SKAGEN Global Statusrapport mai 2014

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1 SKAGEN Global Statusrapport mai 04

2 Hovedtrekk i mai 04 SKAGEN Global* gjorde det bedre enn referanseindeksen i mai. Fondet steg,0 prosent mens MSCI All Country World Index steg,5 prosent. Så langt i år har SKAGEN Global en avkastning på, prosent, noe som er 0,6 prosentpoeng bedre enn referanseindeksen. Verdens største PC-produsent Lenovo Group kom inn i porteføljen i mai. I tillegg til produksjon av datamaskiner er selskapet også en betydelig produsent av nettbrett, smart-telefoner og servere. Vi økte også posten i kleskjeden GAP. Vil solgte oss ut av Tesco og ADT, og reduserte postene i Kyocera, China Unicom og Samsung Electronics. Netto kontantbeholdning i SKAGEN Global økte fra,9 i april til,0 prosent ved utgangen av mai. De 0 største postene falt fra,5 prosent til prosent av fondet. SKAGEN Global består nå av 0 selskaper. Samsung Electronics (8,0 prosent vekt) var beste bidragsyter i mai (opp 7,0 prosent målt i KRW) og OMV (, prosent vekt) var dårligste bidragsyter i måneden (ned 0 prosent i EUR). SKAGEN Globals portefølje er fortsatt attraktivt verdsatt på absolutt og relativ basis. Fondets 5 største poster handles til en vektet Pris/Inntjening ( 4e) på 9,5x og en Pris/Bok på,x. Verdsettelsen av aksjer er fortsatt attraktiv gitt det nåværende lave rentenivået. Men noen sektorer og geografiske områder ser nå verdsettelse over sitt historiske gjennomsnitt. Som et resultat av dette er verdsettelsene mer sårbare for et høyere rentenivå eller en tilbakegang i den økonomiske veksten. Utbytte for aksjer er fortsatt høy relativt til obligasjoner. Ledende økonomiske indikatorer har nylig pekt mot en høyere aktivitet i både utviklede og fremvoksende økonomier. Vi tror det er en god mulighet for at den globale veksten i 04 vil overgå den for 0. Sterke selskapsbalanser kombinert med bedre økonomiske utsikter bør understøtte økt aktivitet innen oppkjøp og fusjoner og at mer penger flyter tilbake til aksjonærene gjennom utbytter og tilbakekjøp. * Med mindre annet er oppgitt er alle avkastningstall for fondet i denne rapporten knyttet til klasse A, og er etter fradrag for gebyrer.

3 SKAGEN Global A Avkastning, mai 04 SKAGEN Global A Mai Hittil i kv. Hittil i år år år 5 år 0 år Siden start* SKAGEN Global A,0% 4,6%,% 6,7%,6%,5%,0% 5,5% MSCI AC World Index*,5%,8%,6% 8,%,9%,% 5,6%,% Meravkastning 0,5%,7% 0,6% -,4% -,%,% 6,4%,% Note: Alle tall utover måneder er annualisert (geometrisk avkastning) * Startdato: 7. august 997 ** Referanseindeksen var MSCI World i NOK fra 7. august 997 til. desember 009 og MSCI All-Country Index fra. januar 00 og videre.

4 Årlig avkastning siden start (%)* SKAGEN Global A har gjort det bedre enn indeks i 4 av 7 år SKAGEN Global A (NOK) MSCI AC World** (NOK) Note: Alle tall i NOK, etter gebyrer * Startdato: 7. august 997 ** Referanseindeks var MSCI World i NOK fra 7. august 997 til. desember 997 og MSCI All-Country Index fra. januar 00 og videre. 04 Hittil i år 4

5 Markedenes utvikling i mai i NOK (%) Russland India Tyrkia Kina (Hong Kong) Hong Kong USA (Nasdaq) Norge Taiwan Mexico Vekstmarkedsindeksen Sør-Korea Japan SKAGEN Global A Finland USA (S&P 500) Spania Verdensindeksen Belgia Tyskland Singapore Nederland Sør-Afrika Kina (lokal) Sveits Storbritannia Canada Frankrike Indonesia Sverige Danmark Østerrike Polen

6 Markedenes utvikling hittil i 04 i NOK (%) Tyrkia Indonesia India Danmark Italia Norge Thailand Spania Sør-Afrika Finland Singapore Frankrike Canada USA (S&P 500) Brasil USA (Nasdaq) SKAGEN Global A Storbritannia Sverige Verdensindeksen Vekstmarkedsindeksen Tyskland Sør-Korea Nederland Hong Kong Polen Østerrike Mexico Kina (Hong Kong) Kina (lokal) Japan Russland

7 Største bidragsytere i mai 04 Største positive bidragsytere Største negative bidragsytere Selskap NOK (m) Selskap NOK (m) Samsung Electronics 97 Gazprom 8 State Bank of India 09 Tyco International 79 Cheung Kong 77 LG Corp 58 Sistema 5 LG Electronics 49 Weatherford 4 Sabanci Holding 4 OMV -49 Banrisul -48 Eletrobras -0 Citigroup -7 Kyocera -7 Gafisa -9 Renault -7 China Comm. Services -4 China Unicom - Chiquita Brands - Total verdiskapning i mai 04: NOK 454 millioner Note: Bidrag til absoluttavkastning 7

8 Største bidragsytere så langt i 04 Største positive bidragsytere Største negative bidragsytere Selskap NOK (m) Selskap NOK (m) Samsung Electronics 77 Weatherford 4 State Bank of India 0 Baker Hughes 97 Teva 9 Renault 55 Nordea 48 Norsk Hydro 6 Cheung Kong Lundin Mining 98 Vimpelcom -0 Citigroup -7 General Motors -4 ADT - CTC Media -8 OMV -75 Kyocera -69 China Comm. Services -65 Vale -64 Gazprom -6 Total verdiskapning så langt i 04: NOK 56 millioner Note: Bidrag til absoluttavkastning 8

9 Største kjøp og salg i mai 04 Kjøp Gap Vi fortsatte å øke posten i mai. Selskapet er en restruktureringshistorie med en imponerende, men dårlig forstått «track record.» De er nå i ferd med å ta de neste stegene i en omstruktureringsfase, og på vei inn i en ny vekstfase etter en lang periode med konsolidering. Vi forventer at GAP vil øke marginene gjennom endring i utsalgssammensetningen og bedringer på leverandørsiden. Selskapet er priset til P/E x, fri kontantstrømavkastning på 7 prosent og en forventet vekst i inntjening per aksje på høye ensifrede nivåer. Dette tatt i betraktning synes aksjen billig. Lenovo Group var nykommeren i porteføljen i mai. Selskapet har hatt en formidabel vekst innen PC-er etter kjøpet av IBM sin PC-virksomhet i 005. Vi forventer at kjøpet av IBM sin server-virksomhet og Motorola sin mobiltelefonenhet vil øke farten på veksten til selskapet. Inntektene steg 0 prosent i første kvartal og handles nå til 5x inntjening. For USD 0 milliarder får en nå verdens største produsent av PC-er, # 4 på mobiltelefoner og # 4 innen nettbrett. Salg ADT forsvant ut av fondet i løpet av måneden. Vi ser økt risiko for at nedside-scenariet vi fryktet nå blir realitet mer konkurranse som gir mindre stabilitet i kundemassen, noe som igjen vil være med på å redusere den frie kontantstrømmen. Tesco vi solgte oss ut i mai. Konkurransen i bransjen ser ikke ut til å avta og kundene endrer handlingsmønster som både påvirker lønnsomheten og truer eiendomsverdier. Sistnevnte har vært ansett som en nedside-beskyttelse for de underliggende verdiene i Tesco. Kyocera ble solgt etter en gjennomgang av de potensielle katalysatorene for omvurdering. Vi ser per dags dato får katalysatorer samtidig som veksten i inntjeningen vil være svak de kommende årene. Selskapet ser også ut til å holde på en lite optimal kapitalstruktur. China Unicom posten ble redusert i mai etter sterk utvikling i aksjekursen. Samsung Electronics posten ble redusert for å å unngå risiko for å bryte med våre pålagte plasseringsbegrensninger. 9

10 Viktigste endringer i 04 Økte poster Reduserte poster Q AIG Raiffeisen Bank International (ny) Cheung Kong State Bank of India Sanofi (ny) Storebrand DSM(ny) Yamaha Motor Q Ensco (ut) Tyco International ADT Baker Hughes Oracle Q AIG Gap (ny) Philips Lenovo Group (ny) Q ADT (ut) State Bank of India Weatherford Tesco (ut) Kyocera Lundin Mining China Unicom Samsung Electronics 0

11 Største poster pr.. mai 04 Postens Pris P/E P/E P/BV Kurs størrelse, % 04e 05e last mål SAMSUNG ELECTRONICS 8, ,6 5,4, CITIGROUP 5, 47,6 0, 8,8 0,7 75 AIG, 54,, 0,9 0,8 70 NORDEA BANK,6 98,7,,,5 05 TYCO INTERNATIONAL,4 4,6,0 7,8 4,0 50 RENAULT, 69, 9, 7,0 0,9 80 MICROSOFT, 40,9 5, 4,,9 45 GAZPROM, 8,,7,9 0, TEVA PHARMACEUTICAL,0 50,5 0,8 0,8,9 65 CHINA UNICOM,0,6 6,8,9,0 7 Vektet topp 0,9 8,0 7,5 0,9 % Vektet topp 5 64,8 9,5 8,6, MSCI AC World 5,,5,

12 Sektor og geografisk fordeling mot indeks for SKAGEN Global Sektorfordeling Energi 0 Geografisk fordeling 0 Asia ex Japan 9 Fond Indeks Råvarer 6 0 EMEA 7 Kapitalvarer, service og transport Frontier Markets 0 Inntektsavhengige forbruksvarer Defensive konsumvarer Medisin Bank og finans 6 0 Japan Kjerne EU Nord Amerika Norge Informasjonsteknologi Perifer EU 0 Telekom 4 6 Sør Amerika 4 Nyttetjenester Oceania 0 Kontanter 0 Kontanter 0

13 Nyheter og annet om porteføljeselskaper på engelsk

14 Key earnings releases and corporate news, May 04 Vimpelcom (.%) AIG (.%) Gazprom (.%) Reported weaker than expected results driven by market share loss in Russia Summary: The weak results were mainly driven by continued market share loss in Russia. The company continues to execute well in a very difficult Italian market. As expected, weak emerging market currencies across the board had a negative effect on earnings. Implications: The weakness in Russia highlights the need for higher capex in this market. This is clearly negative, as it limits the company s ability to reduce debt and pay dividends in the short-term. We still believe the higher capex requirements are not permanent. The company is attractively priced on a normalised free cash flow basis, with further upside from refinancing of the balance sheet and merging its Italian business. Reported better than expected results driven by financial gains Summary: AIG reported Q04 results that were 4% ahead of expectations thanks to gains in the direct investment book, better life earnings, and higher share repurchases. Life insurance continued to perform very well driven by growth and improving margins. The troubled P&C business still had a combined ratio above 00%. It was disappointing not to see an improvement in the underlying core loss ratio and expense ratio, which were both stable YoY. The company bought back close to.5% of outstanding shares in the quarter and book value per share increased by 5% (QoQ). Implications: The life business, the investment book, and share repurchases continue to be in-line with our thesis. For a major re-rating of the shares, we need to see improved profitability in the P&C business. We are still very confident this will happen as all the underlying soft evidence is in place AIG has reduced its P&C business, it has streamlined and invested aggressively in new systems and technology, and has hired a top quality management team. Announced the long-awaited China gas deal Summary: Exact terms of the contract have not been disclosed but the total value of the project has been announced at USD 400bn. Total capex is estimated at USD 55bn, a price derived from an oil-linked formula, and the contract includes take-or-pay clauses. Implications: The economic value of the project will obviously depend on the future oil price and actual capex requirement. However, this contract will divert the Gazprom capex budget away from 0% return investments towards a project which will grow earnings given current valuation of Gazprom, the market is assuming that the USD 40bn annual spend on capex will yield a return of very close to 0%. Current EV is USD 40bn. 4

15 Key earnings releases and corporate news, May 04 cont. Surgutneftegas (0.9%) Reported better than expected results helped by FX Summary: The net result more than doubled QoQ to USD.9bn. The key driver of the positive surprise was a higher than expected FX gain of USD.8bn, which was higher than the full 0 FX gain. Production of oil and gas came in as expected. Revenue fell short of expectations due to lower realised prices. Implications: Net cash at USD bn implies negative EV. Dividend yield of 0% and soon to become a stock that is possible for investors to touch as the clearing of trades at MICEX will be settled via Euroclear. They could deploy capital into a new big oilfield, or they could do a deal with Rosneft, both of which would be taken positive. Still the cheapest oil company in the world. State Bank of India (.0%) Reported better than expected results on improved operations and better credit quality Summary: The company continued its strong loan growth. The main positive surprise was that Opex was kept at the same level as last year which helped earnings. Overall earnings still declined, as the company took a proactive stance on stressed assets, increasing provisions for loan losses significantly. NPLs actually declined from last quarter and the Basel III capital adequacy ratio improved. Implications: Management has for some time stressed its focus on operational efficiencies, which are now showing up in the results. Labour costs are particularly important as they make up roughly 60% of Opex. In the last quarter, labour costs declined 0% QoQ and 6% YoY as the company switched 40k higher paid retiring employees with entry-level employees at a lower cost and greater productivity. Mayr-Melnhof (0.8%) Reported 0% increase in operating profit in Q 04 vs Q 0. Summary: Mayr-Melnhof delivered a strong set of numbers with reported EPS of EUR.59, up 9% YoY. Both sales and operating profit were above market projections. Group sales grew 6% to EUR 54m driven by strong growth in MM Karton. Group operating margin came in at 8.8% (up from 7.7% in Q 0) leading to an increase of 0% in operating profit. MM Karton increased its operating margin from 4.8% to 7.% and MM Packaging reported an operating margin of 9.4%, on a par with Q 0. Implications: It is encouraging to see better profitability in the more cyclical division MM Karton in a still difficult trading environment in Europe. Due to strong share price performance, valuation has now approached EV/Ebitda ~6. Thus, increased profitability is needed for further revaluation of the shares. Emerging markets should be a driver for further growth and better trading conditions in Europe should help MM Karton to increase its operating margin towards 0%. 5

16 Key earnings releases and corporate news, May 04 cont. Hannover Re (.0%) OMV (.%) Gap (.0%) Q was a strong start to 04 driven by few natural catastrophes and strong financial results Summary: Net income of EUR m was well ahead of consensus. Combined ratio of 94.4% was better than expected and major losses from natural catastrophes were exceptionally low at EUR m (Malaysian air loss). The company booked its natural catastrophe budget loss at EUR 50m and thus has a meaningful reserve for rest of year. An investment return of.4% was ahead of the company expectation for the full year (.%). Implications: The company s full-year guidance of net profit of ~EUR 850m seems very conservative in light of the strong set of Q numbers. With the exception of huge natural disasters, the company is well on its way to reaching last year s net profit level of EUR 895m. The company is overcapitalised and a dividend of at least EUR /share for 04 should be safe. Price/book ratio is now.x, which is high compared to historical levels. Q result burdened by poor refining margin Summary: OMV reported Q EPS of EUR 0.9 and clean operating result and net profit in line with expectations. Production increased % QoQ to barrels/day driven by production from its acquired assets in Norway. OMV reduced its guidance for full-year production from 0-40` barrels/day to 0-0`barrels/day due to disruptions in Libya. OMV is still reporting weak results from the Refining and Marketing segment due to weak refining margins. Implications: OMV is investing in future growth in a period when other oil companies are more focused on free cash flow. Capex requirements in its acquired assets in Norway/UK will lead to negative free cash flow in the coming years. It is important that divestitures of non-core assets (Bayernoil etc.) go according to plan. OMV is valued at 8x 04e earnings and offers a dividend yield of 4.%. Weak quarter as expected, but momentum is building for the rest of the year Summary: Following a very weak holiday season and a tough start to 04 with bad weather, it was widely expected that Q (Feb-Apr) would be weak. Net sales grew % in the first quarter; up % on a constant currency basis. Gross margin fell 60 bps YoY and the operating margin fell 50 bps. Management says momentum built as the quarter progressed, which was visible in strong same store sales in April (up 9% on a 7% increase last year). FCF conversion was 5% in the quarter. Implications: Our case is based on the fact that gradual improvements in design, supply chain and space growth will drive a higher top line growth and margin improvements in the medium term (- years). We also expect that industry trading will pick up cyclically. There was nothing in the Q report to challenge this view. On the contrary, management remained confident that supply chain initiatives will benefit margins in the second half and that trading is picking up on a better assortment in Q and beyond. 6

17 Key earnings releases and corporate news, May 04 cont. Rhoen Klinikum (0.9%) Reported underlying operating results in line with expectations Summary: The reported figures in Q were heavily impacted by several one-offs related to the sale of the majority of its hospitals to Fresenius. The divestment of 40 hospitals resulted in a book gain of EUR,46m. The underlying EBITDA of EUR 6m from the remaining hospitals was in-line with expectations. Its 05 guidance of revenue of EUR.06bn -.bn and EBITDA of EUR 45m-55m was reiterated. The company will distribute EUR.7bn to shareholders in 04 via share buybacks. Implication: Rhoen Klinikum will distribute more than 50% of its current market value to its shareholders after the divestiture of 40 hospitals to Fresenius. The main remaining asset is the Giessen-Marburg University hospital. A further potential upside in the share price is very dependent on an improvement in this hospital s EBITDA margin. 7

18 The largest companies in SKAGEN Global Samsung Electronics is one of the world's largest producers of consumer electronics. The company is global # in mobile phones and smartphones, the world's largest in TV and a global # in memory chips. Samsung also produces domestic appliances, cameras, printers, PCs and air conditioners. Citi is a US financial conglomerate with operations in more than 00 countries worldwide. The bank was bailed out by the US government during the credit crisis and subsequently raised USD 50bn of new capital. Consists of two units: Citi Holdings which is a vehicle for assets that are to be run down and sold and Citi Corp which is the core of the going concern business. In Citicorp 60% of revenues are derived from outside the US, mainly from emerging markets. AIG is an international insurance company serving commercial, institutional and individual customers. The company provides Property & Casualty insurance, life insurance and retirement services. AIG was at the very centre of the financial crisis as the central bank for mortgage insurance it was bailed out in a USD 80bn bail out. The company has two core insurance holdings: Sun America and Chartis that it intends to keep. The company has set a target to achieve 0% ROE by 05. Nordea holds pole position in the Nordics with.m retail costumers and 65,000 corporate clients. Nordea is the largest Nordic asset manager/wealth manager with EUR 4bn in AuM (EUR 8bn in managed funds). It is the most diversified among its Nordic peers. Total loans are EUR 46bn with the following split: Finland 7%, Sweden 6%, Denmark 4%, Norway 8%, and Baltics/Poland/Russia 5%. Tyco International is a Swiss-based and NYSE-listed company focused on fire and security solutions for companies and government entities. It is market leader in most of the market segments in which it operates. Approximately 4% of revenues are derived from services with the remainder coming from equipment sales. 48% of revenues come from North America, 7% from EMEA, 0% from APAC and 5% from Latin America. 8

19 The largest companies in SKAGEN Global cont. Renault is a leading manufacturer of automobiles through brands such Renault, Dacia and Renault Samsung Motors. It holds ownership stakes in Nissan (4.4%), AvtoVaz (5%) and Daimler (.55%). It has also built up sizable operations in Russia, Turkey, North Africa and Brazil. Renault is also a leader in Electrical Vehicles and holds a - year advance vs. competitors. Renault is debt free and its ownership stake in Nissan alone is worth more than the market cap. of Renault. Microsoft is the world s largest software company and delivers software to a number of applications from PCs to servers and cell phones its most famous product is Windows and the affiliated Office Software Suite. In recent years the company has also diversified into video game consoles, ERP systems, internet search and cloud-based computing. Despite a strong push for diversification 80% of the company s revenues and nearly all its profits come from three main areas: Windows OS, Windows Server and the business division (Office Suite). Gazprom is the world s largest gas producer with proven gas reserves of 550bn m (0% of global reserves and equal to 0 years reserve life). The company controls 60,000km of gas pipelines and has significant storage capacity. It owns and operates Russia s entire high pressure gas transportation network and accounts for 8% of gas supply in Europe. Gazprom is also the 5th largest oil producer in Russia with production of 0.87m boe (9% of Russian output) and Russia s largest power utility with 6GW of installed capacity. Teva is the largest generic (off patent) pharmaceutical company worldwide, however more than half its revenues come from patented drugs most well known is Teva s multiple sclerosis drug, Copaxone. Teva has expanded considerably in the past decade and since 0 management focus has been on cleaning up the organisation, optimising the drug portfolio and production units, selling channels and cutting costs. After the merger with China Netcom and disposal of CDMA in 008, China Unicom is now a full service provider, offering both fixed-line and mobile (GSM and WCDMA) services. China Unicom has m mobile subscribers, 9m fixed line subscribers and 6m broadband subscribers. The Chinese government owns 75% of the company which is listed in Hong Kong and also has a fairly liquid ADR in New York. 9

20 Lenovo (99 HK) HKD 9.44 INFO Market cap: P/E 05 consensus: P/E 06 consensus: 8% APAC Desktop Americas 9% % Other Mobile 6% % 9% % EMEA 5% China Notebook 5x x EV/EBITDA 05 consensus: 7,6x Net debt (cash) -69 P/BV,4x ROE (5y average) 9 % ROE 05 consensus: 4 % Dividend % 05 consensus: % Free float 55 % Buy 6 % Hold 9 % Sell % 5 Chinese technology company with 7k employees and USD 0bn in sales. Acquired IBM s PC division in 005 (Think pad). The company's track record is nothing short of stellar, growing profitably in a declining market (PCs). We note that the CEO is the second biggest shareholder after borrowing HKD 5bn to buy 8% of company. We think corporate governance is as good as it gets in China. It is # in PCs in China with 4% market share and # worldwide with 8% (up from 6% in 009). Global market share ex. China was 9.4% in Q4. Lenovo also has a fast growing mobile business. It is the world s fourth largest producer of tablets (4% global market share) and fourth largest producer of smartphones (4% global market share). The mobile segment grew sales 7% in FQ4 04. With the acquisition of Motorola from Google, Lenovo is taking the next step in its mobile growth, as the acquisition opens up for expansion outside China/EM (IP rights/brand/distribution). Lenovo also recently acquired IBM s server business in early 04. We think this gives them tremendous opportunity to drive growth in the Chinese server market. The ongoing business is valued at EV/Sales 0. for yr trailing revenue CAGR of 0% and an operating margin of.6% (04). EBIT margin has risen every year since 009 on improved sales mix (China has double the margin of RoW). We initiate a position with a yr price target of HKD 5 (+60%) The ongoing business (should be able to reach 50bn revenue and.75% net margin within years (currently 9bn and.57%) => EPS of HKD. Assuming a x P/E (currently 5x) gives HKD. Conservatively adding the value of Motorola and IBM servers at acquisition cost adds HKD.75 per share which takes us to HKD 5. KEY RISKS and TRIGGERS IBM and Motorola are loss-making and need to be turned around. Our key bet is that management has the ability to do this. Can Lenovo continue to drive sales and earnings in a declining PC market? We think it can, due to scale and apparent operational excellence. IT is a sensitive topic in the post Snowden world and Lenovo is decidedly Chinese. This is clearly an advantage in China, but there is a risk elsewhere. 0

21 For mer informasjon, vennligst se: Siste Markedsrapport Informasjon om SKAGEN Global på våre nettsider Historisk avkastning er ingen garanti for framtidig avkastning. Framtidig avkastning vil blant annet avhenge av markedsutviklingen, forvalters dyktighet, fondets risiko, samt kostnader ved kjøp og forvaltning. Avkastningen kan bli negativ som følge av kurstap. SKAGEN søker etter beste evne å sikre at all informasjon gitt i denne rapporten er korrekt, men tar forbehold for eventuelle feil og utelatelser. Uttalelsene i rapporten reflekterer porteføljeforvalternes syn på gitt tidspunkt, og dette synet kan bli endret uten varsel. Rapporten skal ikke forstås som et tilbud eller en anbefaling om kjøp eller salg av finansielle instrumenter. SKAGEN påtar seg intet ansvar for direkte eller indirekte tap eller utgifter som skyldes bruk eller forståelse av rapporten. Ansatte i SKAGEN AS kan være eiere av verdipapirer utstedt av selskaper som er omtalt enten i denne rapporten eller inngår i fondets portefølje.