SKAGEN Vekst. Statusrapport juni 2016

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1 SKAGEN Vekst Statusrapport juni 2016

2 Hovedtrekk juni 2016 Brexit (eller engelskmenns valg om å tre ut av EU samarbeidet) førte umiddelbart til store negative reaksjoner i de globale aksjemarkeder så vel som valutamarkedene. Fondet ble særlig berørt av stor eksponering mot europeiske aksjer og desto lavere andel mot amerikanske aksjer i en periode hvor USA ble sett på som en trygg havn. Fondet oppnådde en negativ avkastning på 5.3% mens referanseindeksen var ned 3%. De beste bidragsyterne i juni var Samsung Electronics, Oriflame og TTS Group, mens Continental, Norwegian og Norsk Hydro bidro mest på den negative siden. Aksjemarkedene har ved månedsslutt ristet av seg det verste sjokket som Brexit medførte. For våre aksjer er Brexit fortsatt synlig hos selskaper innen bankvirksomhet og for selskaper med direkte eller indirekte eksponering mot bilindustrien. Flyselskapet Norwegian fikk en kraftig negativ reaksjon i aksjekursen, noe skyldes Brexit, men mest på grunn av negative framtidsutsikter meldt fra to av konkurrentene (EasyJet og British Airways). SKAGEN Vekst porteføljen består av 53 selskaper hvorav de 35 største posisjonene utgjør 92 prosent av totalen. To nye selskaper ble tatt inn i porteføljen siste måned, farmasiselskapet Shire PLC og gjødselprodusenten CF Industries. SKAGEN Vekst fortsetter å være et aktivt aksjefond med solid forankring i vår verdibaserte investeringsfilosofi. Fondet prises nå på 12 ganger årets inntjening, betydelig lavere enn det generelle markedet som prises rundt 16 ganger inntjeningen. Om ikke annet er sagt er alle avkastningstall i rapporten for klasse A etter honorarer. SKAGEN Vekst sin referanseindeks er en likt sammensatt indeks bestående av MSCI Nordic Countries Index og MSCI All Country World 2

3 SKAGEN Vekst vs Indeks vs USD-NOK Usikkerhet skaper svingninger i juni 3

4 A Avkastning, juni 2016 A juni QTD YTD 1 år 3 år 5 år 10 år Siden start* SKAGEN Vekst A -5,3% -3,9% -8,9% -4,9% 9,6% 5,9% 4,5% 13,7% Referanseindeks* -3,0% -0,6% -6,9% 1,2% 16,5% 13,1% 7,4% 10,1% Meravkastning -2,3% -3,3% -2,0% -6,1% -6,9% -7,2% -2,9% 3,6% Note: Alle avkastningstall ut over 12 måneder er annualisert (geometrisk avkastning). *Startdato: 1 desember **Fondets investeringsmandat ble endret med virkning fra fra at fondet investerte minst 50 % av sine midler i Norge til at fondet investerer minst 50 % av sine midler i Norden. Tilsvarende ble fondets referanseindeks endret fra en likt sammensatt referanseindeks av Oslo Børs Hovedindeks (OSEBX) og MSCI All Country World til en likt sammensatt referanseindeks av MSCI Nordic Countries IMI Index og MSCI All Country World Index ex Nordic Countries. Referanseindeks før var Oslo Børs Hovedindeks (OSEBX). 4

5 Årlig avkastning siden start* (%) SKAGEN Vekst (NOK) Benchmark Index (NOK) Hittil i 2016 Note: Alle avkastningstall ut over 12 måneder er annualisert (geometrisk avkastning). *Startdato: **Fondets investeringsmandat ble endret med virkning fra fra at fondet investerte minst 50 % av sine midler i Norge til at fondet investerer minst 50 % av sine midler i Norden. Tilsvarende ble fondets referanseindeks endret fra en likt sammensatt referanseindeks av Oslo Børs Hovedindeks (OSEBX) og MSCI All Country World til en likt sammensatt referanseindeks av MSCI Nordic Countries IMI Index og MSCI All Country World Index ex Nordic Countries. Referanseindeks før var Oslo Børs Hovedindeks (OSEBX)

6 Markedsutvikling i juni 2016 i NOK (%) BRASIL INDONESIA CHILE SØR-AFRIKA MALAYSIA KOREA TAIWAN SINGAPORE NEW ZEALAND THAILAND TYRKIA CANADA RUSSLAND KINA HONG KONG INDIA MEXICO USA JAPAN SVEITS FINLAND MSCI Nordic/MSCI AC ex. Nordic NORGE POLEN PORTUGAL UNGARN SKAGEN Vekst A TSJEKKIA DANMARK SVERIGE UK TYSKLAND FRANKRIKE NEDERLAND ØSTERRIKE SPANIA ITALIA

7 Markedsutvikling YTD 2016 i NOK (%) BRASIL RUSSLAND THAILAND NEW ZEALAND INDONESIA CHILE CANADA SØR-AFRIKA TYRKIA UNGARN TAIWAN MALAYSIA NORGE KOREA SINGAPORE USA INDIA MEXICO HONG KONG MSCI Nordic/MSCI AC ex. Nordic PORTUGAL DANMARK SKAGEN Vekst A TSJEKKIA NEDERLAND SVEITS FRANKRIKE POLEN JAPAN UK KINA SVERIGE TYSKLAND FINLAND ØSTERRIKE SPANIA ITALIA

8 Største poster ved utgangen av juni 2016 SKAGEN Vekst har 54% av porteføljen investert i Norden Weight in Price P/E P/E P/E P/B Target. portfolio Colum n2 2016e 2017e 2018e trailing price Samsung Electronics 8,0 % ,6 8,2 7,9 1, Continental AG 5,7 % ,5 9,7 9,0 2,6 275 Carlsberg 5,5 % ,6 16,0 14,2 2,2 817 Norsk Hydro 5,2 % 30 12,1 9,3 8,7 0,8 45 SAP 5,2 % 67 17,5 15,9 14,4 3,6 95 Citigroup 4,8 % 42 8,3 7,6 6,7 0,6 65 Norw egian Air Shuttle 4,3 % 288 9,0 5,8 5,2 5,2 500 Ericsson 3,9 % 64 16,1 12,6 11,8 1,4 88 Philips 3,5 % 22 16,0 13,0 11,5 1,7 30 ABB 3,4 % ,6 15,8 13,9 3,0 220 Weighted top 10 49,6 % 12,0 10,0 9,1 1,41 40 % Weighted top 35 92,3 % 11,2 8,8 7,7 1,19 49 % Reference index 16,6 14,7 13,2 2,04 8

9 Viktigste bidragsytere i juni 2016 Største positive bidragsytere Største negative bidragsytere Company NOK Millions Company NOK Millions Samsung Electronics Co Ltd 78 ##### Continental AG -60 Oriflame Cosmetics AG 14 ##### Norwegian Air Shuttle AS -56 TTS Group ASA 6 ##### Norsk Hydro ASA -37 Solstad Offshore ASA 5 ##### Citigroup Inc -35 Medistim ASA 4 ##### SAP SE -35 Bonheur ASA 2 ##### Credit Suisse Group AG -30 Sodastream International Ltd 1 ##### Volvo AB -28 Shire Plc-ADR 1 ##### Koninklijke Philips NV -25 ##### ABB Ltd -16 ##### Danske Bank A/S -15 Verdiskapning i juni (NOK MM):-390 NB: Bidrag til absolutt avkastning 9

10 Viktigste bidragsytere hittil i Q Største positive bidragsytere Største negative bidragsytere Company NOK Millions Company NOK Millions Oriflame Cosmetics AG 48 5E+07Continental AG -76 Samsung Electronics Co Ltd 34 3E+07Ericsson LM-B SHS -59 Sodastream International Ltd 20 2E+07Norsk Hydro ASA -33 Sberbank of Russia 20 2E+07Koninklijke Philips NV -29 Roche Holding AG 14 1E+07Credit Suisse Group AG -26 Medistim ASA 12 1E+07SAP SE -24 Lundin Petroleum AB 9 9E+06Norwegian Air Shuttle AS -20 Rec Silicon ASA 8 8E+06Telia Co AB -19 H Lundbeck A/S 8 8E+06Kia Motors Corporation -17 Kemira OYJ 6 6E+06Investment AB Kinnevik -16 Verdiskapning i 2Q (NOK MM): -264 NB: Bidrag til absolutt avkastning 10

11 Viktigste bidragsytere hittil i 2016 Største positive bidragsytere Største negative bidragsytere Company NOK Millions Company NOK Millions Oriflame Cosmetics AG 69 # Continental AG -148 Lundin Petroleum AB 29 # Credit Suisse Group AG -118 Sberbank of Russia 25 # Citigroup Inc -95 Casino Guichard Perrachon SA 19 # Ericsson LM-B SHS -70 Samsung Electronics Co Ltd 18 # SAP SE -44 Wilh Wilhelmsen Holding ASA 14 # Investment AB Kinnevik -38 Volvo AB 11 # Kia Motors Corporation -37 Catena AB 10 # Norwegian Air Shuttle AS -33 Sodastream International Ltd 10 # Frontline Ltd -29 TTS Group ASA 7 # Nippon Seiki Co Ltd -26 Verdiskapning hittil i år (NOK MM): -675 NB: Bidrag til absolutt avkastning 11

12 Viktigste endringer hittil i 2016 Økte poster Reduserte poster Q1 Hennes & Mauritz AB ebay Inc Catena AB Golden Ocean Group Ltd Investment AB Kinnevik Roche Holding AG Ericsson LM-B SHS (Ny) (Ny) (Ny) Q1 FLSmidth & Co A/S Localiza Rent a Car SA Bang & Olufsen A/S YIT Oyj Tribona AB Casino Guichard Perrachon SA ABB Ltd (Ut) (Ut) (Ut) (Ut) (Ut) Q2 Swatch Group AG Philips Lighting NV Nirvana Asia Ltd Ericsson LM-B SHS ebay Inc Kemira OYJ Hennes & Mauritz AB (Ny) (Ny) (Ny) Q2 Casino Guichard Perrachon SA DOF ASA Eidesvik Offshore ASA Sevan Drilling AS Lundin Petroleum AB Telia AB (Ut) (Ut) (Ut) (Ut) 12

13 Kjøp og salg, juni 2016 Kjøp Shire PLC Shire er et globalt ledende bioteknologi selskap med fokus på sjeldne sykdommer. Disse sjeldne sykdommene er ofte misforstått, underdiagnosert og kan i noen tilfeller være livstruende. Shire s nylig inngåtte giftemål med Baxalta har ført til en økt gjeldsgrad, men reduserte kapitalinvesteringer fremover gjør dette håndterbart. Vi tror selskapet igjen vil vise til 16 prosent årlig tilvekst, og vi anså det som en gunstig inngang i aksjen etter et kursfall på 35 prosent. Key sell DOF ASA Det norske supply/subsea rederiet DOF ble solgt helt ut av porteføljen. Selskapet annonserte en restruktureringsløsning vi ikke fant attraktiv å delta i. 13

14 Sektor og geografisk fordeling mot indeks, juni 2016 (%) Sektorfordeling Geografisk fordeling Energy Raw materials Industrials Consumer discretionary Consumer staples Health Banking & Finance IT Telecom Utilities Cash Fund Index Asia DM Asia EM Europe DM ex. The Nordics Europe EM Latin America Middle East & Africa North America Oceania The Nordics Cash Norden i SKAGEN Vekst Sverige 25 Norge 18 Danmark 9 Finland 2 14

15 Nyheter og annet om porteføljeselskaper - på engelsk

16 Key earnings releases and corporate news, June 2016 Citigroup (4.1%) 8.4%% yield is just the beginning Investment case implications Results of the 2016 Comprehensive Capital Analysis and Review (CCAR) confirmed our thesis Citi has the financial strength to significantly increase its capital return. Citi s capital return plan was approved as the company passed both the quantitative and qualitative part of the CCAR test. Specifically, Citi will increase capital return by 43% YoY (dividends by 205% YoY and buy-backs by 29%). Compared to current market cap this provide a annualized yield of 8.4% (dividend 1.5% and buy-backs 7.0%%). As always, sustainability and future direction of the capital return is much more important than the current level. On this point it is worth highlighting that the current 8.4% capital return yield represent a 76% pay-out ratio on current years consensus accounting earnings (on cash earnings the pay-out ratio drops to 64%). It is also worth pointing out, that current years accounting earnings is earned in an environment with: i) very low interest, ii) a year where trading activity is depressed even compared to the sluggish period following the financial crisis, iii) a year where Citi is adding to reserves (and lastly it is important to remember that last Thursday s stress test showed the currently balance sheet being significant over-capitalized). Thus, we still see opportunity for significant higher capital return going forward. Aside from Citi specifically, another important datapoint was that banks further ahead on the capital return path were allowed to pay-out close to 100% of earnings - adding confidence to our thinking that the regulator is not as unreasonable as the market seems to price in. Summary The Fed release results of the 2016 CCAR 3U update: Unpopular: All global banks are disliked due to past behavior and increased cost of regulation. Under researched: A lot of analysts, but they spend all their resources trying to forecast accounting earnings in the next two quarters. Our focus is on the significant FCF generation (far in excess of accounting earnings) and how it is used to buy back own shares well below fair value. Lastly, the market is concerned about how increased capital requirements will depress ROE but forget that the same earnings is obviously worth more today as underlying operational and financial risk is significant lower. Undervalued: Yes, we buy an underlying and growing free cash stream at a very attractive starting yield (15%+). Furthermore, a lot of that cash flow will be used to buy back own shares well below fair value. 16

17 Key earnings releases and corporate news, June 2016 (cont.) TTS Group (0.1%) Austrian Palfinger bids NOK 5,6/share (60% premium). Investment case update Offer is a bit light as it implies low probability for a turnaround of the company. However, SV has accepted it on the back of following: Company has repeatedly for the last two years openly informed the market that is reviewing strategic alternatives but interest has apparently been lackluster and at the end there was only one player willing to make an offer. The major shareholders: Skeie family (chairman of the board), and Rasmussen gruppen have all accepted the offer which implies that they struggle to see opportunities for further value creation in short to medium term. TTS is a small position and the low liquidity makes it very difficult to sell in the open market. Case update details Austrian based Palfinger bids NOK 5,6/share for all outstanding shares Unpopular: Yes, Expectations are low among investors after years of mismanagement and lack of focus. Under researched: Yes, No coverage Undervalued: Yes, Palfinger willing to pay NOK 5,6/share. 17

18 Shire Pharmaceutical (SHP LN) 4300p History and description of business Ireland based specialty pharmaceutical business established in Specialize in rare disease treatment and drugs that require long term use. Entrepreneurial culture. Sales geo North America 73%, Rest of world 27% Sales treatment areas: Hyperactivity 34%, generic malfunction like hemophilia 40%, gastrointestinal 15%, other 11% Case identifiedd in search process after stock price fall for pharmaceutical sector employees in 100 countries Key figures: Market cap USD 53bn NOK 425bn Business model and rationale for investment Pharmaceutical business wrapper in the rare disease and generic treatment area. Bought Baxalta (hemophilia drugs) in June 2016 resulting in revenues going from 6bn $ to 11bn $ and net debt increasing from 1.4bn $ to 16bn $. EBITDA 4.5bn $ so reduction of leverage is high on agenda with management Investment thesis is revenue and earnings growth driven by innovtative treatments, deeper penetration and synergies with Baxalta acquisitio revenues are expected to reach 17-18bn $ from estimated 11bn $ in Gross margin has been 86% and with mid-30 ies EBITDA margin. Shareholders equity is 10bn $ and ROE around 20% ESG: no issues identified and CSR rating is good Triggers: 1. Approval of several phase III drugs expected later in Harvesteing the benefits of the Baxalta acquisition and showing its in later 2016 and Longer term growth in Shire s drug specialities is high hence the revenue Risks 1. New drugs not meeting approval criteria reduction of future revenue forecasts and earnings. 2. Net debt position is high vs EBITDA after Baxalta acquisition. If Shire is not able to reduce debt load it will hold the stock back Target price Based on a 2019 revenue stream of 17bn $, EBITDA margin of 45%, small capex and a net debt that has been reduced to 9bn $ and a return requirement of 6% (in line with market) then it s a EPS of $ times 16.5x = 95$ vs current price of 59 $ - 60% upside potential Net debt (cash) USD 16bn No. of shares 899m No. of pref 0 P/E x P/E x P/BV trailing 2.0x ROE % Yield 0.5% EV/EBITDA x Daily turnover USD 150m No of analysts 26 with sell/hold 4% Owners Blackrosk 7%, Deutsche Bank 3%, Fidelity 2%, Legal & General 2% 18

19 3U addition to fact sheet Unpopular Business model understanding (protection, business volatility, leverage, management quality, historical performance vs future targets and potential) everybody can see Relate the above to why is the business unpopular few sell side buy recommendations is not enough, so take more holistic view like region, sector, management, M&A trail etc Position in economic cycle and or exposure to disruptive trends, where we see different and with common swense can argue why the consensus thinking is ot right Undervalued Underanalyzed Our case focus and trgers vs others perception of the company Sell-side recommendation is in all fairness of limited value in many cases. Number of analysts is value added Ownership structure especially institutional behavior Valuation absolute and argued vs business volatility, management quality, financial leverage, stock liquidity ad timing of trigger Mispriced rather than optical low valuation absolute and vs peers Target price and date as well as downside risk and arguments * In USD 19

20 The largest companies in SKAGEN Vekst Samsung Electronics, the Korean electronics group, has enjoyed very solid growth in consumer electronics, especially smartphones. Pole position in global semiconductor market. Cash generation is very strong and the company has historically wisely invested in new business areas solar power and healthcare are on the roadmap for the future. Continental AG produces tyres for cars and trucks and makes auto technology such as power trains, safety systems and automated drive systems. The replacement cycle for tyres is becoming stretched in some markets, so near-term earnings look promising. In the longer term Continental s pole position in global auto technology provides a good backdrop for substantial growth. Carlsberg A/S is an international brewing company. The company produces branded beers and regional brands. Carlsberg makes most of its beer outside of Denmark and it is sold in markets around the world. The company also markets and produces soft drinks, water and wine. Norsk Hydro ASA is a Norwegian aluminium and renewable energy company headquartered in Oslo. Norsk Hydro is one of the largest aluminium companies worldwide. It has operations in some 50 countries around the world and is active on all continents. The Norwegian state holds a 34.3% ownership interest in the company, which employs approximately 13,000 people. 20

21 The largest companies in SKAGEN Vekst (continued) Citigroup Inc. or Citi is an American multinational banking and financial services corporation headquartered in Manhattan, New York City. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group in October Norwegian Air Shuttle is the leading Nordic-based low cost airline, which in 2015 flew over 26m passengers. The fleet of airliners and the route network are growing rapidly proving the concept of Norwegian local low cost airline, to Nordic, to European and to Global reach. Ericsson is a Swedish multi-national corporation that provides communication technology and services. Founded in 1876 and has today a revenue of 227bn SEK. Ericsson had 33% market share in the 2G/3G/4G mobile network infrastructure market in Koninklijke Philips N.V. is a Dutch diversified technology company headquartered in Amsterdam with primary divisions focused in the areas of electronics, healthcare and lighting. In May 2016 it listed their lighting division as a separate company. ABB (ASEA Brown Boveri) is a Swedish-Swiss multinational corporation headquartered in Zurich, Switzerland, operating mainly in robotics and the power and automation technology areas. ABB is one of the largest engineering companies as well as one of the largest conglomerates in the world. ABB has operations in around 100 countries, with approximately 135,000 employees in December 2015 and reported global revenue of USD 35.5 billion for

22 For mer informasjon, vennligst se: Siste Markedsrapport Informasjon om SKAGEN Vekst 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.