Polar Capital Technology Trust PLC · LSE:PCT
Polar Capital Technology Trust — Shareholder Meeting (September 2017)
63 slides from Polar Capital Technology Trust's shareholder meeting presentation, Sep 7, 2017
Slide 1: Polar Capital Technology Trust AGM Presentation
Polar Capital Technology Trust AGM Presentation 7 September 2017 This presentation is for non-US investor use only www.polarcapital.co.uk For non-US investor use only. Please refer to the Important Information at the end of this presentation. 1
Slide 2: Results As At 30 April 2017
Results As At 30 April 2017 Year ended Year ended Change 30/04/16 30/04/17 (y/y) Net Assets £801,307,000 £1,252,525,000 +56.3% NAV per ordinary share 605.51p 945.39p +56.1% Price per ordinary share 566.00p 947.00p +67.3% Benchmark Change +53.4% Ordinary shares in issue 132,336,159 132,487,000 + 0.1%
Slide 3: Results As At 31 August 2017
Results As At 31 August 2017 Year ended Year ended Change As at FYTD 30/04/16 30/04/17 (y/y) 31/08/17 Net Assets £801,307,000 £1,252,525,000 +56.3% £1,415,082,000 +13.0% NAV per ordinary share 605.51p 945.39p +56.1% 1065.57p +12.7% Price per ordinary share 566.00p 947.00p +67.3% 1057.00p +11.6% Benc
Slide 4: Full Year Review
Full Year Review DJ World Technology vs. FTSE World TR since Apr 2016 • Global equities (FTSE World + 30.7%) enjoyed a banner year due to the combination of earnings growth and ongoing valuation expansion, particularly post the US Presidential election. • Once again, Sterling weakness (-12%/- 7%/-8%
Slide 5: Full Year Review
Full Year Review US technology small caps vs. large caps since Apr 2016 • Small-cap US technology stocks modestly outperformed during the year (c. 2%) due to Trump-related strength that largely unwound during the final third of the year. • NAV performance (+56.1%) exceeded the benchmark by 2.7%. • N
Slide 6: Style Headwinds
Style Headwinds US technology small caps vs. large caps: 2012 - Present Source: Bloomberg, 30 August 2017. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 6
Slide 7: Revisiting Highs (But This Time With Earnings)
Revisiting Highs (But This Time With Earnings) PCT share price performance (1997 – present) June 2017 S&P Tech earnings: $37.48 PE: 25.1x March 2000 S&P Tech earnings: $13.09 PE: 70x PCT in Sterling PCT in US Dollars Source: Bloomberg, June 2017; annotations: NDR, Trailing 12 months EPS, June 2017.
Slide 8: Technology: PE Expansion Inline With Market
Technology: PE Expansion Inline With Market Absolute sector valuation (PE): 1992 - Present Source: Ned Davis, 11 August 2017. Past performance is not indicative or a guarantee of future returns. For non-US investor use only. Please refer to the Important Information at the end of this presentation.
Slide 9: Technology: PE Expansion Inline With Market
Technology: PE Expansion Inline With Market Relative sector valuation (PE): 1992 - Present Source: Ned Davis, 11 August 2017. Past performance is not indicative or a guarantee of future returns. For non-US investor use only. Please refer to the Important Information at the end of this presentation.
Slide 10: 'Next-Generation' Valuations
‘Next-Generation’ Valuations Internet valuation: EV / forward 12 month EV/EBITDA levels1 Source: 1. Goldman Sachs, August 2017. Past performance is not indicative or a guarantee of future returns. For non-US investor use only. Please refer to the Important Information at the end of this presentation
Slide 11: 'Next-Generation' Valuations
‘Next-Generation’ Valuations Software as a Service (SaaS) valuation: EV / forward 12 month revenue multiples1 Source: 1. Pacific Crest, August 2017. Past performance is not indicative or a guarantee of future returns. For non-US investor use only. Please refer to the Important Information at the end
Slide 12: 'Next-Generation' Valuations
‘Next-Generation’ Valuations IT security valuation: EV / forward 12 month revenue multiples1 Source: 1. Factset, 14 August 2017. Past performance is not indicative or a guarantee of future returns. For non-US investor use only. Please refer to the Important Information at the end of this presentatio
Slide 13: 'Next-Generation' Valuations
‘Next-Generation’ Valuations Cloud vs legacy valuation EV / trailing 12 month revenue multiples1 14x 12x EV/ trailing 12 month sales 10x 8x 6x 4x 2x 0x Nov-10 May-13 Dec-12 Jun-15 Jul-10 Sep-11 Jan-15 Nov-15 Feb-10 Apr-11 Jul-12 Oct-13 Aug-14 Feb-12 Mar-14 Apr-16 Sep-16 Jul-17 Feb-17 LEGACY CLOUD So
Slide 14: Valuations Supported By Elevated M&A
Valuations Supported By Elevated M&A Technology M&A since 19951 Select M&A activity2 Date Target Acquirer Premium Value $m May-12 Ariba SAP 19% 4,324 Aug-12 Kenexa IBM 42% 1,260 Oct -12 OPNET Riverbed 31% 912 June-13 ExactTarget Salesforce 50% 2,419 Jul -13 Sourcefire Cisco 29% 2,185 Dec-13 Responsy
Slide 15: Digital Disruption
Digital Disruption Source: Polar Capital. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 15
Slide 16: Digital Disruption: Accelerating Tech Adoption
Digital Disruption: Accelerating Tech Adoption Technology Adoption Curves: 1867 - 20171 Source: 1. KPCB 2017. All other sources: visualcapitalist.com. The stocks represented herein do not reflect the entire holdings contained within the Fund. It should not be assumed that recommendations made in fut
Slide 17: Digital Disruption: Technology Deflation
Digital Disruption: Technology Deflation Computing: The cost of 1m transistors Storage: The cost of gigabyte of data Bandwidth: The cost of 1,000Mbps Source: KPCB, historical data. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 17
Slide 18: Digital Disruption: Ubiquitous Computing
Digital Disruption: Ubiquitous Computing Smartphone installed base: 2008 – 2017E1 Number of Connected Devices (bn) : 2015 – 2025E1 Source:.1. https://www.statista.com/statistics It should not be assumed that recommendations made in future will be profitable or will equal performance of the securitie
Slide 19: Digital Disruption: Big Data
Digital Disruption: Big Data Data growth (Zb): 2005 – 2019E Source: United Nations Economic Commission for Europe http://www.nojitter.com/post/240170228/the-network-impact-of-big-data. All opinions and estimates constitute the best judgment of Polar Capital as of the date hereof, but are subject to
Slide 20: Digital Disruption: The Information Age
Digital Disruption: The Information Age ‒ PCT 2014 Source: Polar Capital. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 20
Slide 21: Digital Disruption: The Information Age
Digital Disruption: The Information Age Number of annual Google searches (bn) Source: Polar Capital, Business Insider 2013. All opinions and estimates constitute the best judgment of Polar Capital as of the date hereof, but are subject to change without notice, and do not necessarily represent the v
Slide 22: Digital Disruption: The Information Age
Digital Disruption: The Information Age Number of manuscripts / books produced in Europe: 500 - 1800 500,000,000 "Every single day 15% of the questions 50,000,000 people ask of Google are (ones) we've never seen before” 5,000,000 500,000 50,000 5,000 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16t
Slide 23: Digital Disruption: New Business Models
Digital Disruption: New Business Models Source: Polar Capital. 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
Slide 24: Digital Disruption: New Networks / Scale
Digital Disruption: New Networks / Scale Centralised, decentralised and distributed networks1 >2tr annual searches 466m active users 5 apps > 1bn MAU 2bn MAU, 1.3bn DAU 1.3m properties online 20+ minutes/user/day 1.5m room nights/day WeChat: 963m MAU >5bn rides, 76 countries 536m SKUs, 66m prime sub
Slide 25: Digital Disruption: Artificial Intelligence (AI)
Digital Disruption: Artificial Intelligence (AI) Collapsing Computing Costs (1850 – 2010)1 “Artificial Intelligence technologies will be the most disruptive class of technologies over the next 10 years due to radical computational power, near-endless amounts of data, and unprecedented advances in de
Slide 26: Digital Disruption: The App Economy
Digital Disruption: The App Economy Available Apps in the Apple App Store (2008 – 2017)1 US Time Spent by App Category2 • The average US consumer spends 5 hours per day on mobile devices (+c. 20% y/y)2 Source: 1. Statista (https://www.statista.com/statistics/263795/number-of-available-apps-in-the-ap
Slide 27: Digital Disruption: Advertising
Digital Disruption: Advertising Facebook Users: responsiveness to advertising1 Internet vs. TV Global Ad Spend ($bn): 1995 – 2017E1 • Digital advertising is expect to account for 77c of incremental ad dollars in 20172 Source: 1. KPCB, 2017. 2. (https://digiday.com/uk/global-state-digital-advertising
Slide 28: Digital Disruption: Retail
Digital Disruption: Retail US Retail Store Closings: 1995 – 2017 YTD1 Amazon Prime Subscriber Growth: 2012 – 2017E1 “I don't think retail is dead. “This business is all about reducing response time. Mediocre retail experiences are dead.” In fashion, stock is like food. It goes bad quickly” - Neil Bl
Slide 29: Digital Disruption: Brands
Digital Disruption: Brands Amazon Echo Device US Installed Base1 Amazon Basics, US online market share1,2 Source: 1. KPCB 2017. 2. Amazon market share as at August 2016 . The stocks represented herein do not reflect the entire holdings contained within the Fund. It should not be assumed that recomme
Slide 30: Digital Disruption: Content
Digital Disruption: Content US Recorded Music Revenues by Format ($bn) US Network TV Minutes Delivered • Number of TV channels watched <10% of those received while Pay TV ARPU 10-15x > Netflix • Spotify = 50m paid subscribers, c.20% of global music industry revenues Source: All KPCB 2017. The stocks
Slide 31: Digital Disruption: Asset-Lite
Digital Disruption: Asset-Lite Percentage of licensed drivers per age-group1 Number of Uber rides taken: 2010 - June 20162 • In the UK, the number of people taking driving tests per year has fallen 28% since 2007/83 Source: 1. Business Insider. 2. Daily Mail. 3. Stat from Daily Telegraph. The stocks
Slide 32: Core Investment Themes
Core Investment Themes eCommerce / payments eCommerce worth $342bn in the US2 and $467bn in China4 last year Penetration just 9% / 8% / 11% in US2 / Europe3 / China5 Number of SKUs Logistics + Ecosystem Digital Advertising / Marketing Internet advertising worth $180bn this year6, Social ads ~16% on
Slide 33: Core Investment Themes
Core Investment Themes Software As A Service Usage based pricing disrupting $150bn2 maintenance market As penetration rises (~27% today2 ) expect more strategic M&A by incumbents SMB adoption / TAM expansion Enterprise / ‘rip and replace’ Gaming $100bn gaming market5 c. 3x > movie box office6, Mobi
Slide 34: eCommerce / Payments
eCommerce / Payments • eCommerce growth continues unabated and is forecast to reach $1,9tr in 2016, representing c. 8.7% of total retail sales1 • Mobile becoming an integral part of the shopping experience, enabling greater volumes and new use cases (eg. Uber) • Improvements in payments / delivery c
Slide 35: eCommerce / Payments
eCommerce / Payments • The shift to mobile remains the central and dominant trend in payments while merchant adoption represents the biggest obstacle. • Over time the smartphone is likely to replace the physical wallet, aided by the use of biometric authentication. • As payments are taken out of the
Slide 36: Digital Advertising / Marketing
Digital Advertising / Marketing • Global online advertising expected to reach $195bn in 2016, c. 20% of total advertising spend1 • Paid Search and Social Media markets expected to grow 16% and 33% respectively in 20172 • Size matters: US market dominated by Alphabet and Facebook, who combined captur
Slide 37: Digital Advertising / Marketing
Digital Advertising / Marketing • Global online advertising expected to reach $195bn in 2016, c. 20% of total advertising spend1 • Paid Search and Social Media markets expected to grow 16% and 33% respectively in 20172 • Size matters: US market dominated by Alphabet and Facebook, who combined captur
Slide 38: Software As A Service (SaaS)
Software As A Service (SaaS) • The rental / usage-based model is expanding the software market while threatening incumbent franchises / maintenance. • Enabled by Cloud, software as a service (SaaS) targets a $164bn opportunity by 2022, c. 30% penetrated today1 • Recent acceleration in M&A supportive
Slide 39: Gaming
Gaming • Video game industry worth $100bn in 2016 $118bn by 2019, driven by new console cycle, mobile and AR/VR1 • Improving market dynamics: industry consolidation + focus on blockbuster franchises = greater scale / profitability / barriers to entry • The shift to digital distribution (full game
Slide 40: Cyber Security
Cyber Security • Security remains one of the more attractive areas within traditional IT budgets, expected to grow c. 10% through 20201 • Favourable regulatory backdrop likely to persist – US National Action Plan calls for a c. 35% increase in spending to $19bn in FY172 • However, priorities shiftin
Slide 41: Cloud Infrastructure
Cloud Infrastructure • Having debunked many of the earlier barriers to adoption, we expect Cloud migration to accelerate over the coming years • Computing / storage costs headed lower: Amazon Web Services (AWS) has lowered prices 61 times since launch1 • Expect ‘all’ incremental capacity added beyon
Slide 42: Robotics / Automation
Robotics / Automation • The Fourth Industrial Revolution underway driven by Cyber Physical Systems, Internet of Things and Cloud Services • Over 25% of manufacturing tasks that can be automated may be performed by robots over the next decade1 • Human-robot collaboration will radically alter the way
Slide 43: Robotics / Automation
Robotics / Automation • The Fourth Industrial Revolution underway driven by Cyber Physical Systems, Internet of Things and Cloud Services • Over 25% of manufacturing tasks that can be automated may be performed by robots over the next decade1 • Human-robot collaboration will radically alter the way
Slide 44: Emerging Themes
Emerging Themes Source: Gartner, July 2017. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 44
Slide 45: Voice As A Computing Interface
Voice As A Computing Interface • Human speak 150 vs. type 40 words per minute on average voice should become the most efficient form of computing input1 • Voice queries already account for 20% of Android mobile app searches in the US, while Siri handles >1bn requests per week2 • “As speech recogni
Slide 46: Electric / Autonomous Vehicles
Electric / Autonomous Vehicles • Automotive market ripe for reinvention: connectivity / infotainment, ADAS / autonomous driving, vehicle electrification • Global ADAS / autonomous vehicle penetration forecast to grow from 12% in 2015, to 48% in 2020 and 70% by 20251 • Fully autonomous driving by 202
Slide 47: Augmented / Virtual Reality (AR / VR)
Augmented / Virtual Reality (AR / VR) • Nascent today, but massive LT opportunity (TAM = $80bn by 20251) • Technology driven by smartphone / display / sensor advances • Gaming primary market today, but additional applications include live events (sports / concerts) patient monitoring, real estate an
Slide 48: eSports
eSports • eSports = Competitive gaming as a spectator sport • Social media has grown eSports viewership making professional leagues with full time players / teams possible – 148m enthusiasts and a further 144m occasional viewers – 40% of eSports viewers do not play the games themselves – Twitch reac
Slide 49: Artificial Intelligence
Artificial Intelligence • What is Artificial Intelligence (AI)? Computers telling humans how to act by learning from data w/o being programmed explicitly • Massive market opportunity: $3.6bn (2016) $36bn (2020) $127bn (2025)1 [combination of hardware / software / services] • Why now? i) vast dat
Slide 50: PCT Positioning As At 31 July 2017
PCT Positioning As At 31 July 2017 Sector exposure (%) Market cap exposure (%) Internet Software & Services 25.9% Software 24.8% Large Cap (>$10bn) 71.4% Semiconductors & Semiconductor Equipment 16.0% Mid Cap (>$1bn - $10bn) 25.8% Technology Hardware, Storage & Peripherals 11.6% Electronic Equipment
Slide 51: PCT Positioning As At 31 July 2017
PCT Positioning As At 31 July 2017 Largest overweights Largest underweights Market cap exposure versus benchmark Activision Blizzard Alphabet Advanced Micro Devices Apple Amazon Baidu Applied Materials Broadcom Large-cap -15.5% Axon Enterprise Canon Inc Cognex Corp Cisco Systems Dolby Laboratories I
Slide 52: PCT Positioning As At 31 July 2017
PCT Positioning As At 31 July 2017 Thematic breakdown1,2 Thematic breakdown relative to benchmark (%)1,2 Legacy 15.0% 7% 10.0% Internet 23% 5.0% 0.0% Semiconductors 21% -5.0% -10.0% Cloud: applications Smartphones 14% 2% -15.0% Apple 7% -20.0% Other 1% -25.0% Cloud: infrastructure Big data / AI Smar
Slide 53: PCT Positioning As At 31 July 2017
PCT Positioning As At 31 July 2017 Index Index ex PCT1 Top 100 Apple Sales growth 2017 – PCT vs. benchmark2 50 PE (Median) CY 26.2 18.8 18.8 NY 24.3 16.6 16.8 45 Earnings growth (Median) CY 17.6 14.8 15.3 NY 15.6 10.6 10.4 EV/Sales (Mean) CY 5.6 4.4 4.5 40 NY 4.8 3.9 3.9 EV/Sales (Median) CY 4.9 3.9
Slide 54: Appendix
Appendix For non-US investor use only. Please refer to the Important Information at the end of this presentation. 54
Slide 55: Introduction To The Team
Introduction To The Team • Technology is at the core of the Polar Capital business • One of the largest technology franchises in Europe with c.US$3.3bn under management • Six dedicated technology specialists – strong multi-cycle track record Global Technology Fund Polar Capital Technology Trust Fund
Slide 56: Team Biographies
Team Biographies Ben Rogoff, Director – Technology Experience: 22 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 21 years. Prior to joi
Slide 57: Team Biographies cont.
Team Biographies cont. Xuesong Zhao Experience: 10 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 s
Slide 58: Investment Framework
Investment Framework 4,000+ universe Dynamic definition of technology Thematic overview Real-world changes in user behaviour S-Curve inflections What we look for Secular themes / pure-plays Last-generation winners What we avoid Public venture capital Growth bias – rev/earnings / cash flow Valuation
Slide 59: Thematic Investing: Hype vs. Reality
Thematic Investing: Hype vs. Reality Polar Capital Technology Team Early stage Searching for revenue growth and investors cash-flow inflection Index / ETF R&D High growth Low growth No growth negative OM% expanding OM% stable OM% uncertain / declining OM% Cognitive Expert Advisors) Machine Learning
Slide 60: New Cycles Challenge The Value Of Incumbency
New Cycles Challenge The Value Of Incumbency Inflation adjusted UK holiday expenditure: 1951-1996 overseas domestic Source: seasidehistory.co.uk. For non-US investor use only. Please refer to the Important Information at the end of this presentation. 60
Slide 61: Hyper-Personalisation (In The Real World)
Hyper-Personalisation (In The Real World) An extra large, wet, double-shot Coffee caramel macchiato (and WiFi) £1.00 £4.00 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
Slide 62: 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 63: 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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