Africa Opportunity Fund Ltd. · LSE:AOF
Africa Opportunity Fund — Investor Presentation (February 2016)
32 slides from Africa Opportunity Fund's investor presentation, February 2016
Slide 1: Africa Opportunity Fund
Confidential and Proprietary AFRICA OPPORTUNITY FUND February 2016 LSE: AOF
Slide 2: Summary
Summary Africa Opportunity Fund • Absolute return - oriented strategy solely focused on Africa • Listed closed-end fund that invests across asset classes and continent| Value driven Africa Opportunity Partners Track Record • 585% cumulative return investing in Africa since 2003, with three down year
Slide 3: Contents
Contents I. Summary II. Africa Opportunity Fund i. Investment Strategy and Universe ii. Track Record iii. Portfolio and Case Studies III. Appendix I: The African Investment Opportunity IV. Appendix II: AOF Reference Data i. Team ii. C Share iii. Monthly returns iv. References 3 Confidential & Propri
Slide 4: Investment Strategy
Investment Strategy Absolute return-oriented strategy solely focused on Africa AOF’s closed-end structure gives manager flexibility to invest across asset classes and across the continent 1) Targets deep-value investments with a preference for companies generating high ROAs with low leverage and hig
Slide 5: African Universe
African Universe Overview • Access to Africa via Equity and Fixed Income • 25 Exchanges represent a 33% increase over 10 years Africa-Related Number Size $ mm securities • Privatization, globalization and foremost the development of the African middle class has driven the Equities 1 185 936 888 incr
Slide 6: Manager Track Record
Manager Track Record* Generated 585% cumulative net return investing in Africa since 2003 Investment Team Track Record Source: AOP and Bloomberg * See Slide 26 for Investment Team Details 6 Confidential & Proprietary LSE: AOF
Slide 7: Manager Track Record
Manager Track Record* Outperformed all indices over the past 12 years Source: AOP and Bloomberg 7 Confidential & Proprietary LSE: AOF
Slide 8: AOF Portfolio Breakdown
AOF Portfolio Breakdown Sector Asset Class Geography Source: AOF 30 June 2015 Report 8 Confidential & Proprietary LSE: AOF
Slide 9: AOF A Shares - Top Ten Positions
AOF A Shares - Top Ten Positions Largest Holdings Description % of NAV Sonatel Fast growing mobile phone provider in Senegal and neighbouring countries 19.9% Enterprise Group Ltd Property and life insurance company in Ghana 19.6% IAM Gold - 6.75% 10/01/20 Medium sized gold producer with operations i
Slide 10: AOF C Shares - Top Ten Positions
AOF C Shares - Top Ten Positions Largest Holdings Description % of NAV Nigerian listed reinsurer operating in 35 African countries, offering marine & Continental Reinsurance Ltd 9.0% aviation, bond, auto, engineering, general accident and life reinsurance services Kenya Power & Lighting Ltd Distribu
Slide 11: Sonatel – Case Study
Sonatel – Case Study Public Equity – Value & Income • Dominant telecom company in West Africa with EBITDA of $820 mm for the 12 months ending June 2015 • EBITDA margin is 53%, Net Margin is 24%, ROA is 20%, and ROE is 41% • Current market capitalization is $4.0 bn, P/E is 11.7x, dividend yield is 6.
Slide 12: Tanzania Breweries – Case Study
Tanzania Breweries – Case Study Public Equity – Value & Growth • Tanzania Breweries is a Tanzania based brewer, with an estimated market share of 75% • Consumption is 10 liters/capita versus 12 liters/capita for the African universe* • EBIT and Net income margins have averaged 29% and 19% over the p
Slide 13: Massmart Holdings – Case Study
Massmart Holdings – Case Study Public Equity – Short Position • Massmart distributes and retails general merchandise, food, and liquors in Southern Africa - South Africa makes up 92% of revenues • Walmart acquired 51% of Massmart in June 2011 • Weaker economic growth and strong competition in South
Slide 14: Diamond Corp – Case Study
Diamond Corp – Case Study Public Equity – Emerging growth • DiamondCorp is an emerging diamond producer established in 2005 to acquire 74% of the Lace Diamond Mine in South Africa • The Lace Mine was active from 1901 to 1931, and mothballed by DeBeers for over 60 years • Estimated to have 13mm carat
Slide 15: Contents
Contents I. Summary II. Africa Opportunity Fund i. Investment Strategy and Universe ii. Track Record iii. Portfolio and Case Studies III. Appendix I: The African Investment Opportunity IV. Appendix II: AOF Reference Data i. Team ii. C Share iii. Monthly returns iv. References 15 Confidential & Propr
Slide 16: The African Investment Opportunity
The African Investment Opportunity • Resilient GDP with high real interest rates • Rising working population, middle class and disposable income • Rising productivity and efficiencies • Inadequate infrastructure and insufficient intra-African trade • Weakening currencies, declining exports and risin
Slide 17: Favorable Demographics
Favorable Demographics • Middle Class Expansion Large and rising working population = • Consumption • Urbanization Working-age Population 1200 1100 1000 900 Africa 800 India 700 China Millions 600 SE Asia 500 L. America 400 Europe 300 N. America 200 Japan 100 0 Source: McKinsey Global Institute – Li
Slide 18: Demographic Dividend
Demographic Dividend Only region in the world with decreasing Dependency Ratio over next 100 years Demographic Dividend Rise of the African Consumer 100% Africa 90% 44m 47m 55m 80% Latam 70% 71m Asia 60% 63m 50% 47m World 40% 56m 41m 30% US 29m 126m 20% 84m 41m 57m 27m 10% 18m Europe 29m 10m 16m 0%
Slide 19: Rising Productivity
Rising Productivity Increasing Productivity, leading to lower costs and higher returns on equity for African companies • Sonatel (West African Telecom) has seen subscribers per employee rise 71x in 16 years • Okomu (West African Palm Oil) has seen production per employee rise 10x in 22 years Product
Slide 20: Growth with High Real Interest Rates
Growth with High Real Interest Rates Capital is scarce in Africa, so investors are rewarded with high returns: As rates come down, asset prices will rise *90 day rate – CPI Source: Bloomberg and Central Bank webpages Feb 2016 20 Confidential & Proprietary LSE: AOF
Slide 21: Africa’s Disappearing Currencies
Africa’s Disappearing Currencies • The Zambia Kwacha depreciated 42% against the US Dollar in 2015 • The Ghanaian Cedi has lost a cumulative 52% against the US Dollar since 2012 • Short term adjustment is painful - but longer term devaluations are the medicine Country Delta 2013 Delta 2014 Delta 201
Slide 22: Profitable African Financial Sector
Profitable African Financial Sector Domestic credit still roughly only a third of BRIC levels • In 2012 Africa’s average domestic credit was just 34% of GDP vs. 95% for BRICS and 148% for OECD Scarce Credit leads to High Returns in the Financial Sector • Growth rates of Africa financial sector likel
Slide 23: Stability of USD Earnings Despite FX Volatility
Stability of USD Earnings Despite FX Volatility Long assets that preserve their real value + short liabilities that depreciate in real terms = Positive US PnL and book value growth • Despite the Ghanaian Cedi depreciating by 49% since 2012 Enterprise Group’s USD EPS has risen 13% and Standard Charte
Slide 24: AOF’s Bank & Consumer Finance Portfolio
AOF’s Bank & Consumer Finance Portfolio 33% of Africa Opportunity Fund is invested in the Financial Sector as of September 2015 Company % of AOF Gearing P/B ROA ROE Enterprise Group Ltd 14.6% 2.2 1.6 15% 27% Continental Reinsurance 5.0% 2.0 0.7 3% 6% Average - Insurance 2.1 1.1 9% 17% Letshego Holdi
Slide 25: Contents
Contents I. Summary II. Africa Opportunity Fund i. Investment Strategy and Universe ii. Track Record iii. Portfolio and Case Studies III. Appendix I: The African Investment Opportunity IV. Appendix II: AOF Reference Data i. Team ii. C Share iii. Monthly returns iv. References 25 Confidential & Propr
Slide 26: Managers
Managers Francis Daniels Robert Knapp • 2007: Launched Africa Opportunity Fund • 2007: Launched Africa Opportunity Fund • 1998 – 2014: Johannesburg. Specialist in insurance, • 1997 – 2014: New York/Boston. Specialist in closed consumer finance, and natural resources: end fund arbitrage, distressed a
Slide 27: Board of Directors
Board of Directors Myma Belo-Osagie (Chair nominee) Shingayi Mutasa • Practicing attorney and former Managing Partner at Udo, • Director of Masawara PLC, a Zimbabwe-focused investment Udoma & Belo-Osagie law firm in Lagos, Nigeria company admitted to AIM Market, and CEO of its investment • Member of
Slide 28: C Share
C Share When: April 2014 Size: $29.2million (29,200,000 C shares) Listing: Admission of new C shares and existing ordinary shares to trading on the London Stock Exchange’s Specialist Fund Market (with admission to trading on AIM cancelled and listing on SFM as well) C Shares: C Shares are advantageo
Slide 29: References
References • Case for Africa: 2012-2014 data see http://www.imf.org/external/pubs/ft/weo/2016/01/pdf/text.pdf 2011 data see http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/text.pdf • Favorable Demographics: McKinsey & Company June 2010 Lions on the move (page 19): http://www.mckinsey.com/insight
Slide 30: Disclaimer
Disclaimer For the purposes of this presentation you have been classified as a professional investor. Nothing in this presentation should be construed as investment advice and is not suitable for a retail audience. This presentation is for information purposes only. It is not a prospectus, advertise
Slide 31: Disclaimer, continued
Disclaimer, continued Any views contained herein are based on financial, economic, market and other conditions prevailing as of the date of this presentation. The information contained in this presentation does not purport to cover all matters that may be relevant for the purposes of considering whe
Slide 32: Contact Information
Contact Information Francis Daniels Anibok Investment Research Ltd 1 Melrose Arch, Suite 3 Melrose Boulevard Johannesburg 2196 South Africa +27-11-684-1528 fdaniels@anibok.com 32 Confidential & Proprietary LSE: AOF
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