Polar Capital Technology Trust PLC · LSE:PCT
Polar Capital Technology Trust — H1 2016 Earnings Presentation
32 slides from Polar Capital Technology Trust's earnings presentation, Dec 8, 2015
Slide 1: Interim Results Presentation
Interim Results Presentation 8th December 2015 This presentation is for one-on-one use with non-US professional investors only
Slide 2: Unaudited Preliminary Half-Year Results
Unaudited Preliminary Half-Year Results Year ended As at Change 30/04/15 31/10/15 (%) Net Assets £793,019,000 £799,718,000 + 0.8% NAV per ordinary share 599.25p 604.31p + 0.8% Price per ordinary share 592.00p 596.00p + 0.7% Benchmark Change - 1.0% Ordinary shares in issue 132,336,159 132,336,159 --
Slide 3: Style Headwinds
Style Headwinds US technology small caps vs. large caps: 2009 - Present Small-caps outperforming Small-caps underperforming Source: Bloomberg, 4 December 2015. Past performance is not indicative or a guarantee of future returns. For non-US investor use only. Please refer to the Important Information
Slide 4: Technology: Undemanding Valuations
Technology: Undemanding Valuations Absolute sector valuation (PE): Relative sector valuation (PE): Compelling vs. history (1992 – present) At / around market level – with superior balance sheet Source: Ned Davis, 27 November 2015. It should not be assumed that recommendations made in future will be
Slide 5: 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. 5
Slide 6: Revisiting our New Cycle Thesis
Revisiting our New Cycle Thesis Computing: The cost of 1m transistors Storage: The cost of storing one gigabyte of data 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 presentati
Slide 7: New Cycle Deflation = IT Budget Headwinds
New Cycle Deflation = IT Budget Headwinds IT spending: IT spending: Contraction in IT spending during downturn1 Information Processing Equipment as % of GDP (1945-present)2 1. Source: Goldman Sachs, August 2014. 2. Source: Ned Davis Research, 30 June 2015. For non-US investor use only. Please refer
Slide 8: New Cycle Deflation = IT Budget Headwinds
New Cycle Deflation = IT Budget Headwinds Modest IT Spending + Budget Reallocation = GDP + Growth? Rev. Rev. Rev. 2016 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. Digital Marketing Cisco EMC HP*
Slide 9: 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 • 2,800 CIO‟s named BI/Analytics, Data Centre & Cloud as the top 3 priorities in Gartner survey for 2015 • Computing and storage costs headed lower: A
Slide 10: Broadband Applications: Expanding The Market
Broadband Applications: Expanding The Market • Social, mobile and cloud adoption driving growth of online advertising, e-commerce and SaaS • Global digital ad spend $138bn, +18%y/y in 2014 (Display +7% y/y, Search +12% y/y, Video +34% y/y, Mobile +65% y/y)1 • Facebook mobile monetisation has driven
Slide 11: Ubiquitous Computing: Driving Mobile Data
Ubiquitous Computing: Driving Mobile Data • Smartphone penetration (> 1.5bn globally1) has transformed the value of the Internet (Metcalfe‟s Law) • Mobile data traffic will grow to 292 exabytes in 2019 from 30 exabytes in 2014 (10x growth / 57% CAGR driven by video)2 • Less exposure to smartphones (
Slide 12: Transforming The World Bit By Bit
Transforming The World Bit By Bit Advertising Commerce Communications Software (as a Service) • Internet advertising worth • eCommerce worth $260bn • c.5.2bn global mobile • Rental software model $121bn this year1 in the US last year handset subscribers2 enabled by Cloud • 45% of media consumption •
Slide 13: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency 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 Grow
Slide 14: 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 15: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency US Technology sector (un-weighted) 1969 – present Source: Piper Jaffray, August 2015. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 15
Slide 16: 'Next-generation' valuation compression
'Next-generation' valuation compression Internet Valuation: Software as a Service Valuation: Currently at average historical forward EV/EBITDA levels1 EV / Forward 12-Month Revenue Multiples Since 20052 10.0x High (1/17/14): 2011 2012 2013 2014 9.4x Average: Average: Average: Average: 4.9x 5.5x 7.3x
Slide 17: Emerging Themes
Emerging Themes Source: Gartner, 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 within the immediately preceding 12 months is available upon request. For non
Slide 18: Augmented / Virtual Reality
Augmented / Virtual Reality 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. Virtual Reality (VR) is a computer- simulated environment that can
Slide 19: Augmented / Virtual Reality
Augmented / Virtual Reality 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. Virtual Reality (VR) is a computer- simulated environment that can
Slide 20: Accelerating Pace of Innovation
Accelerating Pace of Innovation • Additive manufacturing (AM) or “3D printing” – GE GE9X fan blades … https://www.youtube.com/watch?v=jwqNIh-Fwpc – GE Avio Aero AM … https://www.youtube.com/watch?v=UlGyf-oKhI8 – Proto Labs … https://www.youtube.com/watch?v=gCxVENFTpKM • Augmented/Virtual reality & m
Slide 21: PCT Positioning
PCT Positioning Sector exposure (%) Market cap exposure (%) Internet Software & Services 25.9% Large Cap (>$10bn) 69.2% Software 22.8% Semiconductors & Semiconductor Equipment 13.1% Mid Cap (>$1bn - $10bn) 25.8% Technology Hardware, Storage & Peripherals 11.3% Small Cap (<$1bn) 5.0% Internet & Catal
Slide 22: PCT Positioning
PCT Positioning Thematic breakdown1 Revenue growth vs. benchmark2 Legacy 10% Internet 30% Semiconductors 11% Smartphones 4% Medical Technology 1% Apple 9% Electric Vehicles Cloud: applications Solar 0% 9% 0% Emerging 1% Other 1% 3D Printing Payments Cloud: infrastructure 1% IoT 3% 5% 0% Factory auto
Slide 23: PCT Positioning
PCT Positioning Largest Overweights Largest Underweights Activision Blizzard Apple Akamai Technologies ASML Holding Amazon Broadcom Demandware Canon Inc Electronic Arts Cisco Systems Integrated Device Technology eBay LAM Research EMC LinkedIn Ericsson Mastercard Hewlett Packard Enterprise Medidata S
Slide 24: 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 25: 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 26: Appendix
Appendix For non-US investor use only. Please refer to the Important Information at the end of this presentation. 26
Slide 27: Team Biographies
Team Biographies Ben Rogoff, Director – Technology Experience: 20 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 28: 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 29: 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 30: 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. 30
Slide 31: 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 32: 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 FCA and is registered as an investment adviser with the US Securities & Exchange Commission (“S
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