SKAGEN Vekst Statusrapport oktober 2014

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1 SKAGEN Vekst Statusrapport oktober 2014

2 Hovedtrekk oktober 2014 SKAGEN Vekst er opp 8,1 prosent hittil i år, mens fondets referanseindeks er opp 13,3 prosent i samme periode. Fondet steg 1,9 prosent i oktober, noe som var lavere enn oppgangen på 4,6 prosent for den sammensatte nordiske/globale referanseindeksen. De største positive bidragsyterne i oktober var Samsung Electronics, Hurtigruten og Royal Caribbean Cruises. De største negative bidragsyterne var Philips, Ganger Rolf og Bonheur. SKAGEN Vekst gjorde noen endringer i porteføljen og tok inn Citigroup samt økte postene i Lundin Petroleum og Toshiba. Fondet solgte seg ut av Statoil samt reduserte i Royal Caribbean Cruises og Teva Pharmaceuticals etter en solid oppgang i SKAGEN Vekst vurderer nå kontanttilbudet på Hurtigruten (1,6 prosent av fondet). Basert på forventet inntjening i 2014 prises SKAGEN Vekst sine 35 største posisjoner til en P/E på 11,9x mot 15,9x for referanseindeksen. Videre prises SKAGEN Vekst sin portefølje til en pris i forhold til bokført egenkapital, P/B, til 1,5x mot 2,5x for referanseindeksen. For 2015 og 2016 forventer vi at selskapene i porteføljen viser en årlig gjennomsnittlig inntjeningsvekst på ca. 20 prosent, noe som tilsier at det er rom for positiv kursutvikling uavhengig av om verdsettelsesmultiplene øker eller ei. * Om ikke annet er sagt er alle avkastningstall i rapporten for klasse A etter honorarer. 2

3 Fusjoner og oppkjøp (M&A) vil sannsynligvis øke pga. store kontantbeholdninger i selskapene og økt aktivitet fra Private Equity aktører På denne tiden av året forbereder selskapenes ledelse budsjetter og planer for neste år. De står overfor beskjeden økonomisk vekst og en kostnadsbase som er redusert siden I mange tilfeller har de også store kontantbeholdninger hva skal de gjøre? Betale utbytte eller investere, for eksempel gjennom fusjoner og oppkjøp. SKAGEN Vekst tror at M&A aktiviteten vil øke (se historiske nivåer i figuren under) fordi både selskaper og Private Equity fond har den nødvendige kapitalen, og til tross for økte priser på finansielle aktiva, så er verdsettelsene akseptable. Mange små og mellomstore selskaper mangler finansielle ressurser, og noen ganger kunnskapen, til å fullt ut utnytte sitt potensial, derfor vil disse være mest utsatt for oppkjøp. SKAGEN Vekst har 70 posisjoner totalt og flere mindre selskaper, slik som Hurtigruten, det norske ferge- og cruiseselskapet, som er et mål for en Private Equity gruppe. Den norske og globale oljeservicesektoren møter motvind pga. lavere oljepriser og mer fokus på kostnader blant oljeselskaper. Det kan derfor være muligheter for konsolidering/m&a etter den betydelige verdinedgangen vi har sett i Revisjonsfirmaet KPMG melder om en vekst på 26 prosent i oppkjøp og fusjoner i verden. Grafen nedenfor viser at M&A aktivitet i dag som er halvparten av det som ble observert under glansdagene i Gjennomsnittshandelen har blitt gjennomført med en premie på 20 prosent. 3

4 Avkastning, oktober 2014 A Oktober Hittil i kv. Hittil i år 1 år 3 år 5 år 10 år Siden start* SKAGEN Vekst A 1,9% 1,9% 8,1% 11,7% 14,3% 8,1% 10,7% 14,6% Referanseindeks* 4,6% 4,6% 13,3% 18,0% 18,5% 14,1% 11,6% 10,0% Relativ avkastning -2,7% -2,7% -5,1% -6,3% -4,2% -6,0% -0,9% 4,6% 4 Note: Alle avkastningstall ut over 12 måneder er annualisert (geometrisk avkastning) * Startdato: 1 desember Referanseindeks før var OSEBX - Referanseindeks før var MSCI AC World/OSEBX

5 Årlig avkastning siden start* SKAGEN Vekst* (NOK) Benchmark Index** (NOK) Hittil i år * Startdato: 1. desember Referanseindeks før var OSEBX - Referanseindeks før var MSCI AC World/OSEBX 5

6 Markedsutvikling i oktober 2014 i NOK (%) Tyrkia India Hong Kong Kina (Hong Kong) Sør-Afrika Kina (lokal) USA (Nasdaq) USA (S&P 500) Vekstmarkedsindeksen Verdensindeksen Brasil Indonesia MSCI Nordic/MSCI AC ex. Nordic Thailand Japan Finland Sverige Danmark Tyskland Storbritannia Russland Canada SKAGEN Vekst A Ungarn Nederland Polen Spania Sør-Korea Frankrike Italia Norge

7 Markedsutvikling hittil i 2014 i NOK (%) India Thailand Indonesia Tyrkia Kina (lokal) USA (Nasdaq) Danmark USA (S&P 500) Hong Kong Sør-Afrika Verdensindeksen Kina (Hong Kong) Canada Vekstmarkedsindeksen Mexico MSCI Nordic/MSCI AC ex. Nordic Brasil Spania Finland SKAGEN Vekst A Italia Storbritannia Sør-Korea Norge Japan Nederland Sverige Polen Frankrike Tyskland Ungarn Østerrike Russland

8 Største bidragsytere, oktober 2014 Største positive bidragsytere Største negative bidragsytere Selskap Samsung Electronics Hurtigruten Royal Caribbean Cruises Continental Teva Pharmaceutical Norsk Hydro Danske Bank Volvo Citigroup Teliasonera NOK (m) 70m 63m 43m 32m 29m 25m 17m 17m 14m 14m Selskap NOK (m) Philips -23m Ganger Rolf -23m Bonheur -22m DOF -19m Solstad Offshore -16m Sevan Drilling -16m Sodastream -14m Kongsberg Gruppen -12m Statoil -10m Norwegian Air Shuttle -10m Total verdiskapning i oktober 2014: NOK 170 millioner Note: Bidrag til absoluttavkastning 8

9 Største bidragsytere hittil i år 2014 Største positive bidragsytere Største negative bidragsytere Selskap Royal Caribbean Cruises Teva Pharmaceutical Norsk Hydro Danske Bank Statoil Hurtigruten Orange Norwegian Air Shuttle Kongsberg Gruppen Bank Norwegian NOK (m) 311m 186m 160m 87m 81m 71m 44m 44m 34m 34m Selskap NOK (m) DOF ASA -69m Sberbank -69m Solstad Offshore -66m Sevan Drilling -53m Bonheur -44m Ganger Rolf -43m Siem Offshore -35m Stolt-Nielsen -33m Sodastream -29m SAP -25m Total verdiskapning hittil i 2014: NOK 733 millioner Note: Bidrag til absoluttavkastning 9

10 Største poster i SKAGEN Vekst, ultimo oktober 2014 SKAGEN Vekst har 51,0 prosent investert i de nordiske landene Postens Kurs P/E P/E P/E P/B Kursstørrelse 2014e 2015e 2016e siste m ål Royal Caribbean Cruises Ltd 7,1 % 68 19,4 14,3 11,3 1,7 85,0 Samsung Electronics 6,9 % ,0 6,6 5,8 0, ,0 Norsk Hydro 6,3 % 38 30,2 15,1 10,8 1,1 57,5 Continental AG 4,6 % ,1 10,7 9,8 3,2 225,0 Norw egian Air Shuttle 3,8 % ,2 9,9 6,8 2,6 340,0 Teva Pharmaceutical 3,6 % 56 11,5 11,5 10,9 2,0 60,0 Philips 3,4 % 22 18,6 13,1 11,1 1,9 34,0 Teliasonera AB 3,3 % 51 12,6 12,0 11,3 2,0 70,0 Danske Bank A/S 3,3 % ,5 10,8 9,9 1,1 205,0 Kia Motors 3,1 % ,9 5,5 5,2 1, ,0 Vektet topp 10 45,5 % 12,8 10,1 8,6 1,43 41% Vektet topp 35 83,2 % 11,9 9,3 7,8 1,46 49% Referanse indeks 15,9 14,1 12,8 2,02 10

11 Kjøp og salg, oktober 2014 Kjøp Citigroup SKAGEN Vekst tok inn Citigroup i porteføljen i oktober. Det er utsikter til betydelig økning i aksjonærgodtgjørelse ettersom selskapets kapitalposisjon er god og blir stadig bedre. Citi sin siste kvartalspresentasjon viser en klar forpliktelse fra selskapet til å forenkle og optimalisere organisasjonsstrukturen, dvs. selge ut kapitalforbrukende aktiva med avkastning under pari, mens alle områder reduserer sitt kostnadsbruk og kapitalposisjonen blir sterkere og sterkere (les mer i faktaarket lenger bak i statusrapporten). Salg Statoil SKAGEN Vekst har redusert posisjonen i løpet av de siste 4 månedene og solgte seg helt ut av selskapet i oktober. Den første hypotesen for investeringen, strengere disiplin på investeringer har vist seg å holde stikk, og hittil i år har investeringen i Statoil gitt en avkastning på 81 millioner kroner. Noe av midlene fra salget har blitt brukt til å kjøpe Lundin Petroleum, hvor potensialet i leteporteføljen ikke er reflektert i den nåværende aksjekursen, ei heller selskapets eierandel i juvelen Johan Sverdrup. 11

12 Viktigste endringer hittil i år pr. oktober 2014 Økte poster Reduserte poster 9M Casino (ny) Raiffeisen Bank Intl (ny) Toshiba (ny) Kinnevik (ny) SBI Holding (ny) Volvo (ny) GCL Poly (ny) Air Asia Teva Kia Motors Sberbank FLS Philips (ny) Sodastream (ny) Avance Gas Holding Ltd Nippon Seiki Co Ltd Nokian Tyres (ny) Carlsberg (ny) Oriflame (ny) Bang & Olufsen Teliasonera 9M Olav Thon Eiendom (ut) Baker Hughes (ut) Northern Offshore (ut) RSA Insurance (ut) Karolinska (ut) Proact IT Indosat (ut) Northern Offshore (ut) DO&CO (ut) PCI Biotech (ut) Fortum (ut) Norwegian Car Carriers (ut) Deoleo SA (ut) Orange (ut) Norwegian Bank Danske Bank Mahindra & Mahindra (ut) Akzo Nobel (ut) Kongsberg Gruppen Hexagon Composites (ut) Frontline 2012 (ut) Austevoll Seafood (ut) Statoil Q4 Lundin Peroleum Toshiba Citigroup (ny) TeliaSonera Q4 Statoil (ut) Royal Caribbean Hurtigruten Teva Pharmaceutical LG pref (ut) 12

13 Sektor og geografisk fordeling mot indeks (%) Sektorfordeling Geografisk fordeling Energi Råvarer Kapitalvarer, service og transport Inntektsavhengige forbruksvarer Asia ex Japan EMEA Japan Defensive konsumvarer Medisin Bank og finans Informasjonsteknologi Kjerne EU Nord Amerika Norden Danmark 8% Sverige 12% Norge 30% Telekom Nyttetjenester Kontanter Andre Kontanter Finland 1% Fond Indeks 13

14 Nyheter og annet om porteføljeselskaper - på engelsk

15 Key earnings releases and corporate news, October 2014 Samsung Electronics (6.7%) 3Q 2014 is likely to be the bottom quarter. Stock buy back boosts the stock 3Q 2014 performance showed 20% lower revenues to 48trl W, gross profit down 30% to 17trl W and operating profit down 60% to 4trl W. The performance is more or less fully explained by weak smartphone sales and earnings. Strength in semiconductor chips balanced lower earnings contribution from display products (TV and monitors) The outlook for the semiconductor business is good and will get better as competitors must likely can not afford to be part of the game only Samsung and Intel will be left as the new toys costs 15bn $ for starters. On top comes experienced engineers to operate the factories, not a skill you find in the countryside in China. Investment case Last year when we attended the Samsung CMD in Seoul one of the key conclusions was more dividend and stock buybacks should emerge in We have been patient and not really enjoyed the stock price performance in 2014, however with the announced stock buyback things suddenly change to the more positive. Operational challenges with Apple eating in the high-end smartphone segment and Chinese low-price competitors eating from the bottom has had its effect on Samsung. A faster product cycle could maybe have smoothed quarterly earnings, but as this has not been made by Samsung as we await the upcoming revamp of Samsung smartphone offers in late February The updated models should be a good counter reaction to iphone 6 and Chinese low end competitors and will hopefully revive the Samsung business performance. 15

16 Key earnings releases and corporate news, October 2014 Norsk Hydro (6.3%) Strong Q3 report, all business areas improved thanks to higher prices NHY reported Q3 numbers 8% better than market expectations. Underlying EBIT of NOK mill driven by solid result from key segment, Primary Metals. Impressive cost reduction, cash cost now at USD 1.275/t. Capacity growth has been the main problem for the aluminum industry including Norsk Hydro. We now see a situation with limited new capacity going forward and strong underlying demand growth. Idle capacity (globally about 2m tons out of 50m tons) could be a party killer in the short to mid term, but quite a lot of the idle capacity will never re-open due to old technology. Investment Case We expect healthy demand for aluminum going forward as car producers strive to build lighter and more fuel efficient cars with less environmental impact. 16

17 Key earnings releases and corporate news, October 2014 Teva Pharmaceutical (3.6%) Management delivers on cost trimming promise. Cloud from Copaxone competition not in stock price. Teva performance in 3Q 2014 was very good and driven by lower cost in production, inventory and distribution. Adjusted operating profit rose 15% to 1.1bn $ and reported net income rose 22% to 0.9bn $. Generic drugs unit had 2% lower sales and 10% improvement in gross profit as the factory/inventory and distribution infrastructure was trimmed. More can be done, so profitability improvement journey is not over. The unit also saved on other costs, so operating profit rose 40% to 0.56bn $ Patented drug unit had 5% higher sales, 6% better gross profit and 6% higher operating income. Azilect, Parkinson disease drug, rose sales 11% due to price increases and timing of revenue recognition of Russian tender lifted sales. Guidance for 2014 was calibrated with a slight upward tilt on profitability revenues seen at 20.2bn $, gross profit at 12bn $, operating income at 5.7bn $ and EPS $. CEO says Teva is open to transformational transactions. Investment case update Teva delivers on its shareholder promises on costs and cash flow improvement. This, together with a sentiment change on Copaxone competition, has been the big driver for the 55% return in 2014 in NOK. However, the revenue growth in past years has been flat despite steep price increases in patented drugs. We have trimmed our Teva exposure in recent weeks and we do not see Copaxone competition risk priced into the stock after the 55% increase. A significant transformational transaction can propel the stock higher, so the risk/return conclusion for Vekst was to trim the position as we await the outcomes. 17

18 Key earnings releases and corporate news, October 2014 Danske Bank (3.3%) Bank is back in black and next chapter is more dividends and stock buy backs. Danske Bank 3Q 2014 performance was good and driven by stronger income streams, lower costs and lower loan loss provision. The capital position is solid at 15.0% (tier 1) and 19.3% (total capital), so the dividend outlook improves with the report. Total income grew 21% to 10.9bn DKK and costs grew only 1%, so pre-loan loss earnings grew 51% to 5.4bn DKK a nice beat to the 5.2bn DKK expected by sell side analysts. The non-core asset of 36bn DKK (mainly Irish mortgage bonds from a silly expansion) lost 0.2bn DKK Guidance 2014 was upgraded from 10-13bn DKK net income to bn DKK Investment case update Danske Bank is the history of a traditional bank who forgot prudent banking skills in the period. Since 2008 it s been several CEO s and a big clean up job. In 2014 the quarterly updates show that the house is back in order. The 70% stock price increase in DKK since we made it a 3% er in late 2012 now reflect the better health of the bank. Market cap is 159bn DKK, so P/E 15E 10x and ROE 9.5% and price-book-ratio 0.96x. Looking at the organization, revenue streams and cost structures, then more trimming can be done, so we maintain our blue sky target price of 205 DKK as we expect more dividend and introduction of stock-buy backs in 2015/16. 18

19 Key earnings releases and corporate news, October 2014 Volvo (1.9%) Volvo reported better than expected Q3 and announced further cost-cutting. Volvo reported 3Q sales and underlying EBIT that were 5% and 34% above consensus respectively (margin 5% instead of 3.9%). Stronger than expected September deliveries (August and July were known), in combination with FX tailwinds and lower costs were among key driver for the beat. Volumes in EU remained weak but was offset by strong North American demand. Accordingly order intake was 12% ahead on consensus, and book-to-bill was 110% vs 99% expected. Volvo announced an extension of the cost savings program, aiming to save an additional SEK 3.5bn (1.2% of group sales) at a cost of 1-2bn in charges. These measures will be implemented within one year, which is quite fast in our opinion. It also introduced a new way of presenting the progress of the savings program externally, which we think is good and transparent. Investment case update We own Volvo as the current value of the company does not reflect the cost saving potential and the mix effect of the new truck model program. This is a highly cyclical business and which may take some time to be realized. However, the Q3 report showed good progress on both the cost side as well as improved pricing. 19

20 Citigroup Inc (C US) USD Mean reversion Special situation Long term value builder 25% 25% 50% History and what they do Citigroup is an American multinational financial services/banking company. Citibank of New York was established in 1812 to serve NY merchants and in 1929 it was largest commercial bank in the world. Fast forward and in the 1985 to 2005 period a lot of mergers (Travellers, Smith Barney, Solomon Bros etc) created Citigroup. In 2008 financial crisis the card house crumbled and was equity refinanced by US government. The forward path for Citi since the 2008 clean-up is focused on fewer business areas, run-off of bad bank and solid capital position with 10%+ return on equity 44% North Americas, 21% Asia, Latam 20% and EMEA 16%. Business model and rationale for investment In 2013 it had 76bn $ revenue stream coming from Global Consumer Banking (48%) and Institutional Clients Group (44%) and Citi Holding the run-off bad bank (6%). Operating income of 24bn $ with Consumer 14bn $, Insti 11$and Holding losing 3bn $. Total assets 1.8trl $ with 575bn $ loans/ 928bn $ deposits => well funded. 968bn $ short term investments, 30bn $ cash and 111bn $ in Citi Holding. Equity is 214bn $, or 12% of assets in the old fashioned way of looking at banks. On all traditional metrics Citi looks inexpensive and the triggers are; Triggers: Modest revenue growth, but lower costs incl various settlement cost. Lower loan losses in bad asset Citi Holding too Capital position is sufficient to support current business size, and lower costs and trimming of assets will release further capital, so very good prospects for significant dividend increase/share buy backs. Not consensus view,. Cash flows can be further boosted as as tax loss carry forwards are utilized Risks: Delay in improvement proces and US regulator negative view of capital position Competition as the global banking industry gradually recover from the financial crisis hibernation Key figures: Market cap USD 155bn NOK 1.025bn Net debt (cash) USD NM No. of shares 3.034m No. of pref 0 P/E x P/E x P/BV trailing 0.76x ROE % Yield 0.1% Altman Z score NM Daily turnover USD 1.1bn No of analysts 34 with sell/hold 38% Owners Institutional ownership 20

21 The largest companies in SKAGEN Vekst RCL is the second largest cruise company globally with a 25% market share. It sailed 5m passengers in After a decade of lower returns on invested capital the cruise industry is coming to its senses and should be further supported by increased consumer demand in the coming years. 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 into new business areas solar power and healthcare are on the roadmap for the future. 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. 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 tires is getting 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. Norwegian Air Shuttle is the leading Nordic-based low cost airline, which in 2013 flew 21m passengers. The fleet of airliners and the route network is growing rapidly proving the concept from Norwegian local low cost airline, to Nordic, to European and to Global reach. 21

22 The largest companies in SKAGEN Vekst continued Teva is the largest generic (off patent) pharmaceutical company worldwide, however more than half its revenues comes from patented drugs most well known is Teva s multiple sclerosis drug: Copaxone. Teva has expanded considerably in the past decade and since 2012 management focus has been to clean the organization, optimize the drug portfolio and production units, sell channels and cut costs. Philips NV is a global leader in medical systems (scanners), consumer appliances and lightning. Philips historic focus has been on long-lasting light bulbs, but over the years the group has divested of light bulbs and introduced many other activities in its portfolio. Philips also has a clear set of financial priorities as to how to manage the group. Swedish/Finnish incumbent telecom operator offering services primarily in the Nordic region. History goes back to 1853 as the Royal Swedish Electrical Telegraph. The company is Europe s fifth largest telecom operator and offers services across Eurasia, including stakes in mobile phone operators in Turkey and Russia. Danske Bank is the second largest bank in the Nordic region and is also active in Ireland. After an unsustainable acquisition binge and loan growth before 2008, the bank has struggled with high loan losses and a sub-optimal cost structure. In 2012 a new management group began to clean up and prepare customers and the organisation for an automated banking future. Kia Motors is part of the Hyundai system, which is the third largest automotive group worldwide. Kia will produce and sell approximately 3.0m cars in 2014 and has very good quality cars with a nice design and an advanced driver experience at reasonable prices. Continued gain of market share including expanding the factory footprint outside Korea as well as a very attractive valuation are the key drivers for the stock. 22

23 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.