SKAGEN Kon-Tiki Statusrapport juli Kunsten å bruke sunn fornuft

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1 SKAGEN Kon-Tiki Statusrapport juli 216 Kunsten å bruke sunn fornuft

2 Oppsummering juli 216 SKAGEN Kon-Tiki* var opp 6, prosent i juli målt i NOK, på linje med referanseindeksen. Hittil i 216 er fondet opp 4,3 prosent, mens vekstmarkedsindeksen er opp 6,5 prosent. I juli var avkastningen på vekstmarkedsindeksen bedre enn verdensindeksen som økte med 5,5 prosent, målt i NOK. Hittil i år har vekstmarkedene hatt en bedre avkastning enn de utviklede markeder som er opp,4 prosent. Av aksjemarkedene rundt om i verden hadde Egypt en svært sterk juli måned med 19 prosent oppgang i NOK. De kunngjorde at de forhandler med IMF om et låneprogram som forventes avklart i september. Brasil fortsatte oppgangen med 1 prosent godt hjulpet av at den politiske situasjonen stabiliserte seg. Nigeria hadde en tøff måned med nedgang på 16 prosent og reverserte oppgangen i fra juni. Fortsatt uro i Tyrkia etter kuppforsøket ført til en 5 prosent nedgang i det tyrkiske aksjemarkedet i juli, dette etter at aksjene hadde løftet seg noe i fra bunnen tidligere i måneden. I løpet av juli har vi gått inn i en ny posisjon, det franske konglomeratet Bolloré. Vi anser dagens aksjekurs som et attraktivt utgangspunkt med gode muligheter for langsiktig avkastning. Våre tre beste bidragsytere var Samsung, Hyundai og Great Wall Motor (GWM), som til sammen utgjør ca 15 prosent av porteføljen. Samsung leverte gode resultater for 2. kvartal (les mer på side 2) i likhet med Hyundai og GWM. Det tyrkiske holdingsselskapet Sabanci bidro negativt da aksjen ble solgt ned i takt med det innenlandske aksjemarkedet etter det mislykkede militærkuppet i juli. Selskapet som utgjør Sabancis hovedinvestering la frem gode resultater, og det lover godt for Sabanci. Likevel forventer vi fortsatt svingninger i det tyrkiske aksjemarkedet så lenge den politiske risiko vedvarer. I slutten av måneden hadde 45 prosent av Kon-Tikis porteføljeselskaper, målt i verdi, fremlagt sine kvartalsrapporter. Av disse hadde mer enn tre fjerdedeler publisert positive resultater i forhold til våre forventninger. De positive resultatene sammenfaller med senere tids pengestrøm til vekstmarkedene fra investorer som søker en trygg havn etter Brexit. Ingen markeder lever isolert fra global risiko, men globale investorers appetitt på vekstmarkeder er definitivt i ferd med å ta en positiv retning. Selv om appetitten for vekstmarkedene har økt blant investorer, prises vekstmarkedene fortsatt til en rabatt mot utviklede markeder. Basert på 216 estimater, handles vekstmarkeder på 13,2x P/E og 1,5x P/B, sammenlignet med hhv.16,8x P/E og 2,x P/B for de utviklede markedene. SKAGEN Kon-Tiki sine 12 største posisjoner utgjør nå 5 prosent av fondet (opp fra 45 prosent ved begynnelsen av 215). Porteføljen** forblir attraktivt priset med 216e P/E på 9,x og P/B på,9x. I et to-års perspektiv ser vi nå en oppside på 42 prosent for porteføljens topposisjoner. 2 *Med mindre annet er oppgitt er alle avkastningstallene for fondet i denne rapporten knyttet til klasse A, og er etter fradrag for gebyrer. ** Porteføljeverdsettelsen refererer til topp 35 posisjoner.

3 Avkastning, juli 216 Note: Alle avkastningstall utover 12 måneder er annualisert (geometrisk avkastning) *Startdato: 5. april 22 3

4 SKAGEN Kon-Tiki har slått indeks i 11 av 14 år (%) 13 SKAGEN Kon-Tiki A* (NOK) MSCI EM Index (NOK) Hittil i 216 Note: Alle tall i NOK, etter gebyrer * Startdato: 5. april 22 4

5 Utvikling i vekstmarkedene i juli 216 (%) BRAZIL 15 INDONESIA 8 PERU 8 COLOMBIA 7 CHILE SOUTH AFRICA MALAYSIA KOREA Mangler i NOK MSCI EM 4 TAIWAN 4 SKAGEN Kon-Tiki A 2 THAILAND 2 TURKEY 1 RUSSIA 1 CHINA INDIA MEXICO -1 POLAND -4 EGYPT -5 HUNGARY -5 CZECH -6 5

6 Utvikling i vekstmarkedene hittil i 216 i NOK (%) BRAZIL COLOMBIA RUSSIA THAILAND INDONESIA CHILE SOUTH AFRICA PHILIPPINES TURKEY HUNGARY TAIWAN MALAYSIA MSCI EM SKAGEN Kon-Tiki A KOREA INDIA MEXICO CZECH EGYPT POLAND CHINA Mangler i NOK

7 Viktigste bidragsytere i juli 216 Største positive bidragsytere Største negative bidragsytere Selskap NOK millioner Selskap NOK millioner Samsung Electronics 263 Sabanci Holding -13 Hyundai Motor 199 Tullow Oil -66 Great Wall Motor 144 Yazicilar Holding -29 Banrisul 142 Diamond Bank -18 ABB Ltd 134 Eczacibasi Holding -13 Mahindra & Mahindra 13 LG Chem -1 Richter Gedeon 89 China Shineway Pharmaceutical -9 Kiatnakin Bank 88 Enka Insaat -9 X5 Retail Group 85 JSE -9 State Bank of India 83 Moscow Exchange -9 Total verdiskapning i juli : 1824 mill NB: Bidrag til absoluttavkastning 7

8 Viktigste bidragsytere hittil i 216 Største positive bidragsytere Største negative bidragsytere Selskap NOK millioner Selskap NOK millioner Banrisul 389 Frontline -361 Cosan Ltd 378 Lenovo Group -143 Samsung Electronics 298 LG Chem -134 UPL 188 Hyundai Motor -18 Mahindra & Mahindra 176 Great Wall Motor -14 JSE 168 Investment Kinnevik -86 Kiatnakin Bank 158 China Shipping Development -81 Moscow Exchange 151 China Shineway Pharmaceutical -77 ABB 148 Korean Reinsurance -72 Indosat 134 Euronav -7 Total verdiskapning hittil i 216 : 1375 millioner NB: Bidrag til absoluttavkastning 8

9 Kjøp og salg i juli 216 Kjøp Bolloré (Ny) Vi innledet en posisjon i det franske konglomeratet Bolloré. Vi anser dagens aksjekurs som et attraktivt utgangspunkt med gode muligheter for langsiktig avkastning. Salg Samsung Electronics Vi utnyttet en sterk aksjekurs (nå på alltime-high for vår preferanseaksje) til å selge slik at vi forhindrer at posisjonen (7,5 prosent) øker for mye. Moscow Stock Exchange Vi reduserte posisjonen etter en aksjeavkastning på hele 38 prosent målt i USD i år, på toppen kommer 6 prosent utbytte. Avkastningen har derav langt overgått utviklingen i det russiske aksjemarkedet. I tillegg er kursen nå nær kursmålet vårt. State Bank of India Vi utnyttet sener tids aksjekursoppgang til å redusere posisjonen. 9

10 Viktigste endringer i 1. kvartal 216 Q1 Økte poster Q1 Reduserte poster Toray Industries Inc (Ny) Bidvest Group (Ut) Pivovarna Lasko (Ut) Aveng (Ut) Archer (Ut) Hyundai Motor Bharti Airtel Samsung Electronics Indosat ABB 1

11 Viktigste endringer i 2. kvartal 216 Q2 Økte poster Q2 Reduserte poster Rumo Logistica Kinnevik (Ny) Drd Gold Trimegah Securities Samsung Electronics UPL Bharti Airtel State Bank of India Indosat Mahindra & Mahindra DIA OCI Co (Ut) (Ut) 11

12 Viktigste endringer i 3. kvartal 216 Q3 Økte poster Q3 Reduserte poster Bollore (Ny) Samsung Electronics Moscow Exchange State Bank of India UPL Bharti Airtel Mahindra & Mahindra JSE 12

13 Største poster i SKAGEN Kon-Tiki, juli 216 Holding Price P/E P/E P/BV Div. yield Price Upside size, % 216e 217e last 15e (%) target % Hyundai Motor 7, ,1 3,9,4 4, Samsung Electronics 7, ,2 7,4 1, 1, Mahindra & Mahindra 5, ,6 14,7 3,, Richter Gedeon 4, ,6 15,5 1,7 1, Sabanci Holding 4,3 8,9 6,1 5,6,9 1, State Bank of India 4, 229 1,9 9,2 1, 1, Naspers 3, ,8 24,1 6,6, ABB 3, ,4 15,9 3,6 3,5 2 1 X5 Retail Group 2, , 13,1 3,6, Cosan Ltd. 2,7 21,3 7,1 6,4,4 11, Bharti Airtel 2, ,6 2,1 2,3,4 4 1 SBI Holdings 2, ,1 7,5,7 4, Weighted top 12 5,4 9, 8,1,9 1,7 42 Weighted top 35 82,8 12,5 9,8 1, 2,2 42 Emerging market index 13,2 11,6 1,5 2,9 Top price target 14, 12,4 1,4 1,7 Merk: Estimater er basert på SKAGEN Kon-Tiki s uavhengige analyse og kan avvike i fra konsensus estimater. Konverterte aksjekurser til rapporteringsvaluta gjelder for Naspers, X5 and Cosan. 13

14 Dec-5 Apr-6 Aug-6 Dec-6 Apr-7 Aug-7 Dec-7 Apr-8 Aug-8 Dec-8 Apr-9 Aug-9 Dec-9 Apr-1 Aug-1 Dec-1 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 P/E for SKAGEN Kon-Tiki versus vekstmarkeder 2 18 P/E FY1 Kon-Tiki P/E FY1 EM Index Topp 12 posisjoner, 31. juli

15 Dec-5 Apr-6 Aug-6 Dec-6 Apr-7 Aug-7 Dec-7 Apr-8 Aug-8 Dec-8 Apr-9 Aug-9 Dec-9 Apr-1 Aug-1 Dec-1 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 P/BV SKAGEN Kon-Tiki versus vekstmarkedene 3,5 3, P/B Kon-Tiki P/B EM Index 2,5 2, 1,5 1,,5 Topp 12 posisjoner, 31. juli

16 Aggregate weight in portfolio (%) Number of holdings SKAGEN Kon-Tiki porteføljekonsentrasjon 12% 12 1% 1 8% 8 6% 6 4% 4 2% 2 % Number of companies Top 12 weighted positions Top 35 weighted positions Kilde: SKAGEN AS per 31. juli

17 Sektor og geografisk fordeling mot indeks (%) Sektorfordeling Geografisk fordeling Fond Indeks Energi Råvarer Kapitalvarer, service og transport Inntektsavhengige forbruksvarer Defensive konsumvarer Medisin Bank og finans Informasjonsteknologi Telekom Nyttetjenester Kontanter Asia DM Asia EM Europa DM, ekskl. Norden Europa EM Frontiermarkeder Markets Latin Amerika Midtøsten og Afrika Nord Amerkia Norden Kontanter

18 For mer informasjon, vennligst se: Siste Markedsrapport Informasjon om SKAGEN Kon-Tiki 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.

19 Nyheter og annen informasjon om porteføljeselskaper på engelsk

20 Key earnings releases and corporate news, July 216 Samsung Electronics (7.% weight): Strong 2Q16 free cash flow (FCF) means more capital distribution to come Implications for Investment Case: Positive. With a 9% beat to 2Q16 consensus expectations (prior to preliminary results) and constructive comments on 2H16 business outlook, we expect sell-side consensus estimates to continue its upward trend. Strong FCF means cash continue to pile up in the company despite having executed a buy-back of 6% of outstanding shares over a 12 months period and step up in dividend. Over the past 12 months, net cash has increased by KRW 14tr or KRW 1k per share. We expect management to announce further buy-backs following 3Q16 results due mid- October. In summary, we see four earnings drivers ahead; 1) NAND profitability and volumes strong driven by 3D NAND, 2) DRAM profitability bottoming and starting to improve in 2H16, 3) Display segment improving as OLED ramps external customers (Chinese smartphone OEMs and iphone) and 4) strong smartphone profits, even if there may be some downside risk going into FY17. Event summary: Final 2Q16 operating profit of KRW 8.14tr was in line with preliminary guidance and +22% year-onyear(yoy)/+18% quarter-on-quarter (QoQ). Net profit of KRW 5.85tr rose 2% QoQ and 11% YoY, despite losses on nonoperating line. Earnings per share (EPS) was KRW 41k for 2Q16. This leaves 1H16 EPS at KRW 77k which is within our expectations of full-year earnings of KRW 14k, (backed by better 2H seasonality). Management was constructive on 2H16 outlook with favorable statements for all businesses. Unpopular: Not among analysts, with 87% Buy. However, preference shares are still under-owned by local funds - we understand that current local mutual fund weight in Samsung is only 7% versus 13% allowance limit, which also creates local demand potential. Foreign capital going into EM equity products helps Samsung as the largest constituent with a 4.% weight in MSCI EM index. Under-researched: While 47 sell-side analysts cover the company, almost all tend to use a P/E and P/BV approach, failing to capture value of significant low-yielding cash position. This cash is now partially being returned to shareholders through KRW 11.4tr buyback and 3-5% of FCF in dividend/buyback on average for Undervalued: Yes. Based on a conservative sum-of-parts analysis, we calculate a value per share of KRW 1.8m. Of this, the semiconductor and handsets segments contributed KRW c55k each. The pref. share discount has narrowed from 22% to 18% post the buy-back announcement in October 215. Assuming a 4% FCF distribution for FY17, Samsung should return close to KRW 9tr to shareholders versus current market cap of KRW 28tr which provides a yield of 4.3% overall and 5.1% for pref. shares. Our pref. share price target of KRW 1.6mil is based on a 1% discount to sum-of-parts or a c1% pref. share discount. This is conservative and, if anything, subject to upward revision. We note that 2Q16 RoE was 13% while P/BV for pref. share is.96x. Deducting low yielding cash from this, Samsung had post-tax capital return of 19% in 2Q16. 2

21 Key earnings releases and corporate news, June 216 Gedeon Richter (4.4% weight): 2Q16 Results in line with our expectations - negative FX masking underlying strength Implications for Investment Case: The Hungarian pharma company delivered 2Q16 results which were within our expectation,s with good growth from core product Esmya (a uterine fibroid treatment). There were however continued headwinds from a weaker Ruble. In the US, the company is starting to record milestone payments from key future product Vraylar, an anti-psychotic drug targeting bi-polar condition and schizophrenia. Total revenues for 2Q16 were HUF 97.9bn, up 1.7% YoY and gross profit were HUF58.1bn, down 5% primarily due to negative FX translations and lower sales in CIS and the US, which continued seeing competition from generic products. Operating profit was HUF 13.2bn, down 16% due to negative currency movements and higher marketing expenses associated with the ramp-up in EU, China and Latin America. Net income of HUF 18.2bn declined 19% YoY although sequentially better. During 1H, the Rouble depreciated 25% versus the Euro YoY, which significantly impacted Russia sales, which accouns for 25% of Richter s total revenues during the period. However, underlying growth is healthy and Russia sales jumped 16% YoY denominated in RUB. In the key domestic market, Richter 1H retail pharma products grew 5.8% YoY, outpacing industry growth of 4.6% YoY. Esmya 1H sales were EUR 31.1mil vs EUR 21mil last year and was a good contributor in Hungary, CIS and Spain. In 2Q, Vraylar s contribution of $1.4mil is small, but the drug is targeting a large and growing market with the distribution machine of Allergan behind it. Unpopular: While the stock is still dominated by Hungarian ownership, US investors increased their exposure during 2Q and their aggregated ownership now comprise 23% against a domestic ownership of 36%. Still CEE/Russia-focused sellside coverage has 7 out of 1 analysts rating the stock a hold. Under-researched: Yes. Vraylar is poised to be a major growth driver in the next few years, which means Richter s revenues and profits will be diversified away from Russia. As a result, consensus does not seem to factor in much value from either Vraylar or Esmya. Undervalued: Yes. If they can ramp up sales of key products Esmya and Vraylar while expanding their higher margin reproductive health portfolio. The company is notorious conservative and is likely to keep guidance in check during the company call this month. The HUF 75 price target (versus stock price 591) is based on 19x FY17 P/E, which is reasonable for a pharma company with 18-2% earnings growth skewed towards markets outside Central Eastern Europe. 21

22 The largest companies in SKAGEN Kon-Tiki Samsung Electronics is one of the world's largest producers of consumer electronics, with over 155, employees. The company is global #1 in mobile phones and smartphones, the world's largest in TV and a global #1 in memory chips. Samsung also produces appliances, cameras, printers, PCs and air-conditioning units. Hyundai Motor is the world's 4th largest car maker, including their 39% stake in Kia Motor. Sold 5m cars in 215 and has a c5% global market share. Focus on smaller/less expensive cars. Strong position in several countries and in emerging markets such as India and China. Mahindra & Mahindra is the largest manufacturer of utility vehicles in India (with a 5% market share) and tractors (4% market share). It has several listed subsidiaries including Tech Mahindra and M&M financial services (largest financier of utility vehicles and tractors in India). Hungarian pharmaceutical company established in 191 with focus on Central and Eastern Europe. Transitioning from generic-focused manufacturer to a more specialised one through higher margin, innovative products within its women s health division (Esmya) and nervous system treatments (Vraylar). Significant upside potential from US marketing approval of Vraylar and extended usage of Esmya is not reflected in the current valuation. Turkey s leading and financial conglomerate in sectors including financial services, energy, cement, retail and industrials. The company has 1 companies currently listed on the Istanbul Stock Exchange and operates in 18 countries across Europe, the Middle East, Asia, North Africa and North and South America. Controlled by the Sabanci family. 22

23 The largest companies in SKAGEN Kon-Tiki (continued) Largest bank in India with 17% market share (c25% including 5 associate banks). Also presence in the life insurance, asset management and investment banking sectors. 15, branches, 32, ATMs, 4 mil+ accounts and over 22, employees. Upside potential from banking and economic reforms in India. South African listed media and internet holding company incorporated in They have a strong Pay-TV business in South Africa and Sub-Saharan African countries and a fast growing internet division focused on commerce, communities, content, communication and games. They hold a 34% stake in Chinese Tencent and 29% of Russian Mail.ru. ABB is a leader in power and automation technologies that enable utility and industrial customers to improve performance while lowering environmental impact. The group operates in around 1 countries and employs 146, people. Approximately 5% of sales stem from emerging markets and this share is rapidly increasing. X5 is a leading Russian food retailer, operating through several retail formats: discount stores under the Pyaterochka brand, supermarkets under the Perekrestok brand, hypermarkets under the Karusel brand and convenience stores under different brands. Modern retail is gaining share in the Russian retail market, and X5 is well positioned with their formats in the current difficult trading environment. They are also in the middle of an aggressive expansion and refurbishment period. Cosan is one of the largest Brazilian energy conglomerates with almost 8 years of history. Present within gas distribution, fuel distribution (58 gas stations), convenience stores (95 stores at gas stations), sugar and ethanol production (24 mills with 68m ton crushing capacity), lubricants, land development and railways/logistics (25% market share of grain transportation for export). 23