Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Shareholder Meeting (October 2018)
32 slides from Australian Foundation Investment's shareholder meeting presentation, Oct 9, 2018
Slide 1: 2018 Annual General Meeting Presentation
9 October 2018 For personal use only The Manager ASX Market Announcements Australian Securities Exchange Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited 2018 Annual General Meeting Presentation Dear Sir / Madam Please fin
Slide 2: Annual General Meeting 2018 Presentation
For personal use only Annual General Meeting 2018 Presentation
Slide 3: Disclaimer
Disclaimer Australian Foundation Investment Company Limited and its subsidiary AICS (AFSL 303209), their related For personal use only entities and each of their respective directors, officers and agents (together the Disclosers) have prepared the information contained in these materials in good fai
Slide 4: Our Investment Approach
For personal use only Our Investment Approach Annual General Meeting 2018
Slide 5: AFIC is a Long Term Investor in a Diversified Portfolio of Quality Companies
AFIC is a Long Term Investor in a Diversified Portfolio of Quality Companies For personal use only Annual General Meeting 2018
Slide 6: Growth of a $1,000 Investment in AFIC Shares – 10 years to 30 September 2018
Growth of a $1,000 Investment in AFIC Shares (including benefit of franking) – 10 years to 30 September 2018 For personal use only Assumes the reinvestment of AFIC dividends and an investor can take full advantage of the franking credits Annual General Meeting 2018
Slide 7: Share Price is trading at a very slight premium to Net Asset Backing
Share Price is trading at a very slight premium to Net Asset Backing For personal use only Annual General Meeting 2018
Slide 8: Financial Results
For personal use only Financial Results Annual General Meeting 2018
Slide 9: Financial Results
Financial Results For personal use only Management expense ratio of 0.14% Annual General Meeting 2018
Slide 10: Ending refundability of franking credits
Ending refundability of franking credits • We are again highlighting that the Labor Party has announced that if elected For personal use only it will stop excess franking credits being refunded to some shareholders. • This will impact individuals and super funds – in particular, self-managed super f
Slide 11: Ending refundability of franking credits – our response
Ending refundability of franking credits – our response • AFIC has provided a template letter on its website for shareholders to write For personal use only to their parliamentary representatives - personal examples are likely to have the biggest impact on local members. • We have engaged through va
Slide 12: Market Settings and the Portfolio
For personal use only Market Settings and the Portfolio Annual General Meeting 2018
Slide 13: Large companies have underperformed over the year to September 2018
Large companies have underperformed over the year to 30 September 2018 For personal use only Source: FactSet Annual General Meeting 2018
Slide 14: With some growth sectors very strong and banks at the other extreme
With some growth sectors very strong and banks at the other extreme – returns to 30 September 2018 For personal use only Returns include dividends Annual General Meeting 2018
Slide 15: High growth firms now trade above 30x forward P/E
High growth firms now trade above 30x forward P/E, in line with the peak of the dotcom bubble ASX 200 Valuation dispersion For personal use only Source: FactSet, Goldman Sachs Global Investment Research. Annual General Meeting 2018
Slide 16: High PE stocks have outperformed low PE names by 25% year to date
High PE stocks have outperformed low PE names by 25% year to date For personal use only Source: FactSet, UBS Annual General Meeting 2018
Slide 17: Relative Portfolio and Share Price Performance, including franking
Relative Portfolio and Share Price Performance, including franking – Per Annum Returns to 30 September 2018 For personal use only Assumes an investor can take full advantage of franking credits. Annual General Meeting 2018
Slide 18: Top 10 holdings 30 September 2018
Market moves as well as purchases/sales have changed the profile of the Portfolio – top 10 holdings 30 September 2018 Major changes – For personal use only Rank Company % of Portfolio % as at Sept 2017 1 Commonwealth Bank of Australia 7.7% 8.9% 2 BHP 6.7% 5.4% 3 Westpac Banking Corporation 5.9% 7.4%
Slide 19: Next 10 holdings 30 September 2018
Market moves as well as purchases/sales have changed the profile of the Portfolio – next 10 holdings 30 September 2018 Major changes – For personal use only Rank Company % of Portfolio % as at Sept 2017 11 Woolworths Group* 2.5% 1.9% 12 Amcor 2.3% 13 Oil Search 2.0% 14 Woodside Petroleum* 2.0% 1.4%
Slide 20: Profile of the portfolio by size of company September 2018
Profile of the portfolio by size of company September 2018 – looking for growth opportunities some of which is outside of large companies For personal use only Annual General Meeting 2018
Slide 21: Exposure to businesses with revenue generated from overseas – 43% of the portfolio
The other interesting feature of the portfolio is the exposure to businesses with revenue generated from overseas – 43% of the portfolio For personal use only Key examples: • BHP Billiton • Macquarie Group • Seek • CSL • Woodside Petroleum • ResMed • Rio Tinto • Brambles • Fisher & Paykel • Amcor •
Slide 22: Australian Banks – growth in household debt has been a major tailwind
Australian Banks – growth in household debt has been a major tailwind Housing Prices and Household Debt Ratio to annual household disposable income Upward trend in housing prices driven by For personal use only Housing prices Household debt increased household debt: • Growing population, with immigr
Slide 23: Australian Banks – Net Income growth has been strong
Australian Banks – Net Income growth has been strong on the back of these trends however going forward….. $ billion Net Income of 4 major banks Credit growth likely to be more subdued: For personal use only • Lower income growth. • Tighter lending standards: APRA Hayne Royal Commission Slowing
Slide 24: Featured Holdings – Macquarie Group
Featured Holdings – Macquarie Group What we like: For personal use only • Owner driver culture. • Infrastructure exposure. Energy (renewable) Emerging markets Share price GDP/ population growth • Technology exposure. Source: FactSet. Annual General Meeting 2018
Slide 25: Featured Holdings – Woolworths
Featured Holdings – Woolworths What we like: For personal use only • ‘New’ management with clear strategy. • Progress on turnaround: Australian supermarkets regained market leadership Share IT Investment price Exit Masters Simplify BigW • Next phase: Ongoing investment opportunities. • From
Slide 26: Featured Holdings – Reliance Worldwide
Featured Holdings – Reliance Worldwide What we like: For personal use only • Category leader in Push to Connect plumbing fittings market. • Innovative company with R&D focus. Share price • Multiple growth drivers in North American and European markets. • Self funding, cash generative business model.
Slide 27: Closing Remarks
For personal use only Closing Remarks Annual General Meeting 2018
Slide 28: Recent Company Reporting Season
Recent Company Reporting Season • CBA, bank sector: struggling for earnings growth. For personal use only • Healthcare: very strong earnings growth but on high P/E’s (Hospitals the exception). • Resources: very strong cash generation, returning capital to shareholders. • Energy sector: rising cash f
Slide 29: Current Issues We Are Focusing On
Current Issues We Are Focusing On • Met with 100+ companies in recent reporting season. For personal use only • Investment team visited UK/Europe/US in September and in November will be visiting China/HK. • Themes: Australian credit growth/ housing market – slowing. Continued impact of technolog
Slide 30: Last years and next years?
Last 10 years and next 10 years? For personal use only Annual General Meeting 2018
Slide 31: Other factors are still at play…
Other factors are still at play… For personal use only Annual General Meeting 2018
Slide 32: Australian Foundation
AUSTRALIAN FOUNDATION
Australian Foundation Investment Company — Shareholder Meeting (October 2018) on 6ix