Pershing Square Holdings, Ltd. Public Class USD Accum.Shs · LSE:PSH
Pershing Square Holdings, Ltd. Public Class USD Accum.Shs — Pershing Square Holdings — Investor Presentation (February 2019)
58 slides from Pershing Square Holdings, Ltd. Public Class USD Accum.Shs's investor presentation, Feb 13, 2019
Slide 1: London Investor Meeting
London Investor Meeting February 13, 2019 Pershing Square Capital Management, L.P.
Slide 2: Disclaimer
Disclaimer All information provided herein is for informational purposes only and should not be deemed as a recommendation to buy or sell any security mentioned. Pershing Square Capital Management, L.P. (“Pershing Square”) believes this presentation contains a balanced presentation of the performanc
Slide 3: Agenda
Agenda Chairperson’s Introduction 2018 PSH Performance Review Business & Organizational Update Current Portfolio Update Q&A 3
Slide 4: Chairperson's Introduction
Chairperson’s Introduction
Slide 5: Board of Directors of PSH
Board of Directors of PSH All directors are independent of Manager other than Nicholas Botta Anne Farlow – Chairperson Richard Battey Nicholas Botta William Scott Bronwyn Curtis (as of April 2018) Richard Wohanka (as of April 2018) 5
Slide 6: PSH Board Process
PSH Board Process Quarterly in-person meetings, telephonic meetings as needed Review investment performance and portfolio Review operational risk management Shareholder register Investor relations update Expenses Any regulatory matters Additional matters 6
Slide 7: 2018 Corporate Actions
2018 Corporate Actions ✓ Elected two new independent directors, Bronwyn Curtis and Richard Wohanka, to the PSH Board in April 2018 ✓ Removed PSH’s 4.99% ownership limit in April 2018, which creates the potential for additional demand for PSH shares ✓ Completed a $300 million company tender in May 20
Slide 8: PSH Initiates a Quarterly Dividend
PSH Initiates a Quarterly Dividend Beginning Q1 2019, PSH will pay a quarterly dividend of $0.10 per share, a 2.5% yield at the current PSH share price1 ✓ PSH’s current dividend yield is similar to that of the S&P 500 PSH is likely to continue investing primarily in companies in the S&P 500 The
Slide 9: Benefits of a Quarterly Dividend
Benefits of a Quarterly Dividend ✓ Expands the universe of potential PSH investors who prefer or require dividends as part of their investment strategy ✓ Dividend will represent return of capital at NAV which can be reinvested in PSH shares at a discount to NAV Optional dividend reinvestment progr
Slide 10: 2018 PSH Performance Review
2018 PSH Performance Review
Slide 11: Pershing Square Holdings, Ltd. Annual Net Returns
Pershing Square Holdings, Ltd. Annual Net Returns Since 1/1/2013 Year PSH S&P 500 2013 9.6% 32.4% 2014 40.4% 13.7% 2015 (20.5%) 1.4% 2016 (13.5%) 11.9% 2017 (4.0%) 21.8% 2018 (0.7%) (4.4%) 2019 YTD (2/12/2019) 24.7% 9.7% Past performance is not necessarily indicative of future results. All investmen
Slide 12: 2019 is Off to A Strong Start
2019 is Off to A Strong Start 1 Stock Price Performance incl. Dividends YTD (2/12/2019) Earnings Date Restaurant Brands International 22.9% 2/11/2019 Automatic Data Processing 14.0% 1/30/2019 Chipotle Mexican Grill 37.5% 2/6/2019 Lowe's 8.2% 2/27/2019 Starbucks 8.9% 1/24/2019 Hilton Worldwide 3.5% 2
Slide 13: Substantial Outperformance in a Volatile Market
Substantial Outperformance in a Volatile Market 1 PSH Outperformance vs. S&P 500 in 2018 and YTD 2019 (2/12/2019) 1,500 bps 375 bps 2018 YTD (2/12/2019) Net Returns 2018 YTD (2/12/2019) PSH (0.7%) 24.7% S&P 500 (4.4%) 9.7% Past performance is not necessarily indicative of future results. All investm
Slide 14: Cumulative Net Returns Since Inception (1/1/04)
Cumulative Net Returns Since Inception (1/1/04) Pershing Square, L.P. Net Returns vs. S&P 500 through February 12, 2019 Data represents performance of PSLP, the fund managed by Pershing Square with the longest track record. Past performance is not necessarily indicative of future results. All invest
Slide 15: Long-Term Performance in Up & Down Markets
Long-Term Performance in Up & Down Markets Pershing Square, L.P. Net Returns vs. S&P 500 (1/1/2004 through 1/31/2019)(1) Past performance is not necessarily indicative of future results. All investments involve the possibility of profit and the risk of loss, including the loss of principal. Please s
Slide 16: 2018 Contributors (Gross Returns)
2018 Contributors (Gross Returns) Contributors PSH Chipotle Mexican Grill 6.2% Automatic Data Processing 5.5% Starbucks 3.3% Accretion from Share Buyback1 2.1% Lowe's 0.7% All Other Positions 0.4% Total Contributors 18.2% Past performance is not necessarily indicative of future results. All investme
Slide 17: 2018 Detractors (Gross Returns)
2018 Detractors (Gross Returns) Detractors PSH Fannie Mae & Freddie Mac (4.6%) The Howard Hughes Corporation (3.6%) Herbalife (Short) (3.3%) Restaurant Brands International (2.2%) United Technologies (2.2%) All Other Positions (1.6%) Total Detractors (17.5%) Past performance is not necessarily indic
Slide 18: Long and Short Attribution (Gross Returns)
Long and Short Attribution (Gross Returns) Pershing Square, L.P. Long Short / Hedge 2004 61.6% (5.9%) 2005 53.7% (1.6%) 2006 36.9% (6.9%) 2007 (5.6%) 34.9% 2008 (23.2%) 11.6% 2009 60.5% (11.4%) 2010 43.8% (4.7%) Pershing Square Holdings, Ltd. 2011 2.5% (2.1%) 2012 16.9% 1.1% Long Short / Hedge 2013
Slide 19: Total Assets Under Management
Total Assets Under Management ($ in millions) 12/31/2018 AUM 2/12/2019 AUM Pershing Square, L.P. $946 $1,141 Pershing Square International, Ltd. 991 1,189 Pershing Square Holdings, Ltd. 3,833 4,781 Pershing Square II, L.P. 63 76 Total Core Fund AUM $5,833 $7,187 PS VI Funds (ADP Co-Investment Vehicl
Slide 20: Business and Organizational Update
Business and Organizational Update
Slide 21: Our 2018 Strategic Initiatives: What We Said
Our 2018 Strategic Initiatives: What We Said Source: 2018 Annual Investor Dinner Presentation 21
Slide 22: Our 2018 Strategic Initiatives: What We Did
Our 2018 Strategic Initiatives: What We Did 1 Reduced headcount from 74 employees at peak to 38 employees today resulting in a more focused and investment-centric organization 2 Opportunistically redeployed capital into four new investments that are aligned with our core investment principles 3 Cons
Slide 23: 2018 Was A Year Of Transition Organizationally
1 2018 Was A Year Of Transition Organizationally Smaller investment-centric organization Bill delegated day-to-day operational and investor relations duties to other members of the firm Minimal media footprint Pershing Square Advisory Board Added Dawn Lepore, former CEO and President of Dr
Slide 24: Stable Path Ahead
1 Stable Path Ahead Limited Organizational Change We have the right team in place to compound our capital for years without any meaningful headcount changes Stable Capital Base PSH represents ~67%1 of the equity of Pershing Square core funds and 71%1 of the assets under management (including PSH
Slide 25: New Organizational Chart
1 New Organizational Chart 25
Slide 26: Investment Team Bios
1 Investment Team Bios Career PSCM Employee Education and Summary Prior Experience Experience Tenure (Years) (Years) William Ackman Gotham Partners, Co-founder and Portfolio Manager (1992 - 2003) CEO / Portfolio M.B.A., Harvard Business School, 1992 29 15 Manager A.B., Harvard College, magna cum lau
Slide 27: New Idea Generation Reflects Core Principles
2 New Idea Generation Reflects Core Principles New investments in 2018 are in high-quality, simple, predictable, free-cash- flow-generative businesses with formidable barriers to entry Free-Cash-Flow Formidable Compelling Highly Liquid Simple & -Generative Barriers to Value Mid/Large Cap Predictable
Slide 28: Creating Value Through Activism
3 Creating Value Through Activism In 2018, Pershing Square collaborated with our portfolio companies to create long-term value Constructively engaged with company as it accelerated its long-term business transformation Ali Namvar and Matthew Paull joined the board in December 2016 Brian Niccol
Slide 29: The Pershing Square Portfolio: Higher Business Quality and Earnings Growth
The Pershing Square Portfolio: Higher Business Quality and Earnings Growth than Market We expect our portfolio to compound earnings and intrinsic value at a much higher rate than the market (analysis below excludes HHC, FNMA, FMCC)1,2 2019E EBIT Margin ‘18E - ‘20E EBIT Growth ‘18E - ‘20E EPS Growth
Slide 30: The Pershing Square Portfolio: Discounted Valuation at PSH
The Pershing Square Portfolio: Discounted Valuation at PSH Share Price $64 $150 $594 $99 $70 $74 $124 Incl. 27% $47 $109 $432 $72 $51 $54 $90 Discount1 NTM P / E Multiple by Portfolio Company2 49x 36x 23x 25x 26x 24x 17x 18x 16x 19x 17x 15x 12x 11x QSR ADP CMG LOW SBUX HLT UTX Current Current incl.
Slide 31: Pershing Square Holdings vs. a Hedge Fund
Pershing Square Holdings vs. a Hedge Fund Traditional Equity Hedge Fund Pershing Square Holdings Short-term investment horizon Long-term investment horizon Passive ownership Ability to effect change through activism Short-term capital base Stable capital base ‘Mile wide, inch deep’ div
Slide 32: PSH is an Investment Holding Company
PSH is an Investment Holding Company ✓ The Pershing Square investment strategy has a long-term track record PSLP’s compound annual net return, since inception in 2004, is 13.8% vs. 8.4% for the S&P 500 over the same period1 ✓ PSH’s current 27% discount to NAV implies a 0.73x price / book value rat
Slide 33: Pershing Square Holdings vs. the S&P 500
Pershing Square Holdings vs. the S&P 500 We Believe PSH is an Attractive Alternative to the S&P 500 ✓ Access to a portfolio of high-quality, simple, predictable, free-cash-flow- generative, generally large cap U.S. companies at a 27% discount to NAV1 ✓ In light of the discount to NAV, the ‘look-thro
Slide 34: Current Portfolio Update
Current Portfolio Update
Slide 35: Chipotle Mexican Grill ("CMG")
Chipotle Mexican Grill (“CMG”) Chipotle is now executing on its vast unrealized growth potential 2018 was a year of organizational transformation Brian Niccol, formerly CEO of Taco Bell, joined Chipotle as CEO in March Executive team strengthened with external hires in the roles of Chief Marketi
Slide 36: Pershing Square's Constructive Activism
Pershing Square’s Constructive Activism Sept. 6, 2016 Pershing Square files 13D announcing ~10% stake in Chipotle Chipotle names Steve Ells sole CEO concurrent with the resignation Dec. 12, 2016 of former co-CEO Monty Moran Chipotle announces a board refresh in which four new directors are Dec
Slide 37: CMG Share Price Performance Since Inception
CMG Share Price Performance Since Inception CMG’s share price increased 49% in 2018 and 37% year-to-date in 20191 CMG share price performance from 8/4/2016 to 2/12/2019 9/6/16: Pershing Square $594 12/16/16: CMG announces four new files 13D after market directors added to its now 12-person board, cl
Slide 38: Automatic Data Processing ("ADP")
Automatic Data Processing (“ADP”) ADP is substantially transforming its business ADP has accelerated numerous transformation initiatives Accelerating Service Alignment Initiative (cost cutting and facilities consolidation program) Announced Early Retirement Program Accelerating roll-out of N
Slide 39: ADP Share Price Performance Since Inception
ADP Share Price Performance Since Inception ADP’s share price including dividends increased 14% in 2018 and 14% year-to-date in 20191 ADP share price performance from 5/10/2017 to 2/12/2019 6/12/18: ADP hosts Analyst Day; increases long-term earnings target $150 3/1/18: ADP announces 8/17/17: PSCM h
Slide 40: Restaurant Brands International ("QSR")
Restaurant Brands International (“QSR”) QSR is a high-quality business with significant long-term growth potential trading at a discounted valuation Continued strong business performance in 2018 Net unit growth of 5%, including 6% at Burger King1 Healthy same-store-sales growth at Burger King (+
Slide 41: QSR Share Price Performance Since Inception
QSR Share Price Performance Since Inception QSR’s share price including dividends decreased 12% in 2018 and increased 23% year-to-date in 20191 QSR share price performance from 6/19/2012 to 2/12/2019 2/1/17: QSR announces acquisition of Popeyes $64 Share price 1/23/19: QSR announces leadership 8/24/
Slide 42: Lowe's ("LOW")
Lowe’s (“LOW”) Lowe’s is a high-quality business with strong new leadership that is committed to narrowing the performance gap with Home Depot New management team has relevant track record of success New CEO Marvin Ellison played important role in turnaround at Home Depot New leadership team inc
Slide 43: LOW Share Price Performance Since Inception
LOW Share Price Performance Since Inception LOW’s share price including dividends increased 8% from our average cost at inception to December 31, 2018, and 8% year-to-date in 20191 LOW share price performance from 4/6/2018 to 2/12/2019 Housing data indicates a recent slowdown in the market 8/22/18:
Slide 44: Starbucks ("SBUX")
Starbucks (“SBUX”) We expect Starbucks to compound long-term earnings at a high rate driven by strong secular growth and outstanding unit economics Dominant brand in the growing and attractive specialty coffee category Loyal customer base with frequent consumption habit and trade-up potential Wi
Slide 45: SBUX Share Price Performance Since Inception
SBUX Share Price Performance Since Inception SBUX’s share price including dividends increased 27% from our average cost at inception to December 31, 2018, and 9% year-to-date in 20191 SBUX share price performance from 7/13/2018 to 2/12/2019 11/1/18: SBUX reports fiscal Q4 earnings with U.S. SSS of +
Slide 46: Hilton Worldwide ("HLT")
Hilton Worldwide (“HLT”) Hilton is a high-quality, asset-light, high-margin business with significant growth potential led by a superb management team Collection of scaled brands and loyalty program create strong network effects for consumers and cost and revenue advantages for hotel owners Indu
Slide 47: HLT Share Price Performance Since Inception
HLT Share Price Performance Since Inception HLT’s share price including dividends decreased 2% from our average cost at inception to December 31, 2018, and increased 4% year-to-date in 20191 HLT share price performance from 10/8/2018 to 2/12/2019 10/24/18: HLT Q3 2018 earnings call. Reported US RevP
Slide 48: United Technologies ("UTX")
United Technologies (“UTX”) High-quality industrial conglomerate with market-leading businesses in aerospace, elevators and HVAC Undergoing transformative change Recently announced three-way business separation likely to occur in 1H 2020 Recently acquired Rockwell Collins, creating the premiere
Slide 49: UTX Share Price Performance Since Inception
UTX Share Price Performance Since Inception UTX’s share price including dividends decreased 16% from our average cost at inception to December 31, 2018, and increased 16% year-to-date in 20191 UTX share price performance from 2/6/2018 to 2/12/2019 5/17/2018: Pershing Square releases 11/26/2018: UTX
Slide 50: Howard Hughes Corporation ("HHC")
Howard Hughes Corporation (“HHC”) Self-funded, fully integrated real estate developer with seasoned management team, proven track record, and world-class assets Master Planned Communities (“MPC”) Controlled MPCs in desirable locations create substantial cash flow from ongoing residential land sale
Slide 51: HHC Share Price Performance Since Inception
HHC Share Price Performance Since Inception HHC’s share price decreased 26% in 2018 and increased 14% year-to- date in 20191 HHC’s share price performance from 11/9/2010 to 2/12/2019 Share price $111 $37* Note: The performance of HHC’s share price is provided for illustrative purposes only and is no
Slide 52: Fannie Mae ("FNMA") and Freddie Mac ("FMCC")
Fannie Mae (“FNMA”) and Freddie Mac (“FMCC”) We believe that there is near-term potential for a favorable resolution of the status of Fannie and Freddie Recent developments have increased the likelihood of a resolution Treasury Secretary Mnuchin has cited GSE reform as a priority for 2019 Taxp
Slide 53: FNMA and FMCC: Path Towards Reform
FNMA and FMCC: Path Towards Reform The dialogue around GSE reform in both the administration and Congress has intensified over the last few weeks We continue to believe that any proposal for housing finance reform must satisfy the following conditions in order to succeed Simplicity to ensure bro
Slide 54: FNMA and FMCC Performance Since Inception
FNMA and FMCC Performance Since Inception FNMA and FMCC share prices decreased 60% and 58%, respectively, in 2018 and increased 141% and 130%, respectively, year-to-date in 20191 FNMA and FMCC share price performance from 10/7/2013 to 2/12/2019 5/5/14: Pershing Square 12/21/17: Letter agreement betw
Slide 55: The Pershing Square Portfolio: We Believe Our Portfolio Has Substantial Upside
The Pershing Square Portfolio: We Believe Our Portfolio Has Substantial Upside Company Summary Investment Thesis Capital-light, growing royalty stream from leading restaurant brands with high long- term unit growth Defensive, high-growth business with substantial margin expansion with business t
Slide 56: Q&A
Q&A
Slide 57: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results The performance results of PSH and Pershing Square, L.P., the Pershing Square fund with the longest performance track record, included in this presentation are presented on a gross and net-of-fees basis. Gross and net performance include the re
Slide 58: Additional Disclaimers and Notes to Performance Results
Additional Disclaimers and Notes to Performance Results Past performance is not necessarily indicative of future results. All investments involve the possibility of profit and the risk of loss, including the loss of principal. This presentation does not constitute a recommendation, an offer to sell
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