Ausbil Active Dividend Income Fund - Active ETF · ASX:DIVI
Ausbil Active Dividend Income Fund - Active ETF — Ausbil Investment Management — Non-Deal Roadshow (May 2018)
73 slides from Ausbil Active Dividend Income Fund - Active ETF's roadshow presentation, May 2018
Slide 1: Ausbil Investment Roadshow 2018: Rising volatility – risks and opportunities
Ausbil Investment Roadshow 2018 “Rising volatility – risks and opportunities” May 2018
Slide 2: Mark Knight – Head of Distribution
Ausbil Investment Roadshow 2018 “Rising volatility – risks and opportunities” May 2018 Mark Knight – Head of Distribution
Slide 3: Investment performance
Investment performance Active process - strong results over the long term April 2018 3 months (% pa) 6 months (% pa) 1 year (% pa) 5 years (% pa) Inception* (% pa) Return Excess Return Excess Return Excess Return Excess Return Excess Active Equity 2.0 +1.7 6.5 +3.1 11.2 +5.5 9.7 +2.2 11.3 +3.1 Geare
Slide 4: Ausbil MicroCap
Ausbil MicroCap Opportunities ex 200 • Specialist investment team • Excellent track record • Proven process • Spare capacity • SQM – “Superior” A gross investment return of 30% for the year ending April versus 25% for the benchmark* A gross investment return of 34% since inception versus 2% for
Slide 5: Ausbil Active Sustainable Equity
Ausbil Active Sustainable Equity Process summary STAGE 1: Macroeconomic Analysis STAGE 3: Stock STAGE 2: Sectoral Selection Analysis Fundamental stock analysis integrated with ESG & quantitative ranking STAGE 3: Stock Selection STAGE 4: Portfolio i) ESG filter ii) Stock ranking Construction Refined
Slide 6: MacKay Shields Unconstrained Bond Fund
MacKay Shields Unconstrained Bond Fund Seeking the highest absolute, risk adjusted return • Adds alpha through top-down asset allocation and bottom-up credit research • Dynamic asset allocation: different fixed income sectors outperform in different environments • Seeks to protect capital at times o
Slide 7: Your speakers
Your speakers Experienced investment professionals Jim Chronis Paul Xiradis Gian Pandit Mason Willoughby- Chief Economist Executive Chairman, Deputy Head of Thomas Head of Equities Equities Portfolio Manager Balanced Fund Active Equities 130/30 Focus MicroCap Concentrated Equities Active Sustainable
Slide 8: Global outlook
Ausbil Investment Roadshow 2018 Global outlook Jim Chronis Chief Economist
Slide 9: Global forecasts - synchronised & accelerating
Global forecasts - synchronised & accelerating 3.9% growth is historically impressive Real Estimated Average Official Ausbil(f) Official Ausbil(f) GDP Potential Post Crisis Sector 2018 sector 2019 % yoy GDP 2008-2016 Consensus % Consensus % April 2018 % % 2018 (f) 2019 (f) % % United States 1.8 1.3
Slide 10: Global growth - synchronised & accelerating
Global growth - synchronised & accelerating Inflationary impulse is on the horizon, costs are rising 10 Source: Factset, Ausbil
Slide 11: US - fiscal boom
US - fiscal boom Larger deficits from tax cuts and budget deal Budget deal would cement return of trillion-dollar deficits 11 Source: CRFB calculations based on Congressional Budget Office data
Slide 12: US - fiscal boom
US - fiscal boom Capex investment lift next phase of growth 12 Source: Factset, Ausbil
Slide 13: US - fiscal boom
US - fiscal boom Inflation overshoot new focus for Fed policy 13 Source: Factset, Ausbil
Slide 14: Europe - motoring ahead
Europe - motoring ahead GDP accelerates to 2.7% Q4 from 3-yr average 2.1% 14 Source: Factset, Ausbil
Slide 15: China - "high quality" growth long term
China - “high quality” growth long term Exporter of inflation 15 Source: Factset, Ausbil
Slide 16: Japan - positive output gap
Japan - positive output gap Low unemployment, raising wages and inflation expectations 16 Source: Factset, Ausbil
Slide 17: Australia - trend growth
Australia - trend growth Business is the driver, indebted households furloughed Drivers of Real GDP Growth annual contributions by sector 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 1-Dec-15 1-Jun-16 1-Dec-16 1-Jun-17 1-Dec-17 -2.0 17 Source: Ausbil
Slide 18: Australia - trend growth
Australia - trend growth Wages to rise as unemployment rate falls to 5.1% 18 Source: Factset, Ausbil
Slide 19: Ausbil model - Australian inflation
Ausbil model - Australian inflation Forecast to be back in the range 2-3% 12% 10% 8% 6% 4% 2% 0% -2% 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 Actual Forecast 19 Source: Ausbil
Slide 20: Reflation theme ongoing
Reflation theme ongoing Global Accelerating synchronised global growth • Rising input costs and inflation Global cash rates and bond yields higher • Quantitative tightening - US480bn 2018, 600bn 2019 & 2020 • ECB bond buying tapering to end Q3 2018 Expansionary fiscal policy • US tax and $1.5
Slide 21: Reflation theme ongoing
Reflation theme ongoing Australia GDP growth 2.7-3% Unemployment rate lower to 5.1% Expect income tax cuts for Budget 2018/19 Core inflation 2-3% Cash rate to move higher AUD currency - range 72 to 78c, closes at 75c Risk? A change of government 21
Slide 22: Ausbil Investment Roadshow 2018
Ausbil Investment Roadshow 2018 “Rising volatility – risks and opportunities” Paul Xiradis Gian Pandit Executive Chairman Deputy Head of Equities Chief Investment Officer Head of Equities
Slide 23: Australian equity market
Australian equity market Broadening of earnings EPS Growth (%) 16 2016 2017 2018 2019 FY17 = +12.5% 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 FY16 = -12.6% -13 -14 -15 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Apr-2018 Feb-201
Slide 24: Australian equity market
Australian equity market Broadening of earnings EPS Growth (%) 16 2016 2017 2018 2019 15 14 13 12 11 10 FY18 = +8.0% 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13 -14 -15 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Apr-2018 Feb-2018 Source: Ausbi
Slide 25: Australian equity market
Australian equity market Broadening of earnings EPS Growth (%) 16 2016 2017 2018 2019 15 14 13 12 11 10 FY19 = +8.4% 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13 -14 -15 Aug-2013 Feb-2014 Aug-2014 Feb-2015 Aug-2015 Feb-2016 Aug-2016 Feb-2017 Aug-2017 Apr-2018 Feb-2018 Source: Ausbi
Slide 26: Australian equity market: valuation is not stretched
Australian equity market Valuation is not stretched % yoy X 120 Market EPS growth (lhs) PE ratio on one year forward EPS (rhs) 24 PE ratio average of low inflation era 100 20 80 14.6 16 60 40 12 20 8.0 8.4 8 12.5 0 4 -12.6 -20 Forecast -40 0 1988 1992 1996 2000 2004 2008 2012 2016 Source: Ausbil, Ci
Slide 27: Australian equity market
Australian equity market Consensus expectations for EPS growth and P/Es EPS EPS Ausbil* PE PE Growth Growth EPS April 2018 FY 2018 (f) FY 2019 (f) FY 2018 (f) FY 2019 (f) Growth X X % % FY19 *(f) % MARKET 15.9 14.6 +8.0 +8.4 Financials 13.1 12.4 +1.2 +6.2 REITS 15.6 15.0 +3.9 +4.3 Industrials 19.7 1
Slide 28: Australian equity market
Australian equity market High PE stocks relatively expensive Now 14 14x 13 12 11 Average since 10 2003 9x 9 8 7 6 5 Average dispersion since 2003 between high vs low PE stocks Current dispersion between high vs low PE stocks Source: Ausbil, Deutsche Bank, IBES estimates 28
Slide 29: Australian equity market
Australian equity market Volatility is creating opportunities US and Australian equity volatility Source: Factset, Ausbil 29
Slide 30: Market drivers for FY2019
Market drivers for FY2019 Outlook for key sectors • Bond proxies • Overseas earners • Domestic consumer • Resources and energy • Banks • Infrastructure activity 30
Slide 31: Bond proxies
Bond proxies The bond rally is over 700 Underweight Infrastructure REITs Utilities ASX 200 600 500 400 300 200 100 0 Jan 2009 Oct 2009 Jul 2010 Apr 2011 Jan 2012 Oct 2012 Jul 2013 Apr 2014 Jan 2015 Oct 2015 Jul 2016 Apr 2017 Jan 2018 Source: Ausbil, UBS 31
Slide 32: Bond proxies
Bond proxies The bond rally is over 18 Underweight 4 17 P/E (LHS) 15-Yr average (LHS) US 10yr (RHS) 16 15 3 Av .forward P/E 14 13 12 2 11 10 9 1 2009 2010 2011 2012 2013 2014 2015 2016 Source: Goldman Sachs, Ausbil 32
Slide 33: Bond proxies
Bond proxies The bond rally is over 18 Underweight 4 Further 17 P/E (LHS) 15-Yr average (LHS) US 10yr (RHS) Underweight 16 15 3 Av .forward P/E 14 13 12 2 11 10 9 1 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Goldman Sachs, Ausbil 33
Slide 34: Bond proxies
Bond proxies The bond rally is over 18 4 2020 Underweight 17 Further P/E (LHS) 15-Yr average (LHS) US 10yr (RHS) Underweight 16 Further Underweight 15 3 Av .forward P/E 14 13 12 2 11 10 9 1 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Goldman Sachs, Ausbil 34 Bond Proxy = REITs, Utiliti
Slide 35: Offshore earners
Offshore earners Superior earnings delivers outperformance 70% 61% Total return FY18 EPSg 60% 50% 45% 39% 40% 30% 30% 22% 20% 20% 11% 10% 5% 0% Market -10% -20% -20% -30% Source: Ausbil, Bloomberg, Factset 35
Slide 36: Offshore earners
Offshore earners Superior earnings delivers outperformance 70% 61% Total return FY18 EPSg FY19 EPSg 60% 50% 45% 39% 40% 30% 30% 22% 20% 20% 11% 10% 5% 0% Market -10% -20% -20% -30% Source: Ausbil, Bloomberg, Factset 36
Slide 37: Domestic consumer
Domestic consumer The pressure continues… % 800 9 Cost of living (LHS) Wage growth (%) (RHS) index 8 700 7 600 6 500 5 400 4 3 300 2 200 1 100 0 0 -1 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Ausbil, Morgan Stanley 37
Slide 38: Domestic consumer
Domestic consumer …discretionary consumption is falling 45% Share of total nominal consumption 44% 43% 42% 41% 40% 39% 38% 37% 36% Discretionary Consumption = Total Consumption less Food, Education, Health, Transport, Insurance and Rent 35% 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Slide 39: Domestic consumer
Domestic consumer Household leverage remains a headwind 180 % of nominal GDP Household debt to GDP 150 Japan Euro Area United Kingdom Australia United States 120 90 60 30 0 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Source: Ausbil, UBS 39
Slide 40: Domestic consumer
Domestic consumer Household debt at all time high 225 % 200 Household debt-income (LHS) Household debt-income: adjusted for mortgage offset accounts (LHS)* 175 150 125 100 75 50 25 0 59 64 69 74 79 84 89 94 99 04 09 14 19 Source: Ausbil, UBS 40 *Latest UBS estimate
Slide 41: Domestic consumer
Domestic consumer Australian house prices are at risk 7 22 Ratio % Dwelling price to income ratio (LHS)* Mortgage rate (RHS)** 6 18 5 14 4 10 3 6 2 2 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 Source: Ausbil, UBS. *UBS latest estimate. UBS estimate of ratio of dwelling price to average househol
Slide 42: Resources – metals and mining
Resources – metals and mining Commodities prices have bottomed 275 Bloomberg Commodity ex-Precious Metals Index 250 225 200 175 150 125 100 75 50 2001 2003 2005 2007 2009 2011 2013 2015 Source: Ausbil, Bloomberg 42
Slide 43: Resources – metals and mining
Resources – metals and mining Commodities prices have bottomed 275 Bloomberg Commodity ex-Precious Metals Index Ausbil 250 Overweight Resources 225 200 175 150 125 100 75 February 2016 to April 2018: +21% 50 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2018 2017 20
Slide 44: Resources – metals and mining
Resources – metals and mining Commodities prices have bottomed 125 120 115 110 105 February 2016 to April 2018: +21% 100 Source: Ausbil, Bloomberg 44
Slide 45: Resources – metals and mining
Resources – metals and mining Chinese capacity cuts supportive 1200 85% Steel capacity 1140 Utilisation rate (RHS) 1080 80% 1020 Mt 960 75% 900 840 70% 780 720 65% 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E Source: Ausbil, Bloomberg 45
Slide 46: Iron ore cost curve
Iron ore cost curve Lower costs are boosting free cashflow Source: Ausbil, Fortescue Metals Group 46
Slide 47: Iron ore cost curve
Iron ore cost curve Lower costs are boosting free cashflow Source: Ausbil, Fortescue Metals Group 47
Slide 48: Resources – metals and mining
Resources – metals and mining Free cashflow is booming (BHP RIO FMG S32) A$ b $50 Negative 15 Positive $40 Forecast 35 Additional $30 29 27 29 26 25 24 21 $20 17 16 15 15 15 12 12 $10 6 5 5 5 2 $- -4 -7 $(10) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
Slide 49: Resources – metals and mining
Resources – metals and mining Free cashflow is booming (BHP RIO FMG S32) A$ b $50 A$146b A$40b A$159b 2000 – 2011 2012 - 2016 15 2017 - 2021 $40 Negative 35 Positive 29 $30 Forecast 27 26 25 Additional 24 21 $20 17 16 15 15 15 29 12 12 $10 6 5 5 5 2 $- -4 -7 $(10) 2000 2001 2002 2003 2004 2005 2006
Slide 50: Resources – energy
Resources – energy Global oil inventory drawdowns supporting oil prices -3,200 Brent oil ($ / bbl) 140 Global oil inventory estimates (b bbl) (inverse) -3,300 120 -3,400 100 -3,500 80 -3,600 -3,700 60 -3,800 Global oil inventory estimate (b bbl) (LHS) (inverse) Oil price 40 -3,900 20 -4,000 -4,100 0
Slide 51: Resources – energy
Resources – energy Free cashflow is strong A$ b $1.5 Negative Positive 1.0 1.0 $1.0 0.9 Forecast 0.7 $0.5 0.3 $0.0 -$0.5 -$1.0 -0.9 -$1.5 -1.5 -$2.0 2014 2015 2016 2017 2018 2019 2020 Source: Ausbil, Bloomberg 51
Slide 52: Resources – commodity prices
Resources – commodity prices Spot prices higher than consensus… 120% 111% Negative 100% Positive 80% 76% 60% 40% 24% 25% 23% 20% 20% 14% 13% 9% 6% 4% 1% 0% -2% -8% -20% Source: Ausbil, Bloomberg 52
Slide 53: Resources – commodity prices
Resources – commodity prices …creating potential eps upside 180 Index Index 180 Resources (metals & mining) + Energy relative to the market 160 Impact of spot prices 160 on EPS 140 140 120 120 100 100 80 80 60 60 12m fwd eps relative to market Share price vs market 40 40 20 20 03 05 07 09 11 13 15 1
Slide 54: Bank sector
Bank sector Earnings pressure, relative price weakness 10 102 ASX 200 Banks vs Market (LHS) ASX 200 Banks EPS (RHS) 101 5 100 0 99 -5 98 97 -10 96 -15 95 -20 94 -25 93 Source: Ausbil 54
Slide 55: Banks
Banks What drives Bank earnings Revenues (Loan volumes) Profitability (Return of Assets – ROA) 55
Slide 56: Revenues
10 15 20 (%) 25 0 5 -5 10 15 20 (%) 25 0 5 1995 1995 1996 1996 Source: Ausbil, UBS 1997 1997 1998 1998 Revenues 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 Sector Revenue Growth (%) System Housing Credit Growth 2004 2004 2005 2005 2006 2006 2007 2007 Consensus 2008 2008 2009 2009 2010 2010 201
Slide 57: Profitability
20 40 60 80 0 100 120 bps 140 1.5 2.0 2.5 3.0 (%) 4.0 3.5 1993 1993 Source: Ausbil 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 Profitability 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 Sector Net Interest Margin (%) 2004 2004 2005 2005 2006 2006 Sector Bad and Doubtful Debts charge (bps)
Slide 58: Bank sector
(%) -5 0 5 -15 -10 10 15 20 (%) 25 10 12 14 16 18 20 22 1993 1995 1994 1996 Source: Ausbil, UBS 1995 1997 1996 1998 1997 1999 1998 Bank sector 2000 1999 2001 2000 2002 2001 2003 Sector EPS growth (%) 2002 Sector Return on Equity (%) 2004 2003 2005 2004 2005 2006 2006 2007 2007 2008 2008 2009 2009 20
Slide 59: Domestic infrastructure
Domestic infrastructure Significant pipeline of work and more coming Source: Ausbil 59
Slide 60: Active Equity (large cap) strategy
Active Equity (large cap) strategy Key portfolio themes and holdings Offshore earners Resources – metals and mining Resources – energy Infrastructure spend 60
Slide 61: Emerging Leaders (ex 50) strategy
Emerging Leaders (ex 50) strategy Key portfolio themes and holdings Offshore earners Resources – metals & mining Resources – energy Infrastructure spend 61
Slide 62: Summary
Summary Key messages • Synchronised global growth sustained by fiscal spend • Interest rates and inflation higher • FY2019 will deliver positive earnings growth • Volatility is back and presents more opportunities for active managers 62
Slide 63: Ausbil Investment Roadshow 2018
Ausbil Investment Roadshow 2018 “Rising volatility - risks and opportunities” May 2018 Mason Willoughby-Thomas Portfolio Manager, MicroCap Fund
Slide 64: Ausbil MicroCap Fund (ASX 200-300 bias)
Ausbil MicroCap Fund (ASX 200-300 bias) Under-researched “sweet spot” Traditional Ausbil Traditional Small Cap MicroCap MicroCap 100-200 bias Fund 200-300 bias Focus 300+ bias 64
Slide 65: The microcap space
The microcap space Key portfolio management considerations • Wary of extreme earnings multiples – valuations matter • Focus on companies with structural multi-year earnings drivers • Strong quality focus – ROIC, cash flow, balance sheet, management • Preference for organic over acquisition driven gr
Slide 66: Valuation and EPS
Valuation and EPS The outlook for ex 200 EPS Growth IBES Consensus 25% • Small caps still offering a superior growth 20% outlook vs larger peers for only a modest 15% PE premium. 10% 5% • Macro conditions supportive 0% FY18 FY19 FY20 CAGR • Cost and availability of capital for fast Small Ordinaries
Slide 67: Market drivers for FY2019
Market drivers for FY2019 Outlook for sectors (ex 200) • Resources (note: electric motor vehicle) • Infrastructure activity • Offshore earners • Information Technology (including fintech) 67
Slide 68: Resources: Sino Gas
Resources Sino Gas - strategic exposure to Chinese gas demand $0.20 • What they do: equity interests in two production sharing contracts in China $0.18 $0.16 • Why we like it: unique exposure to a large and highly strategic natural gas $0.14 resource at a time of rapidly $0.12 escalating demand $0.1
Slide 69: Infrastructure: Emeco
Infrastructure Emeco - operational and financial turnaround $0.35 • What they do: heavy earth equipment rental and maintenance $0.30 $0.25 • Why we like it: exposure to the resource and infrastructure sectors $0.20 as well as an operational and $0.15 financial turnaround $0.10 • Outlook: strong posi
Slide 70: Offshore earner: Nearmap
Offshore earner Nearmap - unique exposure to a growth industry $1.20 • What they do: capture high $1.10 resolution aerial images using $1.00 proprietary camera systems $0.90 • Why we like it: unique exposure to $0.80 an evolving and growing industry $0.70 • Outlook: embarking on a measured $0.60 exp
Slide 71: Ausbil MicroCap (ex 200) strategy
Ausbil MicroCap (ex 200) strategy Key portfolio themes and holdings Resources Infrastructure Offshore Earners Tech/IT Services/AI 71
Slide 72: The microcap (ex 200) space
The microcap (ex 200) space Summary • Earnings outlook attractive and valuations are relatively inexpensive • Overall macroeconomic conditions remain supportive • Volatility is expected to continue to rise • Certain sectors and stocks are under-researched (“We unearth the unsung”) • The environment
Slide 73: 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
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