Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Investor Presentation (December 2018)
33 slides from Australian Foundation Investment's investor presentation, Dec 3, 2018
Slide 1: NZ Information Meetings – Presentation (ASX cover letter)
3 December 2018 For personal use only The Manager ASX Market Announcements Australian Securities Exchange Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited NZ Information Meetings – Presentation Dear Sir / Madam Please find
Slide 2: NZ Shareholder Meeting December 2018
For personal use only NZ Shareholder Meeting December 2018
Slide 3: Disclaimer
Disclaimer Australian Foundation Investment Company Limited and its subsidiary AICS (AFSL 303209), their related For personal use only entities and each of their respective directors, officers and agents (together the Disclosers) have prepared the information contained in these materials in good fai
Slide 4: Our Investment Approach
For personal use only Our Investment Approach NZ Shareholder Meeting December 2018
Slide 5: AFIC is a Long Term Investor in a Diversified Portfolio of Quality Companies
AFIC is a Long Term Investor in a Diversified Portfolio of Quality Companies For personal use only NZ Shareholder Meeting December 2018
Slide 6: Investment Objectives
Investment Objectives For personal use only A long term investor seeking: To grow dividends over the medium to long term. To give investors attractive total returns over the medium to long term. NZ Shareholder Meeting December 2018
Slide 7: Financial Results
For personal use only Financial Results NZ Shareholder Meeting December 2018
Slide 8: Financial Results $A
Financial Results $A For personal use only Management expense ratio of 0.14% NZ Shareholder Meeting December 2018
Slide 9: Share Price trading at a 4% premium to Net Asset Backing at 31 October 2018
Share Price was trading at a 4% premium to Net Asset Backing at 31 October 2018 For personal use only NZ Shareholder Meeting December 2018
Slide 10: Market Settings and the Portfolio
For personal use only Market Settings and the Portfolio NZ Shareholder Meeting December 2018
Slide 11: In a difficult market large companies have underperformed over the year
In a difficult market large companies have underperformed over the year to 31 October 2018 For personal use only Source: FactSet NZ Shareholder Meeting December 2018
Slide 12: Relative Portfolio and Share Price Performance, Per Annum $A
Relative Portfolio and Share Price Performance, Per Annum $A Returns to 31 October 2018 For personal use only Note: performance figures for AFIC are after tax paid and costs. NZ Shareholder Meeting December 2018
Slide 13: Relative Portfolio and Share Price Performance, Per Annum $NZ
Relative Portfolio and Share Price Performance, Per Annum $NZ Returns to 31 October 2018 For personal use only Note: performance figures for AFIC are after tax paid and costs. NZ Shareholder Meeting December 2018
Slide 14: Some sectors have delivered strong returns, banks at the other extreme
Despite the recent fall some sectors have delivered strong returns with banks at the other extreme – one year returns to 31 October 2018 For personal use only Returns include dividends NZ Shareholder Meeting December 2018
Slide 15: Growth stocks still trade at a premium to their 25-year history
However growth’ stocks still trade at an average P/E of 29 times, a 28% premium to their 25-year history… For personal use only Source: FactSet, Goldman Sachs Global Investment Research. NZ Shareholder Meeting December 2018
Slide 16: Top 10 holdings 31 October 2018
Market moves as well as purchases/sales have changed the profile of the Portfolio – top 10 holdings 31 October 2018 Major changes – For personal use only Rank Company % of Portfolio % as at Oct 2017 1 Commonwealth Bank of Australia 7.9% 8.9% 2 BHP* 6.6% 5.4% 3 Westpac Banking Corporation 6.0% 7.4% 4
Slide 17: Next 10 holdings 31 October 2018
Market moves as well as purchases/sales have changed the profile of the Portfolio – next 10 holdings 31 October 2018 Major changes – For personal use only Rank Company % of Portfolio % as at Oct 2017 11 Woolworths* 2.7% 1.9% 12 Amcor 2.4% 13 Woodside Petroleum* 1.9% 1.5% 14 Brambles 1.9% 15 Oil Sear
Slide 18: Pull back in valuations and increase in effective dividend yields
The pull back in valuations and the increase in effective dividend yields has provided AFIC with selective opportunities For personal use only Source: FactSet. NZ Shareholder Meeting December 2018
Slide 19: Some additions to the Portfolio during recent market volatility
Some additions to the Portfolio during very recent market volatility For personal use only Share price Share price $ $ NZ Shareholder Meeting December 2018
Slide 20: Some additions to the Portfolio during recent market volatility con't
Some additions to the Portfolio during very recent market volatility con’t. For personal use only Share price Share price $ $ NZ Shareholder Meeting December 2018
Slide 21: Profile of the portfolio by size of company October 2018
Profile of the portfolio by size of company October 2018 – looking for growth opportunities some of which is outside of large companies For personal use only NZ Shareholder Meeting December 2018
Slide 22: Exposure to businesses with overseas revenue – 43% of the portfolio
The other interesting feature of the portfolio is the exposure to businesses with revenue generated from overseas – 43% of the portfolio For personal use only Key examples: • BHP Billiton • Macquarie Group • Seek • CSL • Woodside Petroleum • ResMed • Rio Tinto • Brambles • Fisher & Paykel • Amcor •
Slide 23: Australian Banks – growth in household debt has been a major tailwind
Australian Banks – growth in household debt has been a major tailwind Housing Prices and Household Debt Ratio to annual household disposable income Upward trend in housing prices driven by For personal use only Housing prices Household debt increased household debt: • Growing population, with immigr
Slide 24: Australian Banks – Net Income growth has been strong
Australian Banks – Net Income growth has been strong on the back of these trends however going forward….. $ billion Net Income of 4 major banks Credit growth likely to be more subdued: For personal use only • Lower income growth. • Tighter lending standards: APRA Hayne Royal Commission Slowing
Slide 25: Banks trade at a 40% discount to Industrial stocks
Banks currently trade at a 40% discount to Industrial stocks, 20% below the 25-year average… For personal use only Source: FactSet, Goldman Sachs Global Investment Research. NZ Shareholder Meeting December 2018
Slide 26: Featured Holdings – Macquarie Group
Featured Holdings – Macquarie Group What we like: For personal use only • Owner driver culture. • Infrastructure exposure. Energy (renewable) Emerging markets Share price GDP/ population growth • Technology exposure. Source: FactSet. NZ Shareholder Meeting December 2018
Slide 27: Featured Holdings – Woolworths
Featured Holdings – Woolworths What we like: For personal use only • ‘New’ management with clear strategy. • Progress on turnaround: Australian supermarkets regained market leadership Share IT Investment price Exit Masters Simplify BigW • Next phase: Ongoing investment opportunities. • From
Slide 28: Featured Holdings – Reliance Worldwide
Featured Holdings – Reliance Worldwide What we like: For personal use only • Category leader in Push to Connect plumbing fittings market. • Innovative company with R&D focus. Share price • Multiple growth drivers in North American and European markets. • Self funding, cash generative business model.
Slide 29: Closing Remarks
For personal use only Closing Remarks NZ Shareholder Meeting December 2018
Slide 30: Current Issues We Are Focusing On
Current Issues We Are Focusing On • Met with 100+ companies in recent reporting season. For personal use only • Investment team visited UK/Europe/US in September and in November will be visiting China/HK. • Themes: Australian credit growth/ housing market – slowing. Continued impact of technolog
Slide 31: Last years and next years?
Last 10 years and next 10 years? For personal use only NZ Shareholder Meeting December 2018
Slide 32: Other factors are still at play…
Other factors are still at play… For personal use only NZ Shareholder Meeting December 2018
Slide 33: Australian Foundation
AUSTRALIAN FOUNDATION
Australian Foundation Investment Company — Investor Presentation (December 2018) on 6ix