Regal Asian Investments Limited · ASX:RG8
Regal Asian Investments — Investor Presentation (November 2023)
38 slides from Regal Asian Investments's investor presentation, Nov 29, 2023
Slide 1: RG8 Investor Update and Q&A Webinar
Regal Asian Investments Limited ABN 58 635 219 484 Level 47 Gateway, 1 Macquarie Place Sydney NSW 2000 Australia T. +61 2 8197 4333 www.regalfm.com/RG8 29 November 2023 ASX Market Announcements Office ASX Limited Exchange Centre 20 Bridge Street Sydney NSW 2000 For personal use only RG8 Investor Upd
Slide 2: Investor Update & Q&A, Regal Asian Investments, November 2023
For personal use only Investor Update & Q&A Regal Asian Investments November 2023
Slide 3: Contents
Contents Page Section For personal use only Page 3 Introduction Page 7 Market Outlook Page 20 Spotlight on Japan Page 25 Thoughts on Korea Page 29 Australia Page 33 RG8 Update 2
Slide 4: Introduction
For personal use only Introduction Brendan O’Connor, CEO, Regal Partners
Slide 5: Disclaimer
Disclaimer This document (Information) is provided by Regal Partners Marketing Services Pty Ltd (ACN 637 448 072) (Regal Partners Marketing), a corporate authorised representative of Attunga Capital Pty Ltd (ABN 96 117 683 093) (AFSL 297385) (Attunga). Regal Partners Marketing and Attunga are busine
Slide 6: Speakers
Speakers For personal use only BRENDAN O’CONNOR PHILIP KING GLEN BARNES SHANNON MCCONAGHY Chief Executive Officer Co-Founder & Head of Asia Senior Analyst, Asia Regal Partners CIO Long/Short Equities Fundamental Research Regal Funds Regal Funds Regal Funds 5
Slide 7: Regal Asian Investments Limited (ASX:RG8)
Regal Asian Investments Limited (ASX:RG8) RG8 provides investors with access to an actively- For personal use only managed, concentrated portfolio, comprising long investments and short positions in securities with $447m $1.96 $2.33 exposure to the Asian region. • Initially listing in November 2019,
Slide 8: Market Outlook
For personal use only Market Outlook Philip King, CIO Long/Short Equities, Regal Funds
Slide 9: Market update: Key takeaways
Market update Key takeaways 11 For personal use only Significant underperformance of Asian equities versus US markets 23 Strong valuation support in Asia 3 RG8's largest regional gross exposure is to Japan 8
Slide 10: Asian equities have significantly lagged US equities
Asian equities have significantly lagged US equities 350 TOTAL RETURN For personal use only 300 198% Index; Rebased to 100 on 3-Jan-14 250 200 150 53% 100 50 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 MSCI US Index MSCI Asia Pacific Index Source: Bloomberg as at 24 November 2023. Rebased to 1
Slide 11: Large performance dispersion within Asia
Large performance dispersion within Asia EQUITY MARKET PERFORMANCE TOTAL For personal use only 300 RETURN Index; Rebased to 100 on 3-Jan-14 250 128% 200 150 19% 100 50 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 MSCI Japan Index MSCI China Index Source: Bloomberg as at 24 November 2023. Rebase
Slide 12: Bond yields in Japan and China have risen less than the US
Bond yields in Japan and China have risen less than the US 10 YEAR GOVERNMENT BOND YIELDS For personal use only 6% 5% 4% 3% 2% 1% 0% -1% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 US Japan China Source: Bloomberg as at November 2023. 11
Slide 13: US equity risk premiums have collapsed, Asia still attractive
US equity risk premiums have collapsed, Asia still attractive EQUITY RISK PREMIA BY MARKET For personal use only 12% 10% 8% 6% 4% 2% 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Hong Kong Japan US Source: Bloomberg as at November 2023. 12
Slide 14: Equity risk premiums remain elevated in Asia
Equity risk premiums remain elevated in Asia 9% 8.2% For personal use only 8% 7% 6% 5.8% 5.5% 5% 4% 3% 2.2% 2% 1% 0.7% 0% US Australia Japan Hong Kong South Korea P/E 19.2x 14.8x 15.2x 8.3x 10.9x Corporate earnings yield 5.2% 6.7% 6.6% 12.1% 9.2% 10 year government yield 4.5% 4.6% 0.8% 3.9% 3.7% Equ
Slide 15: Increasing exposure to Japan
For personal use only Increasing exposure to Japan 1 2 3 Interest rates normalising Weakening Yen making Increased focus on but still low exporters more competitive shareholder returns 14
Slide 16: Earnings per share trends starting to grow
Earnings per share trends starting to grow EPS (HISTORICAL TRAILING 12 MONTHS) AND CONSENSUS ANALYST FORECAST (NEXT 12 MONTHS) For personal use only 250 200 Index; Rebased to 100 in Nov 2013 150 100 50 Topix Japan Topix Hang Seng Index MSCI US 0 Nov 2013 Nov 2014 Nov 2015 Nov 2016 Nov 2017 Nov 2018
Slide 17: China: growth slowing but stabilising
China: growth slowing but stabilising Growth still below pre-COVID levels Retail sales remain sluggish For personal use only CHINA INDUSTRIAL PRODUCTION GROWTH CHINA RETAIL SALES (RMB BN): OCT EACH YEAR ONLY 16% 5,000 14% 4,500 4,000 12% 3,500 10% 3,000 8% 2,500 6% 2,000 1,500 4% 1,000 2% 500 0% - D
Slide 18: Chinese property earnings have deteriorated, tech remains strong
Chinese property earnings have deteriorated, tech remains strong EPS (HISTORICAL TRAILING 12 MONTHS) AND CONSENSUS ANALYST FORECAST For personal use only 600 500 Index; Rebased to 100 in Nov 2013 400 300 200 100 0 -100 -200 -300 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 China Real
Slide 19: Keeping an eye on China – parallels of 1990's Japan?
Keeping an eye on China – parallels of 1990’s Japan? RESIDENTIAL PROPERTY PRICES DEBT TO GDP COMPARISON 450% 2003 2005 2007 2009 2001 2021 1975 1977 1979 1983 1985 1987 1989 1993 1995 1997 1999 2013 2015 2017 2019 1981 1991 2011 For personal use only 400% Household Corporate Government 300 350% 280
Slide 20: China – Key differences to 1990's Japan
For personal use only 110 100 20 30 40 50 60 70 80 90 100 - 200 300 400 500 600 700 800 900 1,100 1,000 2018 1989 2009 1975 2019 1990 2011 1977 2013 1979 2020 1991 2015 1981 2017 1983 2021 1992 2019 1985 2022 1993 2021 1987 HSI Index (26 Jan 2018 = 100) 2023 1989 2023 1994 2025 1991 MSCI Japan Index
Slide 21: Spotlight on Japan
For personal use only Spotlight on Japan Shannon McConaghy – Senior Analyst
Slide 22: Japan: Increasing focus on profits and shareholder returns
Japan: Increasing focus on profits and shareholder returns MENTIONS OF “PROFITABILITY” IN CORPORATE TRANSCRIPTS SHAREHOLDER RETURNS For personal use only JPY Bn 35,000 30,000 30,000 25,000 25,000 20,000 20,000 15,000 15,000 10,000 10,000 5,000 5,000 0 0 2023* 2002 2003 2004 2005 2006 2007 2008 2009
Slide 23: Japan: Hidden value in cross-shareholdings held at book
Japan: Hidden value in cross-shareholdings held at book Cross-shareholdings are significantly larger in Japan 30 companies hold shares worth more than their own market cap For personal use only % OF OUTSTANDING SHARES OWNED BY OTHER LISTED COMPANIES EQUITY HOLDINGS AS A % OF MARKET CAPITALISATION (S
Slide 24: Long idea: Keisei Electric – Significant value to unlock
Long idea: Keisei Electric – Significant value to unlock INVESTMENT THESIS KEISEI ELECTRIC: SUM-OF-THE-PARTS (BN JPY) 2,500 For personal use only Valuation: 96% upside to fair value assuming: 1 • Listed holding in Oriental Land Co (i.e. Tokyo Disney) post-tax • 15x P/E for operating business (inc Na
Slide 25: Short idea: Konica Minolta – Suffering from digitization
Short idea: Konica Minolta – Suffering from digitization INVESTMENT THESIS PRINT & WRITING PAPER DEMAND (K TONNES, UNADJUSTED) 2,500,000 For personal use only 1 Europe (with pre-covid trend extrapolated) Valuation: 16.6x 12-month forward earnings (1 std dev above 10 yr avg) 2,000,000 1,500,000 1,000
Slide 26: Thoughts on Korea
For personal use only Thoughts on Korea Glen Barnes, Head of Asia Fundamental Research
Slide 27: Global memory markets are bottoming after a long downcycle
Global memory markets are bottoming after a long downcycle AI-related memory is seeing strong growth, with other key segments also improving For personal use only Memory prices are starting to recover after a deep downcycle Further upside implied for semi stocks DRAM AVERAGE PRICE PER 1GB EQUIVALENT
Slide 28: Korean exports rebounding with semiconductors a major component
Korean exports rebounding with semiconductors being a major component SOUTH KOREAN EXPORTS For personal use only yoy% 50% 40% 30% First positive export 20% growth in over a year 10% 0% -10% -20% -30% Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18 Dec 19 Dec 20 Dec 21 Dec 22 Source: B
Slide 29: Korean equities market offers attractive value
Korean equities market offers attractive value Earnings are improving, foreign ownership is extremely low For personal use only Market is cyclical – opportunity to buy into an upturn Foreign ownership close to GFC lows, although improving KOREAN MARKET ROLLING EARNINGS PER SHARE FOREIGN OWNERSHIP OF
Slide 30: Australia
For personal use only Australia Philip King, CIO Long/Short Equities, Regal Funds
Slide 31: Supply demand fundamentals across commodities continue to look favourable
Supply demand fundamentals across commodities continue to look favourable For personal use only THE USUAL STRUCTURAL MINING BULL CASE…. …SEEING INCREASING TAILWINDS 1 Mine depletion 1 Decarbonisation boosting metals consumption 2 Grade decline (reduced supply & increased cost support) 2 Global energ
Slide 32: Mining investment continues to lag
Mining investment continues to lag AUSTRALIA MINING INVESTMENT (A$B) A$B Commodity Price Index For personal use only 60 140 120 50 100 40 80 30 60 20 40 10 20 0 0 1987 1992 1997 2002 2007 2012 2017 2022 Australian mining investment Commodity price index Source: Minack Advisors as at November 2023. N
Slide 33: Resources trading at material discount to average
Resources trading at material discount to average ASX 200 Resources trading at forward EV/EBITDA of 6.1x, 16% below the 20 yr average For personal use only 12x 9x 7.2x 6x 6.1x 3x 2010 2012 2014 2016 2018 2000 2002 2004 2006 2008 2020 2022 Source: FactSet, Goldmans Sachs research as at November 2023.
Slide 34: RG8 Update
For personal use only RG8 Update Philip King, CIO Long/Short Equities, Regal Funds
Slide 35: Actively managed Asian exposures
Actively managed asian exposures PORTFOLIO POSITIONING BY MARKET PORTFOLIO EXPOSURES BY SECTOR For personal use only Long 60% SECTOR (GICS) NET GROSS 50% Communication Services 6% 6% Consumer Discretionary 11% 31% 40% Consumer Staples -2% 2% Net 30% Energy 20% 24% 20% Financials -7% 12% Health Care
Slide 36: RG8 performance since listing
RG8 performance since listing A$/share For personal use only 2.5 RG8 pre-tax NTA adjusted for dividends (LHS) RG8 portfolio management transitions to Regal 2.4 RG8 share price adjusted for dividends (LHS) NTA Return +9.7% 2.3 2.2 2.1 2.0 1.9 1.8 1.7 1.6 Share Price Return +16.9% 1.5 Nov-19 Jan-20 Ap
Slide 37: Investor Q&A
Investor Q&A For personal use only Please submit your questions via the side menu on the webcast player BRENDAN O’CONNOR PHILIP KING GLEN BARNES SHANNON MCCONAGHY Chief Executive Officer Co-Founder & Head of Asia Senior Analyst, Asia Regal Partners CIO Long/Short Equities Fundamental Research Regal
Slide 38: For personal use only
For personal use only 37
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