Ausbil Active Dividend Income Fund - Active ETF · ASX:DIVI
Ausbil Active Dividend Income Fund - Active ETF — Ausbil Investment Management — Non-Deal Roadshow (July 2016)
71 slides from Ausbil Active Dividend Income Fund - Active ETF's roadshow presentation, July 2016
Slide 1: Investment Roadshow 2016
Investment Roadshow 2016 July 2016
Slide 2: Investment Roadshow 2016 – James Harding
Investment Roadshow 2016 James Harding – Key Account Manager NSW & ACT
Slide 3: A challenging equity market
A challenging equity market Alpha for patient, long term investors Rolling 3 year Excess Returns (Gross) 10% 50% 8% 40% 6% 30% 4% 20% 2% 0% 10% -2% 0% Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Active Equity Fund Emerging Leaders Fund MicroCap F
Slide 4: Australian equities team
Australian equities team Well resourced, highly experienced PORTFOLIO CONSTRUCTION COMMITTEE PAUL XIRADIS* (18/35) JOHN GRACE* (14/29) GIAN PANDIT* (1/25) CEO / Head of Equities Co-Head of Equities Deputy Head of Equities RESEARCH ECONOMICS MICROCAP NICK CONDOLEON* (8/17) JIM CHRONIS* (2/21) TONY WA
Slide 5: Jim Chronis – Chief Economist
Investment Roadshow 2016 Jim Chronis – Chief Economist
Slide 6: Global – 2015 & Q1 2016 in review
Global – 2015 & Q1 2016 in review Financial stress • Oil and commodities collapsed • China slowed, currency devalued, large capital outflows • World growth revised lower due to emerging markets • US rate hike delay • Negative cash rates in Japan and Europe • QE programmes expanded 6
Slide 7: Financial conditions
Financial conditions High yield credit bears the brunt 7
Slide 8: US – resilient growth
US – resilient growth Energy output in decline 8
Slide 9: US – resilient growth
US – resilient growth Leading indicators support 2% GDP growth 9
Slide 10: US – resilient growth
US – resilient growth Inflation at 2% target 10
Slide 11: Europe – recovering
Europe – recovering QE3 and credit expansion Target €4.1 trillion extended to March 2017 Buying Euro €80bn per month Includes investment grade corporate bonds 11
Slide 12: China – transitioning
China – transitioning Services growing as a share of GDP, now over 50% 12
Slide 13: Global growth forecasts
Global growth forecasts Consensus versus Ausbil Real GDP Consensus Consensus Ausbil Consensus Ausbil % yoy 2015 (a) % 2016 (f) % 2016 (f) % 2017 (f) % 2017 (f) % US 2.4 2.1 2.1 ↑ 2.2 2.1 ↑ Japan 0.6 0.7 0.4 ↔ 0.3 0.3 ↔ Eurozone 1.6 1.6 1.7 ↑ 1.7 1.8 ↑ UK 2.3 1.9 1.3 ↓ 2.1 0.8 ↓ China 6.9 6.5 6.5 ↑ 6
Slide 14: Australia – gradual return to trend
Australia – gradual return to trend Private consumption drives GDP 14
Slide 15: Australia – gradual return to trend
Australia – gradual return to trend Business confidence responding to AUD & low rates 15
Slide 16: Australia – gradual return to trend
Australia – gradual return to trend Lower unemployment leads to lower savings rate 16
Slide 17: Australia – gradual return to trend
Australia – gradual return to trend Housing pipeline to sustain activity in the near term 17
Slide 18: Summary: Macroeconomic themes
Summary Macroeconomic themes GDP – United States - resilient growth at 2.1% – Europe - recovering at 1.7%, but at risk from Brexit – UK - lower GDP – China - committed to 6.5% target – Japan - at 0.4% will adopt QE and fiscal stimulus measures – Australia - gradual return to trend growth at 2.75%, u
Slide 19: Gian Pandit – Deputy Head of Equities
Investment Roadshow 2016 Gian Pandit – Deputy Head of Equities, Ausbil 130/30 Focus Fund
Slide 20: Agenda
Investment Roadshow Agenda 1. Volatility 2. Portfolio Thematics 3. 130/30 Focus Fund 20
Slide 21: Australian equity market performance
Australian equity market performance S&P/ASX200 $17,500 +61% $15,000 $12,500 $10,000 +3% $7,500 $5,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Accumulation Price Source: Factset, S&P/ASX 200 21
Slide 22: Australian equity market performance
Australian equity market performance Pockets of volatility Market Peak 6851 October 2007 +33% Market Low 3120 March 2009 -54% Source: Factset, S&P/ASX 200 22
Slide 23: Australian equity market performance
Australian equity market performance Rising volatility likely to remain ASX 200 Standard Deviation 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 2014 2015 2016 Source: Factset, S&P/ASX 200 23
Slide 24: Australian equity market performance
Australian equity market performance Widening sectoral dispersion FY 16 Relative Total Returns (%) Pharma Biotech & LS 30.1 Food Beverage & Tobacco 27.1 Transportation 24.6 Utilities 24.5 Consumer Services 23 Real Estate 21.9 Retailing 19.5 Capital Goods 17.2 Media 13.4 Health Care Equip & Services
Slide 25: Portfolio Thematics
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Slide 26: Portfolio Construction
Portfolio Construction Current Portfolio Thematics • Interest rates lower for longer − Favour yield with growth • Earnings growth remains scarce − Superior EPS growth rewarded • Overweight US earners − Prefer US $ EBIT Exposures • Underweight Banking sector − Tactical position • Energy opportunity ─
Slide 27: Interest rates lower for longer
Interest rates lower for longer Bond yields trending lower 7 Bonds: Selected 10yr yields 7 % % 6 Australia Germany UK Japan Switzerland US 6 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16 Source: Bloomberg, Macquarie Research 27
Slide 28: Interest rates lower for longer
Interest rates lower for longer Favour yield with growth 200 180 160 140 120 Infra&Utilities (relative ASX 200) 100 80 60 40 20 0 2010 2011 2012 2013 2014 2015 2016 Source: Ausbil, IRESS 28
Slide 29: Interest rates lower for longer
Interest rates lower for longer Favour yield with growth 140.00% Excess Returns SKI vs ASX 200 120.00% 100.00% Excess Returns TLS vs ASX 200 80.00% ASX 200 60.00% 40.00% 20.00% 0.00% -20.00% -40.00% 2010 2013 2011 2012 2014 2015 Source: Ausbil, IRESS 29
Slide 30: Earnings growth remains scarce
Earnings growth remains scarce Global earnings growth expectations - MSCI 150 2016 2017 140 S&P 500 bottom-up consensus 2015 EPS estimates 130 2014 2013 2009 120 2012 2008 110 2011 100 2010 90 80 70 60 50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Goldman Sachs 30
Slide 31: Earnings growth remains scarce
Earnings growth remains scarce Australian earnings growth expectations – S&P/ASX200 15.0 10.0 5.0 FY13 FY 13 = -1.6 FY14 FY 14 = 5.8 0.0 FY15 FY 15 = -2.9 FY16 FY 16 = -11.2 -5.0 FY17 FY 17 = +6.0 FY18 FY 18 = +8.7 -10.0 -15.0 Feb-13 Feb-14 Feb-15 Feb-16 Aug-12 Aug-13 Aug-14 Aug-15 Source: Morgan St
Slide 32: Earnings growth remains scarce
Earnings growth remain scarce Superior EPS growth rewarded 600 500 TCL 400 SYD 300 ASX200 200 100 0 2010 2011 2012 2013 2014 2015 2016 Source: Ausbil, IRESS 32
Slide 33: Earnings growth remains scarce
Earnings growth remains scarce Superior EPS expected $60.00 • Port Kembla restructured at low $50.00 point of the cycle • Well-timed US acquisition $40.00 • Colorbond volumes strong $30.00 • Significant earnings upside above consensus $20.00 Buy Buy $10.00 $0.00 2006 2007 2008 2009 2010 2011 2012 20
Slide 34: Aristocrat Gaming and Leisure
Aristocrat Gaming and Leisure Superior EPS rewarded FY16 EBIT EPS Consensus Trend 0.700 650 1.00 X 600 0.650 0.95 550 0.90 0.600 500 450 0.85 X 0.550 400 0.80 350 0.75 0.500 300 0.70 250 0.450 200 0.65 0.400 ALL FY16 EBIT AUD ALL FY16 EBIT USD AUDUSD X Ausbil FY16 X Ausbil FY17 Source: Factset, Ausb
Slide 35: Aristocrat Gaming and Leisure
Aristocrat Gaming and Leisure Superior EPS rewarded $16.00 • Strong market share gains $14.00 across all regions Buy $12.00 • Significant revenue synergies $10.00 Buy from VGT acquisition $8.00 • Online product growing strongly $6.00 • Multi-year earnings upgrade cycle continues $4.00 $2.00 $0.00 20
Slide 36: Favour offshore earning companies
Favour offshore earning companies ASX200 versus ‘Offshore Earners’ 300 250 Offshore Earners 200 ASX 200 150 100 50 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Apr-11 Jan-12 Apr-12 Jan-13 Apr-13 Jan-14 Apr-14 Jan-15 Apr-15 Jan-16 Apr-16 Source: Goldman Sachs 36
Slide 37: Treasury Wine Estates
Treasury Wine Estates Australian wine exports +50% in 12 months EPS Consensus Trend 0.400 0.380 X 0.360 0.340 0.320 0.300 X 0.280 0.260 0.240 0.220 0.200 FY16 FY17 X Ausbil FY16 X Ausbil FY17 Source: Department of Foreign Affairs and Trade, ‘Composition of Trade’, 30 December 2015 37
Slide 38: Treasury Wine Estates
Treasury Wine Estates Asia driving sales and earnings $10.00 • Transition continues from agricultural to brand-led, marketing company $8.00 • Chinese wine market – fastest growing globally, driven by rising Buy middle class $6.00 • Asian earnings growth > 100% represents ~30% of group earnings $4.00
Slide 39: Bank sector review
Bank sector review Tactically underweight due to earnings and dividend risk • Margin growth declining • Low point of the bad debt cycle • Dividend payout ratios under pressure • Ongoing capital requirements 39
Slide 40: Bank sector review
Bank sector review Tactically underweight due to earnings and dividend risk BDD expense provisioning Mid cycle EPS growth forecasts 2.0% 2% 1.8% 2% 1.6% 1.4% 1% 1.2% 1% 1.0% 0% 0.8% 0.6% -1% 0.4% -1% 0.2% 0.0% -2% 1H04A FY16E FY17E FY18E 1H02A 2H02A 1H03A 2H03A 2H04A 1H05A 2H05A 1H06A 2H06A 1H07A 2H
Slide 41: Bank sector
Bank sector Stock prices reflect earnings and dividend risk Source: Credit Suisse, 12-mth forward PE relative to Industrial (ex-banks) 41
Slide 42: Energy opportunity
Energy opportunity Oil price has bottomed • Global demand growing and US supply declining • Capex cuts > $500bn over 2014-16 • Global field decline of 5-7% p.a. compounds supply issues • Price recovery to continue • Market returning to balance in 2H 2016 42
Slide 43: Energy opportunity
Energy opportunity Rig count collapsing, oil price rising 1,800 10 mb/d 1,500 9 mb/d 1,200 8 mb/d 900 7 mb/d 600 6 mb/d 300 5 mb/d US oil rigs US oil output (rhs) 0 4 mb/d Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Source: Bloomberg 43
Slide 44: Energy opportunity
Energy opportunity Consensus forecasting significant recovery $120 $100 $80 $60 $40 $20 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Actual Consensus Source: Factset, Ausbil, Oil – Brent (US$/bbl) 44
Slide 45: Energy opportunity
Energy opportunity Oil price leverage $18.00 • Significant leverage to oil price recovery $16.00 • Break-even at oil prices ~$32/bbl $14.00 • Strategically important positioning in $12.00 Asian LNG space $10.00 • Gas projects producing above designed capacity $8.00 $6.00 $4.00 $2.00 2006 2007 2008 2
Slide 46: Ausbil 130/30 Focus Fund capability
Ausbil 130/30 Focus Fund capability
Slide 47: Long short (130/30) strategies
Long short (130/30) strategies Alpha generation & capital preservation • 130% long offset by 30% shorts to retain 100% net equity Alpha exposure (beta 1) Long (Investor skill) • Expanded opportunity set to generate alpha – Negative views rewarded through shorting – Positive views rewarded through in
Slide 48: Long short (130/30) strategies
Long short (130/30) strategies Don’t be constrained by the index 48
Slide 49: An active approach to create alpha
$4.00 $6.00 $8.00 $10.00 $14.00 $16.00 $18.00 $20.00 $12.00 Jan-08 $2.00 +3 Apr-08 Jul-08 +1 +2 Oct-08 Jan-09 Apr-09 Jul-09 +1 Oct-09 Jan-10 +3 Apr-10 Santos price movement Jul-10 Oct-10 Jan-11 +1 Apr-11 Jul-11 +3 Oct-11 Jan-12 0 Apr-12 +2 Jul-12 (Conviction Score) Oct-12 Jan-13 Apr-13 Jul-13 0 An a
Slide 50: Ausbil 130/30 Focus Key advantages
Ausbil 130/30 Focus Key advantages • Proven track record – Alpha generation through all market environments • Unconstrained style – Focus on the company and the earnings they represent • Active management – Prudent management of the overweights and underweights to capture value • Alpha generation ou
Slide 51: Short idea – SGM
Short idea – SGM Scrap price decline, earnings downgrade Chinese Steel Exports & Scrap Price EPS Consensus Trend 120 $800 1.2 100 $700 1.0 80 $600 0.8 60 $500 40 $400 0.6 20 $300 0.4 X 0 $200 0.2 -20 $100 X -40 $- 0.0 Jun-15 Feb-16 Aug-15 Dec-15 Oct-15 Apr-15 Apr-16 Jun-02 Jun-05 Jun-08 Jun-11 Jun-1
Slide 52: Short idea – SGM
Short idea – SGM Metals & electronics recycling company $14.00 $13.00 $12.00 Short $11.00 Short $10.00 $9.00 Bought back $8.00 $7.00 $6.00 $5.00 Jun-15 Jul-15 Jan-16 Jun-16 Mar-15 Mar-16 Feb-15 Feb-16 Aug-15 Sep-15 Nov-15 Dec-15 Apr-15 May-15 Oct-15 Apr-16 May-16 Source: IRESS. 2016. IRESS Market Te
Slide 53: Short idea – SPO
Short idea – SPO Mining capex decline, earnings downgrade Mining Capex (% GDP) EPS Consensus Trend 0.17 0.16 0.15 0.14 0.13 X 0.12 0.11 X 0.10 Jul-15 Jun-15 Jan-16 Feb-16 Sep-15 Dec-15 Apr-15 Oct-15 Apr-16 FY16 FY17 X Ausbil FY16 X Ausbil FY17 Source: EPS Consensus Trend, FACTSET, 2016. FactSet Rese
Slide 54: Short idea – SPO
Short idea – SPO Integrated services company $3.00 $2.50 Short $2.00 $1.50 Bought back $1.00 $0.50 Jul-15 Jun-15 Jan-16 Jun-16 Feb-15 Mar-15 Feb-16 Mar-16 Aug-15 Sep-15 Nov-15 Dec-15 May-15 Oct-15 May-16 Apr-15 Apr-16 Source: IRESS. 2016. IRESS Market Technology [Online] Accessed 19 April 2016 54
Slide 55: Ausbil 130/30 Focus Fund positioning
Ausbil 130/30 Focus Fund positioning Major sectoral tilts at June 2016 Cash 3.94 Telecommunications 2.51 Consumer Staples 1.36 Utilities 1.11 Healthcare 1.04 IT 0.34 LPTs -0.28 Materials -0.54 Consumer Discretionary -0.7 Industrials -0.76 Energy -1.29 Financials (x LPT) -6.72 -8 -6 -4 -2 0 2 4 6 55
Slide 56: Ausbil 130/30 Focus Fund performance history
Ausbil 130/30 Focus Fund Performance history (pre fees) versus benchmark Performance to 130/30 S&P/ASX200 Value Added 30 June 2016 Focus^ Accum Index % % % 3 Months 7.5 3.9 +3.6 6 Months 3.7 1.1 +2.6 9 months# 13.9 7.6 +6.3 1 Year 7.2 0.6 +6.6 3 Years* 11.6 7.7 +3.9 5 Years* 9.7 7.4 +2.3 Inception*
Slide 57: Summary and conclusion
Summary and conclusion …actively managing the confusion • Interest rates to remain lower for longer • Favour yield with growth and superior EPS • There are opportunities in the energy sector • Overweight US earners that deliver growth 57
Slide 58: Tony Waters – Portfolio Manager, MicroCap
Investment Roadshow 2016 Tony Waters – Portfolio Manager, MicroCap
Slide 59: Positioning with Existing Business
Positioning with Existing Business Accessing market capitalisation bands Active Equity Geared Equity 130/30 Focus Fund Emerging Leaders MicroCap Top 50 85% 0% 0% Mid Cap 50 10% 70% 0% 100–200 5% 30% 0% 200+ 0% 0% 100% 59
Slide 60: Business Evolution
Business Evolution The “sweet-spot” for investment INCEPTION HIGH LOW RISK MATURITY DECLINE RISK GROWTH GROWTH Sales Time 60
Slide 61: Outlook for Small and Microcaps
Outlook for Small and Microcaps Opportunities for stock pickers • Often asked: “is now a good time to invest in Micro Caps?” • Valuation: industrial small similar multiples to large caps but with better metrics • Focus on stocks with earnings, high returns on tangible capital and net cash balance sh
Slide 62: Market capitalisation bands
Market capitalisation bands Similar PE’s – better growth rates in smaller caps 30% 30% 24 21 25% 18X 18 16X 15X 20% 15 12 15% 10% 9 10% 8% 6 5% 3 0 0% Top 50 Mid Cap Small 50 Ords PE FY17 EPS Growth FY17 Source: Ausbil calculation based on consensus broker earnings forecasts, 15 July 2016 62
Slide 63: MicroCap Themes
MicroCap Themes Key themes from February Reporting Season Australia Following global sell off in industrial growth stocks – CYTD Small Resources + 54.0% – CYTD in Small Industrials +0.5% AUD stabilising – Offsetting outperformance [offshore earning companies] Volatility increased with downtrodden re
Slide 64: Ausbil MicroCap Historical Sector Weights
Ausbil MicroCap Historical Sector Weights Actively manage portfolio over the investment cycle MicroCap Sector Weights 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Feb 12 Feb 15 Feb 10 Feb 11 Feb 13 Feb 14 Feb 16 Jun 11 Jun 12 Jun 14 Jun 15 Jun 10 Jun 13 Oct 10 Oct 11 Oct 12 Oct 13 Oct 14 Oct 15 Resou
Slide 65: Ausbil MicroCap Fund
Ausbil MicroCap Fund Current major sectoral tilts versus benchmark universe Sectors Portfolio Weight Benchmark Active Tilt % % % Media 14.7 0.6 14.1 Retailing 13.2 2.7 10.5 Software & Services 20.6 14.3 6.3 Food & Drug Retailing 6.1 0.0 6.1 Utilities 8.3 4.4 4.0 Real Estate Investment Trusts 1.5 7.0
Slide 66: Micro Cap opportunities
Micro Cap opportunities IPOs Turnarounds Reinvest for growth Global scale 66
Slide 67: Stock example: Infigen
Stock example: Infigen Portfolio of wind farms $1.20 • What they do: Infigen (IFN) owns a portfolio of wind farms. $1.00 • Why we like it: The company is heavily indebted but has reduced net $0.80 debt with the sale of its US assets. The Turnbull government has reaffirmed its support for the $0.60 R
Slide 68: Stock example: RCG
Stock example: RCG Leading retail footwear business $2.00 • What they do: RCG is a diversified retail footwear business with The Athlete’s Foot, Skechers and $1.60 Platypus retail concepts. • Why we like it: RCG has excellent $1.20 management with a great track record. Skechers and Platypus are high
Slide 69: Stock example: Global Traffic Network
Stock example: Global Traffic Network Leading supplier of traffic information $2.20 • What they do: Provide regular traffic reports across Australia's leading radio networks $2.10 • Why we like it: High free cash generation in Australia with significant pricing power. $2.00 Replicating the Australia
Slide 70: Stock example: Reject Shop
Stock example: Reject Shop Discount variety retailer $16.00 • What they do: • The Reject Shop (TRS) is a discount variety retailer. $14.00 • Why we like it: The company has $12.00 not had meaningful same store sales growth for many years and $10.00 grew store count too quickly. New management has do
Slide 71: 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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