SKAGEN Kon-Tiki Statusrapport for august 2016

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1 SKAGEN Kon-Tiki Statusrapport for august 216

2 Hovedtrekk august 216 SKAGEN Kon-Tiki var opp,5% i august målt i NOK mot 1,4% for MSCI Emerging Markets Index og -,6% for verdensindeksen. Hittil i år har fondet gitt en avkastning på 4,8% mot 8, % for EM-indeksen og -,2% for verdensindeksen. I Sør-Afrika fikk regjeringspartiet ANC den verste valgoppslutningen siden apartheidregimet ble opphevet. Lav økonomisk vekst, høy arbeidsledighet (for tiden på 26%) og en rekke anklager om korrupsjon og skandaler som involverer president Jacob Zuma, satte scenen for en sterkere opposisjon. I Brasil ble Dilma Rousseff avsatt som president etter en avgjørende riksrettprosess. Vi solgte Moscow Exchange etter sterke resultater. Posisjonen hadde doblet seg (inkludert utbytte) fra vår første investering våren 214, og hadde nådd vårt kursmål. DRB-Hicom ble solgt ut av porteføljen da investeringen ikke utviklet seg i henhold til vår investeringshypotese. Fondets tre beste bidragsytere i august var X5 Retail Group, Samsung Electronics og State Bank of India. X5 rapporterte sterke resultater drevet av 6% salgsøkning pr. forretning og resultatmarginene økte med solide,75%poeng. Selskapets resultatmargin på 8% er det høyest på mer enn 3 år. Våre Samsung aksjer fortsatte sin gode utvikling, og er opp 29% (i KRW) hittil i år. Blant negative bidragsytere finner vi telekomselskapene Bharti Airtel og Indosat, samt den indiske bil- og traktorprodusenten Mahindra & Mahindra. Det svært konkurransepregede indiske telekom-marked fikk en ny konkurrent, Reliance Jio. Etter store investeringer i nettverk, har Reliance Jio planer om å vinne kunder ved å tilby lavpris data og gratis taletid. Til tross for oppgangen i vekstmarkeder hittil i år, er de attraktivt vurdert i forhold til utviklede markeder. En 216 verdsettelse på P/E 13,4x og P/BV på 1,6x er klart lavere enn P/E 17.x og P/B 2,1x for de utviklede markeder. De 12 største posisjonene representerer rett under 5% av fondet (45% i begynnelsen av 215). Porteføljen** er fortsatt attraktivt verdsatt til 216 P/E på 12,6x og P/BV på,9x. Vi ser nå en 43% oppside for vår portefølje på en to års tidshorisont. 2 * Med mindre annet er oppgitt er alle avkastningstall for fondet i denne rapporten knyttet til klasse A, og etter fradrag for gebyrer. ** Portefølje vurderingen refererer til topp 35 posisjoner.

3 A SKAGEN Kon-Tiki A avkastning, august 216 NOK, etter honorarer A August QTD YTD 1 år 3 år 5 år 1 år Siden start* SKAGEN Kon Tiki A,5% 6,5% 4,8% 12,2% 9,1% 8,1% 8,6% 14,8% Vekstmarkedsindeks 1,4% 7,5% 8,% 11,6% 12,2% 8,9% 6,8% 9,% Meravkastning -,9% -1,% -3,2%,6% -3,1% -,8% 1,7% 5,8% 3 NB: Alle avkastningstall utover 12 måneder er annualisert (geometrisk avkastning) * Startdato: 5 april 22

4 Årlig avkastning siden startdato* SKAGEN Kon-Tiki A har slått indeks i 11 av 14 år Prosent 13 SKAGEN Kon-Tiki A* (NOK) MSCI EM Indeks (NOK) NB: Alle tall i NOK, etter honorarer * Startdato: 5 April Hittil i 216 4

5 Utviklingen i vekstmarkedene i august 216, NOK (%) MSCI Emerging Markets BRAZIL SKAGEN Kon-Tiki A CHILE PERU HUNGARY MEXICO KOREA RUSSIAN FEDERATION TURKEY EGYPT INDIA THAILAND MALAYSIA COLOMBIA TAIWAN INDONESIA PHILIPPINES MOROCCO SOUTH AFRICA POLAND CHINA CZECH REPUBLIC

6 Utviklingen i vekstmarkedene i hittil i 216, NOK (%) MSCI Emerging Markets BRAZIL SKAGEN Kon-Tiki A CHILE PERU HUNGARY MEXICO KOREA RUSSIAN FEDERATION TURKEY EGYPT INDIA THAILAND MALAYSIA COLOMBIA TAIWAN INDONESIA PHILIPPINES MOROCCO SOUTH AFRICA POLAND CHINA CZECH REPUBLIC

7 Største bidragsytere i august 216 Største positive bidragsytere Selskap NOK Millioner X5 Retail Group 185 Samsung Electronics 83 State Bank of India 78 Cosan 55 Rumo Logistica 51 Yazicilar Holding 49 Største negative bidragsytere Selskap NOK Millioner Bharti Airtel -66 Indosat -65 Mahindra & Mahindra -59 Hyundai Motor -58 Richter Gedeon -54 JSE -52 SBI Holdings 48 Great Wall Motor -51 Samsung SDI 42 Marfrig -36 Moscow Exchange 41 Kinnevik -33 Naspers 41 LG Electronics -31 Total verdiskapning i august: NOK191 millioner NB: Bidrag til absolutt avkastning 7

8 Største bidragsytere 3. kvartal 216 Største positive bidragsytere Største negative bidragsytere Selskap NOK Millioner Selskap NOK Millioner Samsung Electronics 346 Sabanci Holding -94 X5 Retail Group 271 Bharti Airtel -65 Banrisul 165 JSE -61 State Bank of India 161 Tullow Oil -49 Hyundai Motor 141 Marfrig -4 ABB 138 LG Electronics -35 SBI Holdings 13 Diamond Bank -29 Rumo Logistica 113 CCU -24 Great Wall Motor 94 Tech Mahindra -24 Kiatnakin Bank 8 China Shipping Development -23 Total verdiskapning kvartalsvis i 216: NOK 2 15 millioner NB: Bidrag til absolutt avkastning 8

9 Største bidragsytere hittil i 216 Største positive bidragsytere Selskap NOK Millioner Cosan 433 Banrisul 412 Samsung Electronics 382 X5 Retail Group 265 Moscow Exchange 192 UPL 19 Cia Brasileira de Distribuicao 16 ABB Ltd 153 Kiatnakin Bank 15 Største negative bidragsytere Selskap NOK Millioner Frontline -385 Hyundai Motor -167 Great Wall Motor Co -155 Lenovo Group -135 LG Chem -134 Investment AB Kinnevik -119 China Shipping Development -19 Bharti Airtel -94 Tech Mahindra -86 Naspers 148 Korean Reinsurance -84 Total verdiskapning hittil i 216: NOK millioner NB: Bidrag til absoluttavkastning 9

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

11 Viktigste endringer 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 3. kvartal 216 Q3 Økte poster Q3 Reduserte poster Bollore Vietnam Enterprise Investments Naspers (Ny) Moscow Exchange DRB-Hicom Bhd State Bank of India Samsung Electronics Vietnam Enterprise Investments UPL Bharti Airtel Mahindra & Mahindra (Ut) (Ut) 12

13 Beholdninger økt og redusert i løpet av august 216 Kjøp Naspers: Vi økte vår posisjon da vi er positive til Tencents evne til å vokse, tjene penger på sitt mobile økosystem og kutte kostnader. Naspers eier 34% av Tencent. Tencent er verdt c115% av markedsverdien til Naspers. Dermed er Naspers en attraktiv måte å eie Tencent. Ved utgangen av august utgjorde Naspers 4,3% av SKAGEN Kon- Tiki porteføljen. Salg Moscow Stock Exchange (UT): Posisjonen har doblet seg (inkludert utbytte) fra første investering våren 214, og har nå nådd vårt kursmål. DRB-Hicom (UT): Vi solgte posisjonen siden investeringen ikke utviklet seg i henhold til vår investeringshypotese. State Bank of India: Aksjekursen har steget 66% fra markedsbunnen i februar. 13

14 Største poster i SKAGEN Kon-Tiki 14 Holding Price P/E P/E P/BV Div. yield Price Upside size, % 216e 217e last 15 (%) target % Hyundai Motor 7,6 97 4, 3,9,4 4, Samsung Electronics 7, ,5 7,8 1, 1, Mahindra & Mahindra 5, ,2 14,4 3,, Sabanci Holding 4,4 9,13 6,3 5,7,8 1, Richter Gedeon 4, , 15, 1,7 1, Naspers 4, ,5 26,7 7,4, X5 Retail Group 3, ,8 13,4 4,, ABB 3, ,7 16,2 3,7 3,4 2 8 Cosan Ltd. 2,8 22,9 7,6 6,9,5 1, State Bank of India 2, ,6 9,7,9 1, 3 19 SBI Holdings 2, ,8 8,2,7 3, Banrisul 2,2 1,9 6,6 6,4,7 7, Weighted top 12 49,8 8,9 8,,9 1,5 41 Weighted top 35 8,6 12,6 9,9,9 1,8 43 Emerging market index 13,4 11,8 1,6 2,9 Top price target 18, 14,3 1,6 1,4 Per 31 August 216 NB: Verdiestimater er basert på SKAGEN Kon-Tiki s uavhengige analyser og kan variere fra konsensus estimater. Konverterte aksjekurser til rapporterte kurser for Naspers, X5 and Cosan.

15 Dec-5 Mar-6 Jun-6 Sep-6 Dec-6 Mar-7 Jun-7 Sep-7 Dec-7 Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 P/E for SKAGEN Kon-Tiki versus emerging markets 2 18 P/E FY1 Kon-Tiki P/E FY1 EM Index Top 12 positions, as of 31 August, 216

16 Dec-5 Mar-6 Jun-6 Sep-6 Dec-6 Mar-7 Jun-7 Sep-7 Dec-7 Mar-8 Jun-8 Sep-8 Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 P/BV for SKAGEN Kon-Tiki versus emerging markets 3,5 3, P/B Kon-Tiki P/B EM Index 2,5 2, 1,5 1,,5 16 Top 12 positions, as of 31 August, 216

17 Samlet vekt i porteføljen (%) Antall posisjoner 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 august

18 Sektor og geografisk fordeling mot indeks (%) Sektorfordeling Energi Råvarer Kapitalvarer, service og transport Inntektsavhengige forbruksvarer Defensive konsumvarer Medisin Bank og finans Informasjonsteknologi Telekom Nyttetjenester Kontanter Geografisk fordeling Asia DM Asia EM Europa DM, ekskl. Norden Europa EM Frontier Markets Latin Amerika Midt Østen og Afrika Nord Amerika Norden Kontanter Fond Indeks 71 18

19 Nyheter på engelsk

20 Since 21 Jan, EM has outperformed DM by 11.7% (in USD). Brazil, China and South Africa make up more than half of outperformance. 2 Source: Thomson Reuters Datastream, Credit Suisse research.

21 At sector level, financials and tech have contributed 6% of the outperformance 21 Source: Thomson Reuters Datastream, Credit Suisse research.

22 EM non-financial net income margins are forecast to improve by c5bps 22 Source: Thomson Reuters Datastream, Credit Suisse research.

23 Where are margins set to improve most? Brazil and South Africa showing signs of bottoming out. 23 Source: Thomson Reuters Datastream, Credit Suisse research.

24 Consumer discretionary sector is driving recovery in EM margins, but all sectors still have margins below their norm 24 Source: Thomson Reuters Datastream, Credit Suisse research.

25 Relative rise in global EM margins is consistent with a significant pick-up in EM equity outperformance 25 Source: Thomson Reuters Datastream, Credit Suisse research.

26 Productivity growth in EM is now outpacing real wage growth, in contrast to DM 26 Source: Thomson Reuters Datastream, Credit Suisse research.

27 Global EM equities trade near 1-year low on sector-adjusted P/E relative to DM 27 Source: Thomson Reuters Datastream, Credit Suisse research.

28 EM currencies are cheap and close to 22 levels 28 Source: Thomson Reuters Datastream, Credit Suisse research.

29 Currency valuation vs. country fundamentals 29 Source: Thomson Reuters Datastream, Credit Suisse research.

30 Most EM sectors trade at a discount to their DM peer group 3 Source: Thomson Reuters Datastream, Credit Suisse research.

31 RoE vs. Price/Book trade-off is attractive in EM 31 Source: Thomson Reuters Datastream, Credit Suisse research.

32 EM RoE discount to DM is closing, suggesting P/B will follow 32 Source: Thomson Reuters Datastream, Credit Suisse research.

33 Key earnings releases and corporate news, August 216 Banrisul (2.3% weight) Solid 2Q16 results with better asset quality a clear positive Implications for Investment Case: Overall positive from improved asset quality at this Brazilian bank. While declining, current credit costs are still above average over a cycle and a normalisation of these will provide strong support to RoE. Management has made efforts to contain costs, but there is still potential to improve efficiency. Summary: 2Q16 net profit of 22m rose 15% YoY and 7% QoQ and was above sell-side consensus of BRL 188m. This equals RoE of 13.2% versus 12.6% in 1Q16 and 14% in 2Q15. What we liked: 1) Fee income rose 22% YoY and 6% QoQ, 2) Non-performing loans ratio edged down 3) Loan losses declined 27% QoQ and a modest +3% YoY, even with increased provision coverage. Solid results. What we did not like: 1) Administrative costs rose 7% QoQ and employee count rose for the first time since 4Q13. 2) Loan book declined 5% QoQ as credit demand is weak. 3) Basel regulatory capital ratio declined 15bp QoQ to 16.8% with Tier 1 ratio down 15bp to 14.1% (still comfortably above 1.5% regulatory limit) due to the deduction of intangible assets through the acquisition of payroll accounts in June. Management now expects RoE to be 11-15% vs 14-17% with credit growth minus 4-% versus -4% amid strong decline in corporate lending. Credit costs of % are untouched but total allowance balance raised 1pp to %. Unpopular: Partly, with 7 analysts at Hold/Sell and 5 Buy (42%). Average target price of BRL 9.41 versus share price of BRL 1.9. Consensus estimates need upward adjustment based on results. Under-researched: No, not with 12 analysts covering a bank with USD 6m in free float but highly macro driven research with lack of fundamental bottom-up focus. Due to its small size, Banrisul flies below the radar of most global investors and receives less attention from analysts as it is more profitable to focus on a more liquid bank. Undervalued: Yes, but less so now. The stock has returned 96% year-to-date versus a 31% gain for Bovespa index and 46% gain for MSCI Brazil banking index. P/BV is.7x with P/TBV at.9x (deducting goodwill). We conservatively estimate an RoE of c12% for 216 and 217 in line with 1y Brazilian sovereign yield. Based on 2Q16 results, a 1% point decline in credit costs lifts RoE to 16%. We do not expect the bank to return to its +2% RoE seen in 21 and 211, but 16% RoE should be within reach in 218. Our target price of BRL 14 (upside of 28% plus 6% yield) is based on 1.x P/TBV two years from now, which is conservative given the potential upside in RoE. 33

34 The 1 largest companies in SKAGEN Kon-Tiki 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. 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. 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). 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. 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. 34

35 The 1 largest companies in SKAGEN Kon-Tiki (continued) 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. 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. 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. 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). 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. 35

36 For mer informasjon, kontakt oss eller ler mer i siste Markedsrapport og om SKAGEN Kon-Tiki A 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.