Ausbil Active Dividend Income Fund - Active ETF · ASX:DIVI
Ausbil Active Dividend Income Fund - Active ETF — Ausbil Investment Management — Non-Deal Roadshow (May 2019)
73 slides from Ausbil Active Dividend Income Fund - Active ETF's roadshow presentation, May 2019
Slide 1: 2019 Investment Roadshow: See the Forest, Not the Tree
2019 Investment Roadshow “See the Forest, Not the Tree” May 2019
Slide 2: Disclaimer
DISCLAIMER Important information for presentation recipients The information contained in this presentation is given by Ausbil Investment Management Limited (ABN 2676316473) (AFSL 229722) (Ausbil) and has been prepared for informational and discussion purposes only and does not constitute an offer t
Slide 3: Mark Knight, Head of Distribution
2019 Investment Roadshow “See the Forest, Not the Tree” Mark Knight Head of Distribution
Slide 4: Ausbil Australian Equity Funds – Large Cap
Ausbil Australian Equity Funds – Large Cap Generating active returns over the long term Performance 3 months 1 year 3 year Inception* 31 March 2019 % % (p.a) % (p.a) % (p.a) Return Excess Return Excess Return Excess Return Excess Active Equity +12.9 +2.0 +9.5 -2.2 +11.9 +0.5 +11.0 +2.8 Geared Equity
Slide 5: Ausbil Australian Equity Funds – Small Cap
Ausbil Australian Equity Funds – Small Cap Generating active returns over the long term Performance 3 months 1 year 3 year Inception* 31 March 2019 % % (p.a) % (p.a) % (p.a) Return Excess Return Excess Return Excess Return Excess Emerging Leaders +14.0 +3.3 -2.6 -7.2 +9.9 -2.2 +12.2 +3.2 MicroCap +1
Slide 6: Ausbil Global Funds
Ausbil Global Funds Australian based manager - global in scope Performance 3 months 1 year 3 year Inception* 31 March 2019 % % (p.a) % (p.a) % (p.a) Return Excess Return Excess Return Excess Return Excess Candriam +11.4 0.0 +13.5 +1.1 +12.3 -1.3 +6.6 +0.2 Sustainable Global Equity MacKay Shields +3.
Slide 7: Your speakers
Your speakers Experienced investment professionals Jim Chronis Paul Xiradis Michael Price Chief Economist Executive Chairman Portfolio Manager Chief Investment Officer Head of Equities Balanced Fund Active Equities Active Dividend Income Concentrated Equities Active Sustainable Equities
Slide 8: Jim Chronis, Chief Economist
2019 Investment Roadshow “See the Forest, Not the Tree” Jim Chronis Chief Economist
Slide 9: What happened since roadshow 2018?
What happened since roadshow 2018? Rollercoaster ride to a record equity high in 2019 • Euphoria - May to Q3 – US equities, bond yields and credit spreads higher – Fed on auto pilot, tolerating inflation overshoot • Fear - Q4 – Recession fervour as yield curve flattens on Fed misstep – Trump “I’m a
Slide 10: Global uncertainty
Global uncertainty Europe, China, Japan slowed - US supported by fiscal policy Source: Factset, Ausbil
Slide 11: Outlook 2020 - expansion prolonged
Outlook 2020 - expansion prolonged Global growth to respond to easier financial conditions • Lower inflation expectations permit cuts in the US Fed funds rate • Productivity growth contains global core inflation below 2% • Advanced and emerging economies growing at potential GDP • US TWI depreciatio
Slide 12: FED - cuts on lower inflation expectations
FED - cuts on lower inflation expectations Bernanke recommends easier policy to ensure 2.5% overshoot Source: Factset, Ausbil
Slide 13: US 2% potential GDP growth
US 2% potential GDP growth Rising productivity consistent with 3% wages and low inflation Source: Factset, Ausbil
Slide 14: Europe - supply chains disrupted
Europe - supply chains disrupted China traction to spur German rebound Source: Factset, Ausbil
Slide 15: China – aggressive stimulus measures
China – aggressive stimulus measures Policy traction reflected in improving manufacturing PMIs Source: Factset, Ausbil
Slide 16: Australia – slower household consumption
Australia – slower household consumption Low income growth offset by a falling savings rate for now Source: Factset, Ausbil
Slide 17: Australia - fiscal support for consumption
Australia - fiscal support for consumption Household income tax cuts to offset bracket creep Total Income tax bracket creep Source: Factset, Ausbil
Slide 18: Australia - modest wage growth
Australia - modest wage growth Demand key to a low unemployment rate and wages Source: Factset, Ausbil
Slide 19: Australia – rate cut as insurance
Australia – rate cut as “insurance” RBA can respond to weaker demand and lower inflation Source: Factset, Ausbil
Slide 20: Summary: Key messages
Summary Key messages • Global growth to continue - respond to easier financial conditions • Fed rate cut expected, expansion prolonged • US/China trade agreement expected • RBA cut to 1.25% and income tax cuts to offset weaker outlook • AUD/USD in the range 67-72c • Commodity cycle supportive of res
Slide 21: Paul Xiradis, Executive Chairman
2019 Investment Roadshow “See the Forest, Not the Tree” Paul Xiradis Executive Chairman Chief Investment Officer Head of Equities
Slide 22: Global growth
Global growth Central banks extend accommodative policy settings Real GDP Official Sector Ausbil (f) Official Sector Ausbil (f) % yoy Consensus 2019 2019 Consensus 2020 2020 (f) % (f) % May 2019 % % United States 2.4 2.2 1.9 2.0 Japan 0.9 0.9 0.6 0.6 Eurozone 1.3 1.3 1.5 1.5 China 6.2 6.3 6.0 6.1 Au
Slide 23: Financial markets
Financial markets The last 12 months Ausbil 2018 Investment Roadshow Source: Ausbil, Factset, as at 30 April 2019.
Slide 24: Australian equity market
Australian equity market Consensus earnings expectations EPS Growth (%) Trade war mentioned 9% US FOMC meeting 8% Trade war escalates US FOMC pivot 7% China stimulus 6% 2019 5% Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Source: Ausbil, Factset, as at 30 April 2019. Based on S&P/ASX 300 consensus data
Slide 25: Australian equity market
Australian equity market Consensus earnings expectations EPS Growth (%) Trade war mentioned 9% US FOMC meeting 8% Trade war escalates US FOMC pivot 2020 7% China stimulus 6% 2019 5% Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Source: Ausbil, Factset, as at 30 April 2019. Based on S&P/ASX 300 consensus
Slide 26: Australian equity market: EPS growth by sector
Australian equity market EPS growth led by resources and quality industrials PE PE EPS Growth EPS Growth Ausbil** April 2019 FY19 (f) FY20 (f) FY19 (f) FY20 (f) EPS Growth X X % % FY20 *(f) % MARKET 16.4 15.2 5.8 8.0 Financials 13.7 13.0 2.8 5.4 REITS 16.9 16.1 6.3 4.9 Industrials* 22.2 20.2 -1.0 9.
Slide 27: Valuation supported by lower interest rates
Australian equity market Valuation supported by lower interest rates 17.0 ASX 300 Index P/E ratio 1yr forward 16.5 16.0 Average (since 31 Dec 2012) 15.5 15.0 14.5 14.0 13.5 Long Term Average (since 23 Apr 2004) 13.0 2012 2013 2014 2015 2016 2017 2018 Source: Ausbil, Factset, as at 29 April 2019.
Slide 28: Market drivers for FY20
Market drivers for FY20 Outlook for key sectors • Banks – Earnings, margins and business models under pressure • Real Estate Investment Trusts – Not all REITs are equal • Industrials – Quality income and quality growth to outperform • Resources – Strong EPS growth with attractive valuations
Slide 29: Banks since 2000
Banks since 2000 Declining margins and pressure on net income % 50 Consensus 2.90 Billion ($) Forecast 45 Pre-tax Profit (LHS) Net Interest Margin (RHS) 2.70 40 35 2.50 30 25 2.30 20 2.10 15 10 1.90 5 0 1.70 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20
Slide 30: Banks – Royal Commission impact
Banks – Royal Commission impact Cost of remediation likely to escalate > $ 2b > $ 1b FY18 FY19* Future United Kingdom • PPI episode Set Up Investigate Conclusion Redress • Initial estimates £ 2-4b • Realised £ 36b Source: Ausbil, Goldman Sachs, CLSA. *Estimated costs so far (Ausbil, CLSA).
Slide 31: Banks – New Zealand capital impost
Banks – New Zealand capital impost RBNZ proposal requires additional $20bn of Tier 1 capital $ 20bn Total: $ 54bn $ 34bn $ 34bn Current Proposed Minimum Requirements Source: Ausbil, RBNZ, UBS as at 19 April 2019. Figures presented in AUD.
Slide 32: Banks – declining house prices
Banks – declining house prices Increasing bad debt charges? % 0 0 Australian real house prices - declining from peak -5 -5 -10 2017 - current -10 2008 1989 -15 -15 1981 -20 -20 0 3 6 9 12 15 18 21 24 27 Number of months Source: ABS, Deutsche Bank, RP data, CoreLogic as at 26 March 2019.
Slide 33: Banks – valuation
Banks – valuation Appear cheap for a reason - beware earnings risks 15.0 ASX 300 Bank Index P/E ratio 1yr forward 14.5 14.0 Average 13.5 (since 31 Dec 2012) 13.0 12.5 12.0 11.5 Long Term Average (since 23 Apr 2004) 11.0 10.5 2012 2013 2014 2015 2016 2017 2018 Source: Ausbil, Factset, as at 29 April
Slide 34: Real Estate Investment Trusts
Real Estate Investment Trusts Global retail REITs under pressure Rebased to 100 105 sold to Unibail-Rodamco 100 95 90 85 80 EPS 75 70 Equally weighted performance of select global REITs: 65 • Hammerson PLC (UK) • Intuit Inc (UK) 60 • Macrich Co (US) Price • Taubman Centers (US) 55 50 Mar-17 Mar-18 M
Slide 35: Australian retail REITs to follow global experience
Australian retail REITs to follow global experience Not all REITs are equal 115 EPS rebased to 100 110 Asset Manager REITs EPS 105 100 95 Retail REITs EPS 90 Sep-17 Sep-18 Jun-17 Jun-18 Mar-17 Dec-17 Mar-18 Dec-18 Mar-19 Source: Ausbil, Bloomberg, as at 17 April 2019. Equally weighted performance of
Slide 36: Industrials: earnings growth hard to find in 2019
Industrials Earnings growth hard to find in 2019 12% Industrials EPS Growth Forecasts 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 2019 0% -1% -2% Mar-18 Mar-19 Dec-17 Dec-18 Jun-18 Sep-18 Source: Ausbil, Factset, as at 30 April 2019.
Slide 37: Industrials: earnings outlook improving in 2020
Industrials Earnings outlook improving in 2020 12% Industrials EPS Growth Forecasts 11% 2020 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 2019 0% -1% -2% Mar-18 Mar-19 Dec-17 Dec-18 Jun-18 Sep-18 Source: Ausbil, Factset, as at 30 April 2019.
Slide 38: Industrials - quality income
Industrials - quality income Earnings certainty benefiting from low interest rates Yield (%) Price rebased 115 to 100 1.70 112 1.90 Price 109 2.10 106 Australia 2.30 10 Year Yield (Inverted) 103 2.50 100 2.70 97 2.90 Feb-19 Mar-19 Oct-18 Nov-18 Dec-18 Jan-19 Source: Ausbil, Bloomberg. Equally weight
Slide 39: Industrials - quality growth
Industrials - quality growth Superior earnings growth will be rewarded % 203 50 50 FY19 EPSg FY20 EPSg 46 40 30 24 22 20 20 17 16 14 14 13 9 10 8 6 7 6 0 -10 -7 -44 -20 Market QBE A2M ALL TWE CSL SHL RMD LLC Source: Ausbil, Factset, as at April 16 2019.
Slide 40: Lendlease
Lendlease Global leader in major urbanisation projects Development Backlog FY15 Development Backlog FY19* Total $ 45b $ 96b Number of Major Projects > $ 3b 4 7 * Represents the remaining end development value of work yet to be completed. Left picture: Barangaroo FY09. Right picture: Barangaroo, FY24
Slide 41: Lendlease: What is the market pricing in?
Lendlease What is the market pricing in? Lendlease business segment Implied market multiples Comparable multiples Development 6.0x 16.0x Investments 8.0x 17.0x Construction 5.0x 8.5x Engineering & Services 0.0x 0.0x Group multiple (ex E&S) 6.6x 15.0x Left picture: Euston Station, London. $10.5 bn en
Slide 42: Resources – commodity prices
Resources – commodity prices Spot relative to consensus 35% Spot price against consensus 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Source: Ausbil, Bloomberg, as at 30 April 2019.
Slide 43: Resources - metals and mining
Resources - metals and mining Disruption to Brazil iron ore exports 9 Brazil Vale Weekly iron ore seaborne exports (million tonnes) 8 7 6 5 4 Dec-15 Dec-16 Dec-17 Dec-18 Jun-16 Jun-17 Jun-18 Source: Ausbil, Credit Suisse, Reuters, as at12 April 2019.
Slide 44: Resources - metals, mining and energy
Resources - metals, mining and energy EPS upgrades drive outperformance 175 175 Index Impact of spot on EPS 150 150 125 125 100 100 75 75 50 12m fwd relative EPS Relative share price performance 50 25 25 2003 2005 2007 2009 2011 2013 2015 2017 2019 Source: Ausbil, Factset, Deutsche Bank.
Slide 45: Resources - metals and mining: free cashflow boom
Resources - metals and mining Free cashflow boom A$ 146b A$ 42b A$ 169b $b 2000 – 2011 2012 - 2016 2017 - 2021 $50 44 $40 35 15 33 Forecast 7 28 30 $30 27 Capital management 3 24 29 26 25 21 Increase from prior period $20 17 17 16 15 15 12 12 $10 6 5 5 5 2 $- -4 -7 $(10) 2000 2001 2002 2003 2004 200
Slide 46: Resources - energy: free cashflow boom
Resources - energy Free cashflow boom $b $7 5.7 5.9 5.6 5.1 $5 3.5 3.2 $3 2.6 2.2 1.4 1.1 1.1 0.8 0.8 0.6 $1 0.2 -0.2 -$1 -1.2 Forecast -1.4 -1.6 -$3 -4.3 -$5 -4.9 -$7 -6.7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: Ausbil, B
Slide 47: Ausbil Australian Active Equity
Ausbil Australian Active Equity Key portfolio themes and holdings Quality growth Resources Quality income Infrastructure spend As at 24 April 2019.
Slide 48: Ausbil Australian Emerging Leaders
Ausbil Australian Emerging Leaders Key portfolio themes and holdings Quality growth Resources Quality income Infrastructure spend As at 24 April 2019.
Slide 49: Ausbil MicroCap
Ausbil MicroCap Key portfolio themes and holdings Quality growth Resources Quality income Infrastructure spend As at 24 April 2019.
Slide 50: Summary: Key messages
Summary Key messages • Earnings: Risk remains but significant stock picking opportunities • Banks: Earnings, margins and business models under pressure • REITs: Some opportunities but not all REITs are equal • Industrials: Quality income and quality growth to outperform • Resources: Strong EPS growt
Slide 51: Michael Price, Portfolio Manager
2019 Investment Roadshow “See the Forest, Not the Tree” Michael Price Portfolio Manager Active Dividend Income
Slide 52: The demand for retirement income
The demand for retirement income People are living longer Age to which different Retirees require an income stream which is: proportions of retirees* High – as a replacement to previous income are likely to live from age source 65? Growing – income stream to help mitigate Likelihood of survival for
Slide 53: ASX Dividends vs Term Deposits
ASX 200 Dividends vs Term Deposits Annual income generated by $100,000 invested in December 1993 to December 2018 $20,000 $500,000 $18,000 $16,000 $400,000 $14,000 $12,000 $300,000 $10,000 $8,000 $200,000 $6,000 $4,000 $100,000 $2,000 $0 $0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 54: Passive yield – not what it seems
Passive yield – not what it seems Index dividends come from a very limited number of companies Cumulative Percent of Benchmark Yield (%) 100% 90% 80% 70% Over 50% of all dividends 60% paid by just 8 stocks! 50% 40% 30% 2/3rds of dividends paid by just 18 stocks! 20% 10% 0% 0 100 110 120 130 140 150
Slide 55: Passive yield: limited options to increase yield
Passive yield – not what it seems Limited options to increase the yield Number of ASX 200 stocks greater than a specified grossed up yield 200 180 160 Number of ASX 200 companies with: 140 Dividend yield > 6% 68 120 Dividend yield > 7% 38 100 Dividend yield > 8% 24 80 60 40 20 - 0 1 2 3 4 5 6 7 8 9
Slide 56: Evolution of equity income investing
“Evolution” of equity income investing Seeking high income and capital growth 3rd generation approach Active Dividend Income funds Active management of dividend 2nd generation income Buy/write Income funds approach Buy/write Imputation funds 1st generation strategies approach Value biased Dividend t
Slide 57: Income from equities: dispelling myths
Income from equities Dispelling some myths about “high dividend stocks”
Slide 58: Highest dividend payers have outperformed long term
The highest dividend paying companies Have outperformed over the long term but… 10% Mean Return 8% 6% 4% 2% 0% Highest Dividend yield basket Lowest -2% 1 2 3 4 5 6 7 8 9 10 Source: Ausbil, Macquarie Equities. Data is from September 1999 to January 2019.
Slide 59: Highest dividend payers don't always outperform
The highest dividend paying companies … don’t always outperform 6% Sep 1995- Sep 2005 Mean Return 4% 2% 0% -2% -4% -6% 1 2 3 4 5 6 7 8 9 10 Highest Dividend yield basket Lowest 14% Mean Return 12% 10% Jan 2014 – Jan 2019 8% 6% 4% 2% 0% -2% -4% 1 2 3 4 5 6 7 8 9 10 Highest Dividend yield basket Lowes
Slide 60: Highest dividend payers don't grow earnings
The highest dividend paying companies Don’t grow their earnings… 30% Earnings Growth 25% 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 -5% Highest Dividend yield basket Lowest Source: Ausbil, Macquarie Equities. Data is from September 1995 to January 2019.
Slide 61: Highest dividend payers are volatile
The highest dividend paying companies …and they are volatile 35% Volatility 30% 25% 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 Highest Dividend yield basket Lowest Source: Ausbil, Macquarie Equities. Data is from September 1995 to January 2019.
Slide 62: Highest dividend payers: risk adjusted returns
The highest dividend paying companies Don’t provide the best risk adjusted return outcomes 0.70 Return / volatility 0.60 0.50 0.40 0.30 0.20 0.10 - (0.10) 1 2 3 4 5 6 7 8 9 10 Highest Dividend yield basket Lowest Source: Ausbil, Macquarie Equities. Data is from September 1995 to January 2019. Risk a
Slide 63: Next generation active dividend income
Income from equities Next generation active dividend income
Slide 64: Actively seeking superior income
Next generation dividend income Actively seeking superior income • All securities should offer an attractive total return Strong Including franking credits • Focus on strong and growing dividends, and rather than just high dividends growing • Overall portfolio in line with top-down dividends sector
Slide 65: Opportunities for increasing dividends
Next generation active dividend income Opportunities for increasing dividends Dividend yield: monthly contribution versus benchmark 0.9% 20% Dividend Distribution Contribution to Dividend Yield 0.8% 18% 16% 0.7% 14% 0.6% 12% 0.5% 10% 0.4% 8% 0.3% 6% 0.2% 4% 0.1% 2% 0.0% 0% Mar-19 Apr-19 May-19 Jun-1
Slide 66: Increased opportunity, and risk, on reporting date
Next generation dividend income Increased opportunity, and risk, on reporting date 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 20
Slide 67: Ausbil Active Dividend Income Fund: Targeted outcomes
Ausbil Active Dividend Income Fund Targeted outcomes • Underlying gross income yield of at least 25% above market • Outperform the market over the cycle – Increasing income without reducing total return – Allows income and capital to grow over time • Managed specifically for superannuation and pensi
Slide 68: Ausbil Active Dividend Income Fund: Smooth monthly income
Ausbil Active Dividend Income Fund Smooth monthly income 1.4% 1.2% Dividend Income breakdown, cash only, based on ex-date 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Fund Index Excess CPU Past performance is not a reliable indicator of future performance.
Slide 69: Sustainable and growing dividends
Sustainable and growing dividends Telstra v CSL: cash dividend amount 5,500 5,000 Value of gross dividends assuming $10,000 worth of shares is acquired on 22 March 1999 (no reinvestment) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 70: Stock example: Rural Funds Group
Stock example Rural Funds Group (ASX: RFF) $2.40 Buy Price $2.30 • REIT with $770m market cap $2.20 • Diversified agricultural $2.10 assets $2.00 • 4.5% dividend yield (paid quarterly) $1.90 • 5% pa expected earnings $1.80 and dividend growth $1.70 • Inexpensive valuation May-18 Mar-18 Jul-18 Mar-19
Slide 71: Performance, including franking since inception
Ausbil Active Dividend Income Fund Performance, including franking since inception March 2019 Cash Franking Total (%) Credit Return (%) (%) Dividend return (ex buyback) 5.7 2.2 +7.9 Benchmark dividend return 3.5 1.3 +4.8 Excess dividend return (ex buyback) 2.2 0.9 +3.1 Fund return 7.2 4.4 +11.6 Benc
Slide 72: Disclaimer
DISCLAIMER Important information for presentation recipients The information contained in this presentation has been prepared for general use only and does not take into account your personal investment objectives, financial situation or particular needs. Before you make any decision about whether t
Slide 73: See the Forest, Not the Tree
2019 Investment Roadshow “See the Forest, Not the Tree” May 2019
Ausbil Investment Management — Non-Deal Roadshow (May 2019) on 6ix