SKAGEN Global. Statusrapport mars 2014

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1 SKAGEN Global Statusrapport mars 2014

2 Hovedtrekk i mars 2014 SKAGEN Global* utviklet seg på linje med sin referanseindeks i mars. Fondet var opp med 0,2 prosent mens MSCI All Country World Index var opp 0,3 prosent. Så langt i år er SKAGEN Global ned 1,3 prosent, mens referanseindeksen er ned 0,2 prosent i samme periode. Det nederlandske kjemiske konglomeratet, DSM, kom inn i porteføljen i mars. I tillegg økte vi vår posisjon i Yamaha Motors. Vi solgte oss helt ut av Ansco og reduserte våre posisjoner i Tyco International, Baker Hughes, ADT og Oracle. Netto kontantbeholdning i SKAGEN Global økte fra 1,8 prosent til 2,1 prosent i mars. De 10 største postene ble redusert fra 32,6 prosent til 32,4 prosent av fondet. SKAGEN Global består nå av 102 selskaper. State Bank of India (1,2 prosent av fondet) var beste bidragsyteren til absolutt avkastning i mars (opp 25 prosent i INR) og Vimplecom (1,4 prosent av fondet) var den dårligste bidragsyteren (ned 10 prosent i USD). SKAGEN Globals portefølje er fortsatt attraktiv verdsatt på absolutt og relativ basis. Fondets 35 største poster handles til en vektet Pris/Inntjening ( 14e) på 9,3 og en Pris/Bok på 1,0x. Verdsettelsene for aksjer er fortsatt attraktive med 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 at det er en god mulighet for at den globale veksten i 2014 vil overgå den for 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. 2

3 SKAGEN Global A Avkastning, mars 2014 SKAGEN Global A Mars 1. Kv år 3 år 5 år 10 år Siden start* SKAGEN Global A 0,2% -1,3% 31,1% 18,9% 9,1% 17,2% 10,8% 15,4% MSCI AC World Index** 0,3% -0,2% 33,9% 20,1% 11,4% 14,5% 5,0% 3,0% Meravkastning -0,1% -1,1% -2,8% -1,2% -2,3% 2,7% 5,8% 12,3% Note: Alle tall utover 12 måneder er annualisert (geometrisk avkastning) * Startdato: 7. august 1997 ** Referanseindeksen var MSCI World i NOK fra 7. august 1997 til 31. desember 2009 og MSCI All-Country Index fra 1. januar 2010 og videre. 3

4 Årlig avkastning siden start (%)* SKAGEN Global A har gjort det bedre enn indeks i 14 av 17 år 113 SKAGEN Global A (NOK) MSCI AC World** (NOK) Hittil i år Note: Alle tall i NOK, etter gebyrer * Startdato: 7. august 1997 ** Referanseindeks var MSCI World i NOK fra 7. august 1997 til 31. desember 1997 og MSCI All-Country Index fra 1. januar 2010 og videre. 4

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

6 Markedenes utvikling 1. kvartal 2014 i NOK (%) Indonesia Danmark Italia India Thailand Spania Sør-Afrika Tyrkia Norge Sverige Frankrike Brasil Canada USA (S&P 500) Finland Verdensindeksen Taiwan Nederland USA (Nasdaq) SKAGEN Global A Tyskland Storbritannia Vekstmarkedsindeksen Østerrike Sør-Korea Hong Kong Mexico Kina (lokal) Japan Kina (Hong Kong) Ungarn Russland

7 Største bidragsytere i mars 2014 Største positive bidragsytere Største negative bidragsytere Selskap NOK (m) Selskap NOK (m) State Bank of India 128 Microsoft 71 Eletrobras 59 Banrisul 56 Nordea 35 Cheung Kong 33 Weatherford 32 Petrobras 32 Hannover Re 30 LG Corp 29 Vimpelcom -68 OCI -55 Citigroup -54 Afren -53 Storebrand -35 Google -35 General Motors -31 CTC Media -31 Sistema -26 Stolt Nielsen -26 Total verdiskapning i mars 2014: NOK 185 mill Note: Bidrag til absoluttavkastning 7

8 Største bidragsytere så langt i 2014 Største positive bidragsytere Største negative bidragsytere Selskap NOK (m) Selskap NOK (m) Teva Pharmaceuticals 209 Renault 179 Baker Hughes 130 Rec Silicon 112 Nordea 97 Microsoft 85 EFG Hermes 70 Roche 70 Heidelbergcement 68 State Bank of India 65 Vimpelcom -264 Citigroup -260 General Motors -143 China Unicom -131 ADT -121 Gazprom -117 Sistema -111 LG Corp -107 CTC Media -105 China Communications Services -70 Total verdiskapning så langt i 2014: NOK -446 mill Note: Bidrag til absoluttavkastning 8

9 Største kjøp og salg, mars 2014 Kjøp i mars DSM er nytt selskap i porteføljen i mars. Selskapet er priset som et kjemisk råvareselskap. Vi tror at markedet ikke evner å se den underliggende omformingen av selskapet mot et vitenskapsbasert selskap med høy lønnsomhet, attraktiv kontantstrøm og strukturell vekst. Selskapets attraktive ernæringsvirksomhet utgjør nå 2/3 av total inntjening, men dets virkelige inntjeningskraft har blitt holdt tilbake av et antall enkelthendelser. Yamaha Motors - vi økte vår posisjon i mars i forbindelse med at selskapet er halvveis gjennom en omfattende restruktureringsprosess for å kutte kostnader og forbedre sluttproduktet. Markedet verdsetter effektene av kostnadskuttene, men klarer ikke å se hvilken effekt et forbedret og billigere produkt vil ha på salget. Operasjonell gjeld er betydelig, derfor vil et høyere salg ha en betydelig påvirkning på inntjeningen. Salg i mars Ensco vår posisjon ble solgt helt ut i løpet av mars. Selskapet opplever de samme pågående problemene for borefartøyer på fallende dagrater og vi solgte de resterende aksjene i fondet. Tyco International - vi fortsatte å trimme vår posisjon i selskapet etter en betydelig ekspansjon i verdsettelsesmultiplene. Vi ser fremdeles en vekst i nettoresultat på prosent de neste årene, men etter en økning i aksjekursene på 50 prosent de siste 12 måneder, er mye av vekstforventningene allerede priset inn i aksjekursen. Baker Hughes posisjonen ble redusert i mars etter en periode med god aksjekursutvikling. Rabatten mot lignende selskaper er blitt mindre og vi ser en redusert oppside for vårt fundamentale kursmål på USD 70 pr. aksje. ADT vi reduserte vår posisjon i mars da vi ser økt risiko for at vårt nedsidescenario vil bli en realitet større konkurransepress fører til oppsigelse av abonnementer og dermed mindre fri kontantstrøm. Oracle vi reduserte vår posisjon i mars da aksjen har hatt en god utvikling så langt i 2014 og vi ser redusert oppside. 9

10 Viktigste endringer i 2014 Økte poster Reduserte poster Q1 AIG Raiffeisen Bank International (ny) Cheung Kong State Bank of India Sanofi (ny) Storebrand DSM (ny) Yamaha Motor Q1 Ensco (ut) Tyco International ADT Baker Hughes Oracle 10

11 Største poster i SKAGEN Global pr. 31. mars 2014 Postens Pris P/E P/E P/BV Kurs størrelse, % 2013a 2014e Siste mål SAMSUNG ELECTRONICS CITIGROUP NORDEA BANK AIG TYCO INTERNATIONAL RENAULT MICROSOFT CHINA UNICOM GAZPROM AKZO NOBEL Vektet topp % Vektet topp MSCI AC World Aksjekurser i lokal valuta 11

12 Sektor og geografisk fordeling mot indeks for SKAGEN Global Sektorfordeling Energi Geografisk fordeling 19 Asia ex Japan 8 Fond Indeks Råvarer 6 10 EMEA 2 7 Kapitalvarer, service og transport Frontier Markets 2 0 Inntektsavhengige forbruksvarer Japan 3 7 Defensive konsumvarer 2 10 Kjerne EU Medisin 6 11 Nord-Amerika Bank og finans Norge 0 5 Informasjonsteknologi Perifer EU Telekom 4 6 Sør-Amerika 4 2 Nyttetjenester 1 3 Oceania 0 3 Kontanter 0 2 Kontanter 2 0 NB: Tallene summere ikke til 100 prosent pga. desimal avrunding. 12

13 Nyheter og annet om porteføljeselskaper på engelsk 13

14 Key earnings releases and corporate news, March 2014 Oracle (0.7%) In-line results but confirming our thesis of a company with sustainable growth Summary: Oracle reported Q3 FY14 results in-line with expectations. Headline earnings were marginally weaker than expected driven by a one-time non-operating balance sheet charge relating to revaluing of the Venezuelan Bolivar. Both the software and hardware segments had positive organic growth while cloud revenue continues to grow fast from a small base. On a geographical basis, the US continues to see healthy growth while Asia Pacific is declining as we have seen from peers. Oracle continues to expand margins (up 0.2pp) and buy back shares (USD 1.3bn in the quarter, bringing the total to 6.3bn for the first three quarters of FY14). Implications: The result confirmed our investment thesis. Despite being late to cloud, Oracle is not a company in perpetual decline. The market increasingly seems to agree that the tail risk has diminished. Thus, the stock has performed well and we have reduced our position accordingly. Oracle is not expensive with an FCF yield of almost 9% (after adjusting for stock compensation). Although capital allocation has clearly improved, the company only pays out around half of its FCF to shareholders the rest is still used for fairly expensive M&A. Vimpelcom (1.4%) Weak results driven by FX and market share loss in Russia Summary: Revenue decline was mainly due to weak FX in all markets (as expected) but revenues in Russia were clearly weaker than expected as Vimpelcom lost market share. Italy continued to outperform in a tough market, while Ukraine is seeing lower prices from bundling. Margins came in better than expected as the company continues to improve the cost structure. Net income came in significantly below expectations due to non-cash impairment charges on the company's assets in Ukraine and Canada. Net debt stands at 2.3x EBITDA at year end. Implications: The loss of market share in Russia and the resulting need for higher capex was not part of the initial investment thesis. Unless the higher capex is permanent, the shares are undervalued from a cash flow basis and with a number of non-operational triggers. However, the poor development in Russia has increased the risk in our thesis low FCF generation would remove downside protection and limit value creation from refinancing the Italian debt. 14

15 Key earnings releases and corporate news, March 2014, continued Tyco Int. (2.6%) Sold its Korean Fire & Security business and increased its share buy-back authorization Summary: Tyco announced that it had sold its Korean subsidiary for cash proceeds of USD1.93bn. The price seems high at 3.5x sales, 16.3x EBIT and 11.4x EBITDA. Tyco had a #2 market share in Korea and was operating with a very high operating margin (21%). Tyco also announced that it upsized the share buy-back program to USD2bn (10% of today s market cap.) Implications: The divested business will reduce EPS by USD 0.20/year. We think that the buy-back program will neutralize the effect of lost EPS from the sold business. We think the divesture of the capital intensive, well-operated Korean business makes a lot of sense taking the high price tag into account. Hannover Re (1.2%) Reported Q4 net income ahead of expectations due to low tax rate Summary: Hannover Re reported Q4 EPS of EUR 2.20 well ahead of expectations. The underlying reason was low tax rates relating to its businesses in Asia and Australia. On the operating level, the results came in slightly shy of expectations due to disability charges in its Australian Life operation. The company announced an expected dividend of EUR 3 per share, implying a yield of close to 5%. Hannover Re guides for a net income target of EUR 850m in Implications: Hannover Re is still delivering on its promises. The company is among the best in class with return on equity of ~15% also in 2013 (the same level we have seen for many years). The guidance for 2014 implies RoE of 13.9% and seems conservative. The share trades at P/E (2014e) of 8.5x and price/book of 1.2x. The share has re-rated from being priced well below book value, but we still see some upside to fair value. 15

16 Key earnings releases and corporate news, March 2014, continued Citigroup (5.4%) IFED rejected Citi s capital plan Summary: The Fed surprisingly rejected Citi s 2014 capital plan. Citi asked to implement a share buy-back plan and increase dividends to its shareholders. The reason for the Fed s rejection was insufficient processes and bad practice when it comes to projecting revenue and losses in stressful scenarios. Implications: The Fed s objection is clearly a set-back for our capital-return driven investment thesis. With higher excess capital, it will be harder for Citi to reach its target of return on tangible equity of 10% in Our capital return story will clearly be pushed forward in time. The good news is that the Fed s rejection is not based on insufficient capital, but practice and processes. The latter should be much easier to fix. Citigroup will probably be one of the best capital return stories in the US banking universe when the relationship with the Fed/regulators has improved. We believe that our patience in waiting for a strong 2015 capital return story will likely be rewarded given today s low valuation (0.7x book, 0.85x tangible book and P/E 2014e<10). Chiquita (0.3%) Chiquita and Fyffes to merge creating the undisputable number one banana company in the world Summary: Chiquita and Fyffes (listed in Ireland) announced that they have agreed to merge. Chiquita shareholders will receive 50.7% of the combined Chiquita/Fyffes entity. The company is targeting USD 40m of combined synergies by Half of the savings are targeted to be realised in the first fiscal year post closing. Fyffes Chairman will become the new CEO for the merged company, while the CEO of Chiquita, Ed Lonergan, will become Chairman. Fyffes shareholders received a 35% premium compared to the share price before the announcement. Implications: The deal makes a lot of sense from an industrial point of view. The two companies have a strong foothold in different markets and should be able to take out substantial operational synergies. Whether the deal makes sense for Chiquita shareholders, very much depends on the ability to reach the USD 40m target for efficiency improvement. Fyffes is valued at substantially higher valuation multiples than Chiquita. 16

17 Key earnings releases and corporate news, March 2014, continued Royal Unibrew (0.4%) Strong finish to 2013 and decent 2014 guidance Summary: Royal Unibrew reported better than anticipated performance in Q4 and issued 2014 guidance for operating profit 5-8% above sell side estimates. Revenue guidance is for a slightly lower revenue in 2014 than was achieved on a comparable basis in 2013 (including Hartwall). Profitability will improve as a result of efficiency improvements in Hartwall. Implications: The Royal Unibrew share has had a stunning performance since the trough in All credit is attributed to the management for bringing the stock from DKK 25/share to today s level of DKK 900/share. Valuation is starting to get high. EV/EBITDA for 2014 is estimated to be in the region of compared to Carlsberg/Heineken in the region of 8-9. We have started to shave off our existing position. Sberbank (0.4%) High quality earnings in Q4 reiterates 20% RoE guidance Summary: Sberbank reported 2013 IFRS accounts showing all the right things. Strong growth in loans and fee income, net interest margins expanded, operating cost grew less than revenue and non-performing loans declined. Sberbank continued bolstering its reserve for future loan losses and the coverage ratio now stands at 154%. Even with the relatively high provisions for future loan losses, return on equity was a very healthy 21% in the quarter. Despite the current tumult relating to the situation in Ukraine, management confirmed its 20% RoE guidance for next year. Implications: The result confirmed our investment thesis. Loan growth and fee income continue to grow steadily as a result of very low penetration of financial services in Russia. After several years of heavy IT spending, we are starting to see the scale benefits on operating costs. With sustainable return on equity in excess of 20%, healthy top-line growth and improved margins, we see significant upside from current levels. The stock trades at PB of less than 0.8x, PE is less than 4x, and the dividend yield is close to 6% 17

18 The largest companies in SKAGEN Global Samsung Electronics is one of the world's largest producers of consumer electronics with 155,000 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 domestic appliances, cameras, printers, PCs and air conditioners. Citi is a US financial conglomerate with operations in more than 100 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 c. USD 500bn of 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 in emerging markets. Nordea has the number one position in the Nordics with 11.2m retail costumers and 625,000 corporate clients. Nordea is the largest Nordic asset manager/wealth manager with EUR 224bn in AuM (EUR 138bn in managed funds). It is the most diversified among its Nordic peers. Total loans are EUR 346bn with the following split: Finland 27%, Sweden 26%, Denmark 24%, Norway 18%, and Baltics/Poland/Russia 5%. 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 180bn 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 10% ROE by Tyco International is a Swiss-based and NYSE-listed company focused on fire and security solutions for companies and government entities. It is a market leader in most of the market segments in which it operates. Approximately 42% of revenues are derived from services with the remainder coming from equipment sales. 48% of revenues come from North America, 27% from EMEA, 20% from APAC and 5% from Latin America. 18

19 The largest companies in SKAGEN Global Renault is a leading manufacturer of automobiles through brands like Renault, Dacia and Renault Samsung Motors. It holds ownership stakes in Nissan (43.4%), AvtoVaz (25%) and Daimler (1.55%). 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 2-3 years 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 early all its profits come from three main areas: Windows OS, Windows Server and the business division (Office Suite). After the merger with China Netcom and disposal of CDMA in 2008, China Unicom is now a full service provider, offering both fixed-line and mobile (GSM and WCDMA) services. China Unicom has 222m mobile subscribers, 93m fixed line subscribers and 61m broadband subscribers. The Chinese government owns 75% of the company. The company is listed in Hong Kong and also has a fairly liquid ADR in New York. Gazprom is the world s largest gas producer with proven gas reserves of 550bn m3 (10% of global reserves and equal to 30 years reserve life). The company controls 160,000km of gas pipelines and has significant storage capacity. It owns and operates Russia s entire high pressure gas transportation network and accounts for 28% 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 36GW of installed capacity. Akzo Nobel is the world s leading coatings supplier. It is active in three key areas: performance coatings, decorative paints and specialty chemicals. The company has strong positions in all key mature markets globally and a very strong portfolio of emerging markets assets, including top 3 positions in China, India & Brazil. High growth markets make up 44% of sales, with North America representing 15% and developed Europe 38%. 19

20 Koninklijke DSM (DSM NA) EUR Ratios (Euro): Market Cap: 9.0bn Net debt: 2.3bn Shares Out.: 181.4m P/E(14e): 15.6x P/E(15e): 13.5x Price/Book (last): 1.4x EV/EBITDA(14e): 8.3x ROE(14e): 8.8% Div yield (14e): 3.3% DSM is a global life sciences and materials science company. The company operates in five segments: nutrition, performance materials, polymer intermediates, pharma and an innovation centre. DSM has spent a decade reshaping its businesses from basic chemicals to life sciences. Today, 2/3 of earnings come from nutrition. The company was founded in 1902 and is headquartered in Heerlen, the Netherlands. Demand in the nutrition business is driven by a number of structural factors. Its is a high margin, high return business. Costs are generally driven by technology, not capital investments or cheap feedstock. DSM is increasing its downstream presence consulting and premixing of ingredients for food companies which is a less capital intensive business. After a string of acquisitions to broaden the portfolio in nutrition that enabled success in its downstream business, the focus is now on integration and costs. DSM also seems committed to reducing/exiting existing commodity businesses (performance materials and polymer intermediates). Current earnings do not reflect the true earning power of DSM. Nutrition is depressed due to a number of one-off factors: performance materials are struggling with still low activity in Europe and excess supply is having a (more lasting) effect on caprolactam prices (polymer intermediates). Catalyst: High (15% 20%) medium terms earnings growth in nutrition Significant room for cost cutting which will be higher on the agenda going forward Higher dividends as the nutrition business has attractive cash flow characteristics Selling/reducing its commodity businesses Re-rating (DSM is a high ROIC science based company, priced as a commodity chemical company) The Innovation Centre has a number of interesting biomedical businesses that could be transformational for the company Risk: Health concerns over synthetic additives in general and for DSM s products specifically Chinese competitors entering high ROIC areas of the nutrition business Execution (lack of cost control and continued M&A lead growth) 20

21 DSM: underlying exposure has changed significantly The pharma business was merged with Patheon in 2013 and is now in a 49% owned JV 21

22 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.