Regal Partners Global Investments Limited · ASX:RG1
Regal Partners Global Investments — VGI Partners Global Investments — Investor Presentation (October 2023)
29 slides from Regal Partners Global Investments's investor presentation, October 2023
Slide 1: VGI Partners Global Investments Limited (ASX: VG1)
VGI Partners Global Investments Limited (ASX: VG1) October 2023
Slide 2: Welcome
Welcome Brendan O’Connor CEO, Regal Partners 2
Slide 3: 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 4: Speakers
Speakers Philip King Marco Anselmi Simon Birrell Co-Founder & Portfolio Manager Portfolio Manager Chief Investment Officer VGI Partners VGI Partners Regal Philip is widely recognised as one of the pioneers of the Marco has 10 years’ experience as a portfolio manager and Simon has over 15 years’ expe
Slide 5: Market update – key takeaways
Market update – key takeaways 1 Equity markets remain driven by moves in bond yields 2 Despite higher interest rates, corporate earnings have remained broadly resilient 3 3 Equity risk premiums have declined further, suggesting equity markets may be fully valued in aggregate. Select opportunities co
Slide 6: Recent rise in US 10 yr Treasury yields put into context
Recent rise in US 10 yr Treasury yields put into context 10-Yr US Treasury Yields Over The Last 50 Years 18% 16% Quantitative Quantitative 14% Easing Tightening 12% 10% 8% 6% 4% 2% 0% 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 2023 Source: Bloomberg as at October 2023 (monthly data). 6
Slide 7: Increasing bond yields have placed further pressure on equity markets
Increasing bond yields have placed further pressure on equity markets MSCI World Total Return (USD) Vs. 10 Yr US Treasury Yield (%) MSCI World TR (USD) 10 yr US Treasury yield (RHS) 120 5.00 Rising bond yields pressure Flat bond yields allow equity markets equity markets to rally 4.50 110 4.00 3.50
Slide 8: US equities looking increasingly expensive vs bonds
US equities looking increasingly expensive vs bonds 8% US equity risk premium Average 6% 4% 2% 0% 2013 2015 2017 2019 2021 2023 Source: Bloomberg as at October 2023. Past performance is not a reliable indicator of future performance. 8
Slide 9: S&P 500’s YTD gains have been driven by mega cap US technology stocks
S&P 500’s YTD gains have been driven by mega cap US technology stocks 80% "Magnificent 7" Remaining 493 70% 60% 61% 50% 40% 30% 20% 10% 12% 0% 0% -10% Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Source: Bloomberg as at October 2023. “Magnificent 7” includes Apple, Microsoft
Slide 10: S&P 500 trades on 18x P/E in aggregate but 16x excluding the “Magnificent 7”
S&P 500 trades on 18x P/E in aggregate but 16x excluding the “Magnificent 7” 45x "Magnificent 7" Remaining 493 S&P 500 40x 35x 30x 28x 25x 20x 18x 16x 15x 10x 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Bloomberg as at October 2023 (monthly data). Magnificent 7 include Apple, Micr
Slide 11: Equity risk premia by country
Equity risk premia by country 8.0% 7.1% 7.0% 6.3% 5.9% 6.0% 5.0% 5.0% 4.0% 3.0% 2.2% 2.0% 1.0% 0.3% 0.0% US Australia Japan Hong Kong Germany UK P/E 20.2x 15.0x 15.0x 8.9x 11.0x 10.5x Corporate earnings yield 5.0% 6.7% 6.7% 11.3% 9.1% 9.5% 10 year government yield 4.7% 4.5% 0.8% 4.2% 2.8% 4.5% Equit
Slide 12: VG1 Portfolio Exposure
VG1 Portfolio Exposure1 Long Portfolio by Sector1 20 October 2023 eCommerce & Internet 24% Exposures1 Industrials 17% Long Equity Exposure 98% Exchanges & Financial Services 16% Energy 13% Short Equity Exposure (45%) Gaming & Entertainment 12% Consumer Staples 10% Net Equity Exposure 53% Medtech 8%
Slide 13: VG1 Portfolio Contributors Calendar YTD
VG1 Portfolio Contributors Calendar YTD1 Long Contributors to Net Portfolio Return Short Contributors (Sector) Consumer Unprofitable Brands Tech AMZN US CME US Retailers RHM GY SPOT US Source: Citco Fund Services, VGI Partners. 1. Past performance is not a reliable indicator of future performance. 1
Slide 14: Long Investments - What Are We Looking For?
Long Investments - What Are We Looking For? Camouflaged Quality Quality Hidden Asset Network effects De-mutualisations Scale economics Key misunderstanding of the business drivers Mispriced compounders Spin-offs Software – Vertical and Horizontal Low-risk turnarounds Dominant consumer brands Busines
Slide 15: Liquidity Pools: CME – Key Drivers
Liquidity Pools CME – Key Drivers 19.0m Fed Debt Excluding Federal Reserve $39,000 CME Average Daily Volume 17.0m $34,000 15.0m $29,000 • Holdings (bn) CME operates futures and derivatives 13.0m exchanges, alongside ownership of other key $24,000 11.0m assets related to FX trading and a strategic $1
Slide 16: Scale Economics: Amazon North America Capex and Operating Margin
Amazon – North America Capex (US$bn) Amazon – North American Operating Margin (%) 40.0 37.4 7.0% 35.0 6.0% 30.0 5.0% 25.0 4.0% 20.0 3.0% 15.0 2.0% 10.0 1.0% 5.0 - 0.0 -1.0% -2.0% Scale Economics • Continue to see upside as North American retail profitability improves and AWS growth inflects • After
Slide 17: Scale Economics: Amazon Web Services Growth Rates
Scale Economics Amazon – Amazon Web Services Growth Rates (%) 40% 35% • Amazon, through AWS, is a leader in cloud 30% services. Growth will normalise after a period of industry optimisation 25% • AI-related investments across the economy are providing a tailwind for cloud computing providers 20% ove
Slide 18: Network Effects: Meta Revenue Growth and Cost Control
Meta - Revenue Growth Acceleration Meta - Cost control with recent employee reductions 60% 100,000 50% 80,000 40% 60,000 30% 40,000 20% 20,000 10% 0% 0 Q1-2019 Q1-2020 Q1-2021 Q1-2022 Q1-2023 Q1-2019 Q1-2020 Q1-2021 Q1-2022 Q1-2023 -10% Network Effects Temporary headwinds abating (macro, Apple IDFA)
Slide 19: Network Effects: Meta Earnings Power and Metaverse Spend
Network Effects Meta - Earnings power masked by aggressive spend on 'metaverse' projects (US$20bn/year) $20bn $19bn $18bn $18bn $16bn $15bn $14bn $14bn Continues to fight off competitive threats $12bn $10bn Under-appreciated AI initiatives $10bn (recommendation engine, Advantage+, Llama 2) $8bn $7bn
Slide 20: Business Model Transition: Royal Dutch Shell Divisions
Business Model Transition Royal Dutch Shell – Divisions FY22 100% 90% 80% • World leader in Liquid Natural Gas (LNG), an 70% important energy transition fuel 60% • New management have a capital returns focus 50% • Optimising portfolio after a long period of 40% questionable capital allocation 30% •
Slide 21: Mispriced Compounders: Defence Spend as a % of GDP
Mispriced Compounders Defence Spend as a % of GDP Portugal Geopolitical tensions have created a renewed Czech Republic willingness to invest in defence capabilities, with NATO signatories set to significantly Denmark increase spend in the coming years to 2% of Romania GDP and beyond, in line with tr
Slide 22: Mispriced Compounders: German Defence Budget
Mispriced Compounders German Defence Budget €Bn 90 German defence budget change and 80 subsequent contract awards are indicative of spending increases across NATO 70 Whilst defence spending grew at a 6% CAGR 60 from 2014-21, this will accelerate to a 17% CAGR from 2021 to 2024 50 Significant majorit
Slide 23: Short Investments - What Are We Looking For?
Short Investments - What Are We Looking For? Structural Losers Red Flags Irrational Extrapolation Fad FinTech AI Hype Chemicals Co Consumer Brand 1 & 2 Energy Co "Science Experiments" 23
Slide 24: VG1 Net Portfolio and Share Price Return since Merger
VG1 Net Portfolio and Share Price Return since Merger1 Net Portfolio Return Since Inception2 $2.20 $2.60 Pre-tax NTA Share price $2.40 $2.00 $2.20 $1.80 $2.00 $1.60 $1.80 $1.60 $1.40 $1.40 $1.20 $1.20 $1.00 $1.00 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep
Slide 25: Questions
Questions Submit your questions via the side menu on the webcast player
Slide 26: Appendix
VGI PARTNERS Global Investments Appendix
Slide 27: Key Pillars of a Successful Listed Investment Vehicle
Key Pillars of a Successful Listed Investment Vehicle Investment Performance Investor Engagement Capital Management & Communication Initiatives • Deliver attractive risk- • Experienced sales and • Defined dividend policy adjusted absolute returns marketing team over the medium term • Buy-back utilis
Slide 28: VG1 Investment Guidelines
VG1 Investment Guidelines Exposure Number of Long Investments Typically 10-25 (10-15 Core) Concentration of Long Investments Top five 40-50% of NAV on average Average Size of Long Investments Start at 1-3% and build to 4-10% of Portfolio’s NAV Single Security Long Investment Limit 15% at purchase; m
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