wesfarmers Strategy Briefing Day (7 June 2017) • Population concentration (3 cities have >5
Slide 15: Portfolio Positioning: Retail – Quick, Amazon is coming!
Portfolio Positioning For personal use only Retail – Quick, Amazon is coming! Consumer Discretionary stocks have been weak in recent months. Longer term growth forecasts appear overly optimistic - Scope for further disappointment. Apparel and Consumer Electronics stocks could be vulnerable. The
Slide 16: Portfolio Positioning: Retail - The arrival of Amazon
Portfolio Positioning For personal use only Retail - The arrival of Amazon Amazon will offer opportunities for many companies and investors Amazon will need distribution centres and access to infrastructure and supply chain through Ports/Road/Rail. Beneficial Real Estate / Logistics / and Infr
Slide 17: Top Shareholdings as at June 7
Portfolio Positioning Top 25 Shareholdings as at 30 June 2017 For personal use only Stock % of Total Stock % of Total Portfolio Portfolio 1 Commonwealth Bank 9.3% 14 IAG Limited 2.1% 2 National Australia Bank 8.0% 15 Macquarie Group 2.0% 3 Westpac Banking Corp 6.9% 16 ASX Limited 2.0% 4 ANZ Banking
Slide 18: Recent Buy/Sells during FY2017
Portfolio Positioning For personal use only Recent Buy/Sells during FY2017 Investment Portfolio Purchases Investment Portfolio Disposals Flight Centre BHP Billiton (half position) Sydney Airport Fairfax Media Telstra Corporation Telstra Corporation Sonic Healthcare Crown Resorts Ch
Slide 19: Total Shareholder Returns Including Franking Credits
Total Shareholder Total Shareholder Returns For personal use only Including Franking Credits Returns including the As at 30 June 2017 benefit of franking credits passed on from 20.0% BKI to shareholders. 15.5% 15.0% 14.1% 13.3% 11.2% 10.1% BKI has ample franking 10.0% 9.3% 7.8% credits to ensure 5.2
Slide 20: Total Shareholder Returns
Total Shareholder Returns Capital appreciation since IPO – including dividends and franking credits. For personal use only As at 30 June 2017. $4.00 $3.88 $3.50 $3.00 $2.50 Highlights the $2.00 benefit of $1.50 investing for the $1.00 long term. $0.50 Performance of BKI TSR per share including divid
Slide 21: Discount/Premium to NTA
Discount/Premium to NTA For personal use only Focused on closing the gap $1.90 $1.80 40% $1.70 $1.60 30% $1.50 $1.40 20% BKI’s Premium to $1.30 $1.20 10% Pre-Tax NTA as at $1.10 30 June 2017 $1.00 0% $0.90 was 0.4% $0.80 -10% $0.70 $0.60 -20% Prem/Disc % Pre Tax NTA BKI Share Price 21
Slide 22: Dividend History of BKI
Dividend History of BKI For personal use only Focused on capital management Growing Fully Franked Dividend Ordinary Dividends Special Dividends 0.50 1.00 1.00 1.00 Cents Per Share BKI’s pay out 7.30 7.25 7.20 6.95 ratio is typically 6.65 6.40 6.00 6.00 6.00 5.30 5.25 5.00 4.30 90%-95% of 2.00 Operat
Slide 23: Dividend History of BKI
Dividend History of BKI For personal use only Focused on capital management Dividends + Franking Credits received from a $10,000 investment in BKI at inception V’s Bank Quarterly Interest. $2,000 $1,810 $1,800 $1,600 $1,400 Highlights the $1,200 $1,000 opportunity of receiving $800 a fully franked d
Slide 24: Appendix
For personal use only BKI Investment Company Limited APPENDIX 24
Slide 25: LIC Structure - Key Features of BKI
LIC Structure - Key Features of BKI For personal use only Closed-End Company - As opposed to a managed trust, enabling us to have a long term view on investments without being concerned about fund redemptions. High Value / Low Cost - Active, high conviction, no debt. No excessive portfolio manag
Slide 26: LIC Structure - Key Features of BKI
LIC Structure - Key Features of BKI For personal use only Diversification – Exposure to well managed, dividend paying companies in a variety of industries. Listed on the ASX - Transparency and Compliance. ASX Listing Rules - Continuous Disclosure requirements, High levels of Transparency and C
Slide 27: LIC Structure - Key Features of BKI
LIC Structure - Key Features of BKI For personal use only Washington H Soul Pattinson and Company Limited - WHSP is the largest shareholder in BKI. Listed in 1903, WHSP is the second oldest listed company on the ASX and holds investments valued at >$4.0bn. Soul Pattinson has a deep understanding o
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