BKI Investment Co. Ltd. · ASX:BKI
BKI Investment — Investor Presentation (August 2010)
37 slides from BKI Investment's investor presentation, Aug 4, 2010
Slide 1: Investor Presentation cover letter to ASX
For personal use only ABN: 23 106 719 868 Level 2,160 Pitt Street Sydney NSW 2000 Ph. (02) 9210-7000 Fax. (02) 9210-7099 4th August 2010 The Manager Company Announcements Australian Stock Exchange Limited Exchange Centre 20 Bridge Street Sydney NSW 2000 Dear Sirs Re: Investor Presentation Please fin
Slide 2: Presentation to Shareholders August 2010
For personal use only Presentation to Shareholders August 2010 1
Slide 3: Disclaimer
For personal use only Disclaimer Di l i 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 individuals financial circumstances or investment objectives. This is general investm
Slide 4: Background Information
For personal use only B k Background d Information I f ti 3
Slide 5: Background
Background g For personal use only BKI was formed on the 17th October 2003 to take over the investment portfolio of Brickworks Limited. BKI’s investment portfolio has been built on a philosophy of long term investment with a focus on Australian equities. It primarily seeks k tto iinvestt iin well-ma
Slide 6: Background
Background g For personal use only 2008 BKI becomes 1988 internally 2004 managed BKW BKI merges Establishes Share with PSI BKI takes Portfolio over HIC 2003 2007 2009 BKI acquires BKI BKI SPP BKW’s Share Renounceable Raises Portfolio Rights Issue $24.1m raises $57.0m BKI Lists on the ASX BKI Placeme
Slide 7: Board and Management
Board and Management g For personal use only Directors Robert Millner Chairman of Directors David Hall Director, Chairman of Audit Committee Alexander Payne Director, Chairman of Remuneration Committee Ian Huntley Director Chief Executive Officer Investment Committee Thomas Millner Robert Millner Al
Slide 8: BKI Full Year 2010 Result Highlights
For personal use only BKI Full Year 2010 Result Highlights 7
Slide 9: Revenues
Revenues For personal use only 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 $'000 $'000 $'000 $'000 $'000 $'000 $'000 2004 2005 2006 2007 2008 2009 2010 Total Income including dividend and trust distributions, special di id d iinterest dividends, t t andd gains/losses i /l on th the ttra
Slide 10: Operating Profits
Operating p g Profits For personal use only 25,000 20,000 15,000 10,000 5,000 0 $'000 $'000 $'000 $'000 $'000 $'000 $'000 2004 2005 2006 2007 2008 2009 2010 Net operatingg profit before special dividend income, realised and unrealised losses on investment portfolio was up 8.4% to $22.4m. 9
Slide 11: Net Profits
Net Profits For personal use only 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 $'000 $'000 $'000 $'000 $'000 $'000 $'000 2004 2005 2006 2007 2008 2009 2010 Net profit after tax attributable to shareholders was $31.2m up 34.8% on the previous corresponding period. 10
Slide 12: Earnings Per Share
Earnings g Per Share For personal use only 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2004 2005 2006 2007 2008 2009 2010 Basic as c Earnings a gs Per e SShare a e aafter te spec special a ddividend de d income co e aandd realised gains on investment portfolio was up 14.1% to 7.57cps. 11
Slide 13: Dividends Paid
Dividends Paid For personal use only $0.07 $0.06 $0.05 $0.04 $0.03 $0.02 $0.01 $0.00 2004 2005 2006 2007 2008 2009 2010 INTERIM FINAL SPECIAL The Final Dividend consists of a 2.75cps Ordinary Dividend and a 0.5cps Special Dividend, both fully franked. Key dates for Final Dividend: • Ex-Dividend Date
Slide 14: Management Expense Ratio
Management g Expense p Ratio For personal use only 0.80% 0.69% 0.71% 0.70% 0.56% 0.60% 0.46% 0.46% 0.50% 0.40% 0.31% 0 30% 0.30% 0.19% 0.20% 0.10% 2004 2005 2006 2007 2008 2009 2010 Operatingg Expenses were $1.0m as at 30 June 2010, a reduction of 29.3% on the corresponding period. BKI s Management
Slide 15: Net Tangible Assets
Net Tangible g Assets For personal use only $1.75 $1.50 $1.25 $1.00 $0.75 $0.50 $0.25 $0.00 2004 2005 2006 2007 2008 2009 2010 NTA per share before tax NTA per share after tax The Th consolidated lid t d nett assett bbacking ki before b f tax t off th the company’s ’ shares at 30 June 2010 was $1.32
Slide 16: Portfolio Valuation
Portfolio Valuation For personal use only 600,000 500,000 400 000 400,000 300,000 200,000 100,000 100 000 0 $'000 $'000 $'000 $'000 $'000 $'000 $'000 2004 2005 2006 2007 2008 2009 2010 Investment Portfolio Cash ota Portfolio Total o t o o value a ue has as increased c eased 15.2% 5 % to $55 0 $551.0
Slide 17: Portfolio Performance
Portfolio 15.0% 13.4% 13.1% BKI S&P/ASX 300 ACC INDEX Performance For personal use only 7.8% 7.8% 5.0% 4.5% 5.0% 2.6% 0.1% ‐5.0% ‐2.2% ‐5.1% ‐3.7% ‐7.0% ‐8.0% ‐10.1% ‐15.0% 6 Mths 1 Year 2 Years (pa) 3 Years (pa) 4 Years (pa) 5 Years (pa) 6 Years (pa) 5.0% BKI Portfolio oto o 4 4.5% 5% 4.3% Outperfo
Slide 18: Share Price Performance
Share Price 15.0% 14.4% 13.1% BKI S&P/ASX 300 ACC INDEX Performance For personal use only 7.4% 7.8% 5.9% 4.5% 5.0% 2.1% 0.9% 0.1% ‐5.0% ‐5.1% ‐4.5% ‐9.1% ‐8.0% ‐10.1% ‐15.0% 6 Mths 1 Year 2 Years (pa) 3 Years (pa) 4 Years (pa) 5 Years (pa) 6 Years (pa) BKI Share Price 8.0% 7 2% 7.2% Outperformance 6
Slide 19: Discount to Pre Tax NTA
Discount to Pre Tax NTA For personal use only Source: Evans & Partners “ASX Listed Investment Companies” May 2010 As at 30th June 2010, BKI’s share price was trading at a 13% discount to the Pre Tax NTA. BKI represents a good opportunity for investors to acquire assets at a discount to the Pre Tax N
Slide 20: BKI Investment Process
For personal use only BKI Investment I t tPProcess 19
Slide 21: Stock Selection Criteria
Stock Selection Criteria For personal use only Income - Dividend Yields, Franking, Pay Out Ratios. Principal Activity - Sustainable Business Model, Competitive Advantage. Debt Levels - Gearing Ratios, Net Interest Coverage. Management and Board - Ownership, Ownership Board Meeting Attendance, Histor
Slide 22: Top Investments
Top 25 Investments For personal use only A att 30th June As J 2010 1 New Hope Corporation 14 Westpac Banking Corp SPSII 2 BHP Billiton Limited 15 Metcash Limited 3 National Australia Bank 16 Coca Cola Amatil Limited 4 Commonwealth C lth B Bankk 17 TPG Telecom Tl Li Limited it d 5 Westpac Banking Cor
Slide 23: New Hope Corporation
New Hope Corporation For personal use only Income – Historical Fully Franked Dividend Yield of 2.1% 2 1% (excluding special dividends) dividends). Principal Activity - NHC produces thermal coal for the international and domestic markets from 3 mines based in Queensland. NHC also owns coal shipping p
Slide 24: New Hope Corporation
New Hope Corporation For personal use only Debt Levels – Nil. Nil Following the sale of the New Saraji Coal Deposit in September 2008 NHC paid a fully franked special dividend of approx $600m (72.75cps). Post this event NHC still holds approximately $1.4bln in cash. Following the takeover proposal o
Slide 25: Telstra Corporation
Telstra Corporation For personal use only Income - Historical Fully Franked Dividend Yield of 8.6%. 8 6% Principal Activity –TLS’s services include the provision of Telephone Lines, Mobile Services, Fixed Retail Broadband, IP & Data Access, Advertising,g Telephone p Directories and Pay TV. TLS conti
Slide 26: ARB Corporation
ARB Corporation For personal use only Income - Historical Fully Franked Dividend Yield of 3.7% 3 7% (excluding special dividends) dividends). Principal Activity - ARB manufactures, distributes and sells 4WD motor vehicle accessories and light g metal engineering g g works in Australia and over 80 co
Slide 27: Market Outlook
For personal use only M k tO Market Outlook tl k 26
Slide 28: Market Outlook
Market Outlook For personal use only • Concerns C iin major j economies i continue ti over th the hhealth lth off fifinancial i l andd economic systems (European Debt, US double-dip recession). • Local Government interaction interaction. Policies affecting major sectors including Resources, Telecomm
Slide 29: Market Outlook
Market Outlook For personal use only • General G l market k t negativity ti it iis providing idi ththe llong tterm iinvestor t with ith yett another opportunity. • It continues to be a stock pickers market. market BKI are focused on basic fundamentals and investing in companies that have: • The abil
Slide 30: Market Outlook
Market Outlook For personal use only 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2006 2007 2008 2009 2010F 2011F 2012F 2013F Income S&P/ASX 300 Dividend Yield Source: GSJBWere Market Multiples p and Growth Rates, Database Summaryy • Reduced company distributions had a significant impact on the earnings gener
Slide 31: Market Outlook
Market Outlook For personal use only Principal Activity • Negative market sentiment and consumer confidence eroded many companies competitive advantage. • Business models were put under significant pressure, pressure and consequently some failed (ABS, BNB, AFG, SFX, MFS, TIM, FEA, CPR). • Asset valu
Slide 32: Market Outlook
Market Outlook For personal use only 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 2010F 2011F 2012F 2013F Debt Levels q y Source: GSJBWere Market Multiples S&P/ASX 300 Net Debt/Equity p and Growth Rates, Database Summaryy • Investors became complacent with the level of company debt and their abili
Slide 33: Market Outlook: Management and Board
Market Outlook For personal use only M Management t and dBBoard d • During the GFC many management teams and Boards created significant wealth for shareholders, despite external headwinds. Revenue Growth NPAT Growth Dividend Growth Company Special Dividend 1H10 V's V s 1H09 1H10 V's V s 1H09 1H10 V'
Slide 34: Market Outlook
Market Outlook For personal use only 18x 16x 14x 12x 10x 8x 6x 4x 2x 0x 2006 2007 2008 2009 2010F 2011F 2012F 2013F Valuations p . Source: GSJBWere Market Multiples S&P/ASX 300 PE Multiples p and Growth Rates, Database Summaryy • On a PE basis, the S&P/ASX 300 index is currently trading inline with
Slide 35: Market Outlook
Market Outlook For personal use only 35% 25% 15% 5% ‐5% 2006 2007 2008 2009 2010F 2011F 2012F 2013F ‐15% ‐25% Earnings S&P/ASX 300 EPS Growth. Source: GSJBWere Market Multiples p and Growth Rates, Database Summaryy • EPS growth for the S&P/ASX300 index has been impacted by: • Concerns over major fin
Slide 36: The Basis for Investment
For personal use only The Th Basis B i for f Investment I t t 35
Slide 37: The Basis for Investment
The Basis for Investment For personal use only 11. Strong dividend payout ability with abundant franking credits. credits 2. High quality diversified investment portfolio. 3. Experienced Board and conservative investment team. 4. Competitive Management Expense Ratio (MER) of 0.19%. 55. Sou Soundd re
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