Polar Capital Technology Trust PLC · LSE:PCT
Polar Capital Technology Trust — Shareholder Meeting (September 2015)
48 slides from Polar Capital Technology Trust's shareholder meeting presentation, Sep 9, 2015
Slide 1: AGM Presentation
AGM Presentation 9th September 2015 This presentation is for non-US investor use only
Slide 2: Results As At 30 April 2015
Results As At 30 April 2015 Year ended Year ended Change 30/04/14 30/04/15 (y/y) Net Assets £606,633,000 £793,019,000 + 30.7% NAV per ordinary share 458.40p 599.25p + 30.7% Price per ordinary share 442.00p 592.00p + 33.9% Benchmark Change + 29.5% Ordinary shares in issue 132,336,159 132,336,159 -- S
Slide 3: PCT As At 28 August 2015
PCT As At 28 August 2015 Year ended Year ended Change As at Change 30/04/14 30/04/15 (y/y) 28/08/15 (y/y) Net Assets £606,633,000 £793,019,000 + 30.7% £752,193,815 +9.1% NAV per ordinary share 458.40p 599.25p + 30.7% 569.15p +9.1% Price per ordinary share 442.00p 592.00p + 33.9% 564.50p +14.9% Bench
Slide 4: Full Year Review
Full Year Review DJ World Technology vs. FTSE World TR since Apr 20141 • Global equities (FTSE World + 18.2%) added to their post 2008 gains as PE expansion once again outweighed negative revisions to global growth • Pronounced US dollar strength (+10% vs. GBP) significantly augmented returns • Tech
Slide 5: Full Year Review
Full Year Review US technology small caps vs. large caps since Apr 20141 • Small-cap US technology stocks underperformed modestly during the year (30.9% vs. 32.3%) with 2H strength just failing to offset first half weakness • NAV performance (+30.7%) exceeded the benchmark by 1.2% • New technology c
Slide 6: Style Headwinds Abating
Style Headwinds Abating US technology small caps vs. large caps: 2009 - Present Small-caps outperforming Small-caps underperforming Source: Bloomberg, 2 September 2015. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 6
Slide 7: Technology: Undemanding Valuations
Technology: Undemanding Valuations Absolute sector valuations (PE): 1982 - Present Source: Ned Davis, 28 August 2015. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made withi
Slide 8: Technology: Undemanding Valuations
Technology: Undemanding Valuations Relative sector valuations (PE): 1982 - Present Source: Ned Davis, 28 August 2015. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made withi
Slide 9: Revisiting Our New Cycle Thesis
Revisiting Our New Cycle Thesis 2010 2011 2012 2013 Delivering IT Public clouds Smartphones ‘Big data’ as a service mass production mass adoption new (cheap) tools Source: Polar Capital. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 9
Slide 10: Revisiting Our New Cycle Thesis
Revisiting Our New Cycle Thesis Source: Polar Capital. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 10
Slide 11: Deflation: Cost Of Computing
Deflation: Cost Of Computing The cost of 1m transistors Source: KPCB, Deloitte May 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 11
Slide 12: Deflation: Cost Of Storage
Deflation: Cost Of Storage The cost of storing one gigabyte of data Source: KPCB, Deloitte May 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 12
Slide 13: Deflation: Cost Of Bandwidth
Deflation: Cost Of Bandwidth The cost of 1,000Mbps of bandwidth Source: KPCB, Deloitte May 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 13
Slide 14: New Cycle Deflation = IT Budget Headwinds
New Cycle Deflation = IT Budget Headwinds IT spending: 1990 - 2014 Source: Goldman Sachs, August 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 14
Slide 15: New Cycle Deflation = IT Budget Headwinds
New Cycle Deflation = IT Budget Headwinds IT spending: Information Processing Equipment as % of GDP: 1945-present1 1. Source: Ned Davis Research, 31 March 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 15
Slide 16: New Cycle Deflation = IT Budget Headwinds
New Cycle Deflation = IT Budget Headwinds Modest IT Spending + Budget Reallocation = GDP + Growth? Rev. Rev. Rev. 2015 IT priorities Growth Growth Growth 20142 2015E2 2016E2 2.5% in constant-currency 1. BI / Analytics 2. Infrastructure / Data Centre 3. Cloud 4. ERP 5. Mobile Cisco EMC HP -1% 5% -1%
Slide 17: Cloud Computing: IT As A Variable Cost
Cloud Computing: IT As A Variable Cost • Cloud computing came of age during 2013, evidenced by Adobe‟s move to SaaS and Amazon $600m CIA contract win • The shift towards hybrid and public clouds incremental capacity is being added beyond the enterprise • Computing and storage costs headed lower: A
Slide 18: Cloud Computing: IT As A Variable Cost
Cloud Computing: IT As A Variable Cost • Cloud computing came of age during 2013, evidenced by Adobe‟s move to SaaS and Amazon $600m CIA contract win • The shift towards hybrid and public clouds incremental capacity is being added beyond the enterprise • Computing and storage costs headed lower: A
Slide 19: Broadband Applications: Expanding The Market
Broadband Applications: Expanding The Market • Social, mobile and cloud adoption driving growth of online advertising, e-commerce and SaaS • iPhone/Android users access e-commerce 4x more vs. other smartphones and 10-20x non-smartphone users1 • Facebook mobile monetisation has driven a significant r
Slide 20: Mobile Computing: Making The Internet Ubiquitous
Mobile Computing: Making The Internet Ubiquitous • Smartphone penetration (> 1bn globally1) has transformed the value of the Internet (Metcalfe‟s Law) • Mobile data is forecast to rise 11x between 2013 and 20182, driving infrastructure investment (WiFi and 4G) • Less exposure to smartphones (due to
Slide 21: Mobile Computing: Making The Internet Ubiquitous
Mobile Computing: Making The Internet Ubiquitous • Smartphone penetration (> 1bn globally1) has transformed the value of the Internet (Metcalfe‟s Law) • Mobile data is forecast to rise 11x between 2013 and 20182, driving infrastructure investment (WiFi and 4G) • Less exposure to smartphones (due to
Slide 22: Advertising
Technology: Transforming The World Bit By Bit Advertising Internet advertising worth $121bn this year1 45% of media consumption / 26% of ad. dollars2 1. Source: TechCrunch, April 2014. 2. Source: KPCB, May 2014. It should not be assumed that recommendations made in future will be profitable or will
Slide 23: Commerce
Technology: Transforming The World Bit By Bit Commerce eCommerce worth $260bn in the US last year Penetration just 8% / 10% in US / W. Europe1 1. Source: Citigroup, February 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securit
Slide 24: Gaming
Technology: Transforming The World Bit By Bit Gaming $39bn online market c. 3x > movie box office1 Mobile gaming growing c.30% per annum2 1. Source: bigishgames.com, August 2014. 2. Source: Mobile Gaming, August 2014 It should not be assumed that recommendations made in future will be profitable or
Slide 25: Payments
Technology: Transforming The World Bit By Bit Payments $617bn mobile payments market by 20161 Growth driven by m-commerce / money transfer 1. Source: Gartner, August 2014 . It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in
Slide 26: Robotics
Technology: Transforming The World Bit By Bit Robotics Industrial robotics market worth $40bn by 20201 Commercial drones set to grow >100% CAGR1 1. Source: Markets & Markets, It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities i
Slide 27: Automotive
Technology: Transforming The World Bit By Bit Automotive Semiconductor content worth $29bn today1 ADAS today, autonomous vehicles tomorrow? 1. Source: electronicsweekly.com, February 2015. It should not be assumed that recommendations made in future will be profitable or will equal performance of th
Slide 28: Healthcare
Technology: Transforming The World Bit By Bit Healthcare US market alone worth c. $4tr in 20151 Ripe for ‘big data’ / IoT transformation Source: Forbes, February 2014. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this
Slide 29: Diverging Fortunes
Diverging Fortunes Technology: long-term growth expectations and valuation for top vs. bottom tertile of growth expectations 40% 35% 30% 25% 20% 15% 10% 5% 0% 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 LT Earnings Growth Top Tertile (T1) LT Ear
Slide 30: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency Global Technology M&A avg. premiums: 1995 – 20131 Select M&A activity2 60% Date Target Acquirer Premium Value $m May-12 Ariba SAP 19% 4,324 Aug-12 Kenexa IBM 42% 1,260 50% Oct -12 OPNET Riverbed 31% 912 Feb-13 Acme Packet Oracle 24% 1,677 40% Feb-13 Dell
Slide 31: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency S&P Technology sector (equal weighted) 1969 – present Absolute performance Relative performance vs. S&P 500 Index Source: Piper Jaffray, August 2015. For non-US investor use only. Please refer to the Important Information at the end of this presentation.
Slide 32: Less Demanding Next-Generation Valuations
Less Demanding Next-Generation Valuations Internet Valuations: Currently at average historical forward EV/EBITDA levels1 Source: 1. Goldman Sachs, May 2015. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A
Slide 33: Less Demanding Next-Generation Valuations
Less Demanding Next-Generation Valuations Software as a Service Valuations: Approaching long term average / 2011 lows on forward EV/Sales1 Source: 1. Pacific Crest, May 2015. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities i
Slide 34: PCT Positioning
PCT Positioning Sector exposure (%) Market cap exposure (%) Internet Software & Services 23.8% Large Cap (>$10bn) 68.1% Software 23.1% Technology Hardware, Storage & Peripherals 13.1% Mid Cap (>$1bn - $10bn) 24.3% Semiconductors & Semiconductor Equipment 12.5% Small Cap (<$1bn) 7.6% Internet & Catal
Slide 35: PCT Positioning
PCT Positioning Largest Overweights Largest Underweights Activision Blizzard Apple Amazon ASML Holding Arista Networks Broadcom Check Point Software Tech Canon Inc Demandware Cisco Systems Medidata Solutions Cognizant Technology Solutions Netsuite eBay Nimble Storage EMC Nintendo Co Ericsson NXP Sem
Slide 36: PCT Performance
PCT Performance 10 year PCT performance: April 2005 – April 2015 375 350 325 300 275 250 225 200 175 150 125 100 75 Apr 05 Oct 05 Apr 06 Oct 06 Apr 07 Oct 07 Apr 08 Oct 08 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 Source: Bloomberg, as at 2/8/11 Dow J
Slide 37: Emerging Themes
Emerging Themes Source: Gartner, July 2014. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 37
Slide 38: Augmented / Virtual Reality
Augmented / Virtual Reality 2 Augmented reality (AR) is a live direct or indirect view of a physical, real-world environment whose elements are augmented by computer-generated sensory input such as sound, video, graphics or GPS data1. 4 Virtual Reality (VR) is a computer- simulated environment that
Slide 39: Augmented / Virtual Reality
Augmented / Virtual Reality 2 Augmented reality (AR) is a live direct or indirect view of a physical, real-world environment whose elements are augmented by computer-generated sensory input such as sound, video, graphics or GPS data1. 4 Virtual Reality (VR) is a computer- simulated environment that
Slide 40: Augmented / Virtual Reality
Augmented / Virtual Reality Source: YouTube, June 2015. For illustrative purposes only. It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within the immediately preceding 12
Slide 41: Outlook
Outlook • We remain constructive on markets, although anticipate greater volatility – Aligned interests/valuations in line with long-term averages/paucity of alternatives • The new technology cycle has entered a more pernicious phase for incumbents – New technologies are no longer complementary to l
Slide 42: Appendix
Appendix For non-US investor use only. Please refer to the Important Information at the end of this presentation. 42
Slide 43: Team Biographies
Team Biographies Ben Rogoff, Director – Technology Experience: 19 years Ben joined Polar Capital in May 2003. He is lead manager of Polar Capital Technology Trust plc and is also joint manager of the Polar Capital Global Technology Fund. He has been a technology specialist for 19 years. Prior to joi
Slide 44: Team Biographies cont.
Team Biographies cont. Xuesong Zhao Experience: 9 years Xuesong joined Polar Capital in May 2012, having spent most of the previous four years working as an investment analyst within the emerging market & Asia team at Aviva Investors, where he was responsible for the technology, media and telecom se
Slide 45: A Second Technology Bubble? We Think Not
A Second Technology Bubble? We Think Not Technology Company Market Value as % of S&P500: 1999 – Present1 Select valuations at highs: then and now 2 Investment into VC backed companies: 1995 – present3 Number of technology IPOs by year4 1. Source: KPCB Internet Trends, April 2014. 2. Source: The Soci
Slide 46: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency Inflation adjusted UK holiday expenditure: 1951-1996 overseas domestic 1. Source: www.seasidehistory.co.uk. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 46
Slide 47: Important Information
Important Information Polar Capital 16 Palace Street London SW1E 5JD Important Information: This document is provided for the sole use of the intended recipient and is not a financial promotion. It shall not and does not constitute an offer or solicitation of an offer to make an investment into any
Slide 48: Important Information Cont.
Important Information Cont. Polar Capital 16 Palace Street London SW1E 5JD Regulatory Status: Polar Capital LLP is a limited liability partnership number OC314700. It is authorised and regulated by the UK Financial Conduct Authority (“FCA”) and is registered as an investment adviser with the US Secu
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