SKAGEN Kon-Tiki Statusrapport for oktober 2016

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1 SKAGEN Kon-Tiki Statusrapport for oktober 21

2 Hovedtrekk oktober 21 SKAGEN Kon-Tiki* var opp, prosent i oktober og gjorde det bedre enn vekstmarkedsindeksen, som var opp, prosent. Hittil i år har fondet en avkastning på 4,8 prosent mot 8,4 prosent for referanseindeksen. Vekstmarkedene gjør det fremdeles bedre enn globale markeder. De tre beste bidragsyterne i oktober var Cosan, Banrisul og Richter Gedeon. Det brasilianske konglomeratet Cosan er involvert i sukker- og etanolproduksjon, i tillegg til logistikk, gassdistribusjon, samt bensinstasjoner og detaljhandel. Selskapet nyter for tiden godt av et bra sukker- og etanolmarked, samt økende markedsandeler innen drivstoffsdistribusjon. Den brasilianske banken Banrisul steg sammen med et fortsatt sterkt marked i Brasil. Det ungarske farmasiselskapet Richter Gedeon steg i påvente av et godt kvartalsresultat i begynnelsen av november. Selskapet pleier å guide konservativt for så å levere bedre enn forventet, noe som var tilfellet dette kvartalet også. De svakeste bidragsyterne var Hyundai Motor, Mahindra & Mahindra og EFG Hermes. Posten i Hyundai Motor ble tynget av omfattende streiker som førte til svake resultater for tredje kvartal 21. Den indiske bil- og traktorprodusenten Mahindra & Mahindra falt på fortsatte bekymringer om økt konkurranse for deres virksomhet innen nyttekjøretøy. Den egyptiske banken EFG Hermes ble priset ned i påvente av en devaluering av landets valuta, noe som kom i begynnelsen av november. Samsung Electronics styrket seg igjen etter fallet at selskapet bestemte seg for å trekke tilbake Galaxy Note 7 av sikkerhetsmessige hensyn. Til tross for oppgangen i vekstmarkeder hittil i år, er disse markedene fortsatt attraktivt vurdert sammenlignet med utviklede markeder. De prises nå til en estimert 21 P/E på 1,x og P/B på 1,5x, sammenlignet med 1,8x og 2,1x for utviklede markeder. De 12 største posisjonene representerer 5 prosent av fondet (45 % i begynnelsen av 215). Porteføljen** er fortsatt attraktivt priset til 21 P/E på 1,x og P/B på 1,x. Vi ser 9 prosent oppside for porteføljen over en toårshorisont. * 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 5 posisjoner. 2

3 A SKAGEN Kon-Tiki A avkastning i NOK, oktober 21 A Oktober QTD YTD 1 år år 5 år 1 år Siden start* SKAGEN Kon Tiki A,%,% 4,8%,9% 5,9% 8,% 7,% 14,5% Vekstmarkedsindeks,%,% 8,4%,% 9,% 9,% 5,9% 8,9% Meravkastning,%,% -,% -2,% -,4% -1,% 1,7% 5,% 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 1 SKAGEN Kon-Tiki A* (NOK) MSCI EM Indeks (NOK) NB: Alle tall i NOK, etter honorarer * Startdato: 5 April Hittil i 21 4

5 Utviklingen i oktober 21, NOK (%) BRASIL EGYPT CHILE UNGARN MEXICO TSJEKKIA POLEN MOROCCO SKAGEN Kon-Tiki A INDIA TAIWAN MSCI EM COLOMBIA RUSSLAND MALAYSIA PERU TYRKIA INDONESIA THAILAND SØR-AFRIKA KINA FILIPPINENE KOREA

6 Utviklingen i vekstmarkedene i hittil i 21, NOK (%) BRASIL PERU MOROCCO RUSSLAND UNGARN COLOMBIA INDONESIA THAILAND EGYPT TAIWAN CHILE SØR-AFRIKA MSCI EM SKAGEN Kon-Tiki A KOREA KINA INDIA TYRKIA MALAYSIA MEXICO FILIPPINENE TSJEKKIA POLEN

7 Største bidragsytere i oktober 21 Største positive bidragsytere Company NOK Millions Cosan 255 Banrisul 29 Richter Gedeon 119 GPA 15 X5 Retail 77 Indosat 2 Største negative bidragsytere Company NOK Millions Hyundai Motor -14 Mahindra & Mahindra -9 EFG-Hermes -5 ABB -9 LG Electronics -27 Apollo Tyres -17 Rumo Logistica 1 Ghana Commercial Bank -12 CNH Industrial LG Corp -12 Marfrig 54 Samsung SDI -11 State Bank of India 5 OCI -1 Verdiskapning i oktober (NOK MM):12 NB: Bidrag til absolutt avkastning 7

8 Største bidragsytere hittil i 21 Største positive bidragsytere Company NOK Millions Cosan 7 Banrisul 12 X5 Retail 9 Samsung Electronics 27 GPA 22 UPL 21 Kiatnakin Bank 25 Moscow Exchange 192 Naspers 17 Største negative bidragsytere Company NOK Millions Frontline -8 Hyundai Motor -254 Great Wall Motor -158 Lenovo Group -149 LG Chem -14 LG Electronics -17 Bharti Airtel -122 Tech Mahindra -121 Kinnevik -15 Rumo 14 Samsung SDI -15 Verdiskapning hittil i år (NOK MM):14 NB: Bidrag til absoluttavkastning 8

9 Viktigste endringer 4. kvartal 21 Q4 Økte poster Q4 Reduserte poster Bollorè CCU Kinnevik DIA (Ut) 9

10 Beholdninger økt og redusert i løpet av oktober 21 Kjøp CCU: Den svake utviklingen etter resultatet for andre kvartal har gitt oss muligheten til å øke posisjonen. CCU er et diversifisert drikkevareselskap og opererer hovedsakelig i Chile og Argentina. EV/Salg er på 1,7x, noe som gjør CCU til et av de billigste børsnoterte bryggeriene i verden. Salg DIA (Ut): Vi solgte oss ut i forkant av kvartalsresultatet på grunn av lavere overbevisning forbundet med deres virksomhet i Iberia. ABB: Vi benyttet en sterk aksjekurs til å redusere posten noe. Bollorè: Det franske konglomeratet er den ledende logistikkleverandøren på det afrikanske kontinentet, noe som gjør det til en viktig spiller i den langsiktig økonomiske utviklingen i regionen. En kompleks gruppestruktur gjør selskapet upopulært blant investorer. Bollorè handles til mer enn en prosent rabatt til vår konservativt beregnede verdsettelse basert på summen av bestanddelene i selskapet. 1

11 Største poster i SKAGEN Kon-Tiki Per 1 oktober 21 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. 11 Holding Price P/E P/E P/BV Div. yield Price Upside size, % 21e 217e last 15 (%) target % Hyundai Motor 7, 95 4,,8,4 4, Samsung Electronics, ,5 7,7 1, 1, Mahindra & Mahindra 4, , 1,2 2,7, Richter Gedeon 4,5 45 2,2 1, 1,8 1, Naspers 4,4 1,2 25,1 7,, 21 Sabanci Holding 4,4 9,5,4 5,8,9 1, 14 5 X5 Retail Group, , 15,2 4,, Cosan Ltd.,7 28,8 9, 8,7, 1,2 2 1 Banrisul 2,8 1, 8, 8,,9, 14 State Bank of India 2, ,1 11,7,9 1, 1 ABB 2, 18 17,8 1,2,5,4 2 7 SBI Holdings 2, ,9 8,,7, Weighted top 12 5, 9,2 8,,9 1,4 8 Weighted top 5 8,8 1, 1,5 1, 1,8 9 Emerging market index 1, 12, 1,5 2,9 Top price target 18, 14, 1, 1,4

12 Dec-5 Mar- Jun- Sep- Dec- 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-1 Jun-1 Sep-1 Dec-1 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-1 Jun-1 Sep-1 P/BV for SKAGEN Kon-Tiki versus vekstmarkedene,5, P/B Kon-Tiki P/B EM Index 2,5 2, 1,5 1,,5 12 De 12 største postene per 1 oktober 21

13 Dec-5 Mar- Jun- Sep- Dec- 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-1 Jun-1 Sep-1 Dec-1 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-1 Jun-1 Sep-1 P/E for SKAGEN Kon-Tiki versus vekstmarkedene 2 18 P/E FY1 Kon-Tiki P/E FY1 EM Index De 12 største postene per 1 oktober 21

14 Aggregate weight in portfolio (%) Number of holdings SKAGEN Kon-Tiki - porteføljekonsentrasjon 12% 12 1% 1 8% 8 % 4% 4 2% 2 % Number of companies Top 12 weighted positions Top 5 weighted positions Kilde: SKAGEN AS ved utgangen av oktober 21 14

15 Sektor og geografisk fordeling mot indeks (%) Telecommunication Services Sektorfordeling Energy Materials Industrials Consumer Discretionary Consumer Staples Health Care Financials Information Technology Real Estate Utilities Cash Geografisk fordeling Asia DM Asia EM Europe DM ex. The Nordics Europe EM Frontier Markets Latin America Middle East & Africa North America The Nordics Cash Fond Indeks 7 15

16 Nyheter på engelsk

17 Key earnings releases and corporate news, October 21 Samsung Electronics (.9% weight) Q1 inline with guidance; more capital distribution ahead Implications for the investment case: Neutral. Board answer to the Elliott letter during November should include announcements of new buy-backs and/or dividend. Despite buy-backs of KRW 11.4tr in the past year and dividend of KRW.1tr, cash is piling up with a net cash accumulation of KRW 1.tr in the past year. This is also supported by what seems to be a new plan to consolidate operations with pending sale of printer operation (USD 1.1bn) and several stake sales in the past few months. Summary: Q1 operating profit of KRW 5.2tr was in line with revised guidance after the Note 7 recall, and includes total KRW c.8tr cost related to it. This is comparison to an operating profit of KRW 8.1tr in 2Q1 and KRW 7.4tr in Q15. Operating profit for IM (mobile) fell to only KRW 1bn (.4% margin). The good news is strong sales of S7 which is expected to surpass S4 (launched 21) during the product cycle. Margin for Semiconductor improved further to 25.% and the division accounted for 5% of group operating profit. Display division improved profit to KRW 1.tr for a 14.4% margin. Cash flow was strong and net cash increased by KRW 5.2tr during Q1 to KRW 7.1tr (KRW 5k per share), helped by sale of non-core assets. Fund managed by Elliott this month sent a letter to the board suggesting a four step plan close the valuation gap; separation into an operating- and holding company using the treasury shares, paying a special dividend of KRW 245, per share, listing operating company on NASDAQ and improve corporate governance. Elliot also suggested to pay out 75% of FCF as dividend going forward. We believe the board will announce a new buy-back program next month and, based on statements from management, they still seems to have a preference for buy-back versus dividend. Valuation: Our target price of KRW 1.7m implies an upside of %. Our target price is based on a sum-of-parts valuation discount of 25% and a 1% additional discount for our preference shares. Thus, we agree with the Elliot view that the share is worth close to KRW m based on a comparable valuation. A more aggressive capital distribution plan than the -5% of FCF on average for could allow for further closing of discount to sum-of-parts. 17

18 Key earnings releases and corporate news, October 21 GPA (2.% weight) Weak Q1 as expected but margin contraction levels off Implications for the investment case: No change. 21 is a very challenging year, but margins should start improving from 1Q/2Q17 due to efficiency program gains and improved supplier commitment behind promotion program. We do not assume any tailwind from better consumer sentiment near term, but decelerating inflation and lower rates should stimulate consumer spending. The governance risk through Casino is well priced into valuation. Summary: Adjusted EBITDA for food business of BRL 478m declined 11% YoY to sales growth of 14% YoY. Hence, margin declined 14bp YoY to 4.7% versus a 28bp YoY contraction in 2Q1. GPA had already reported sales numbers with LFL growth of 9% YoY (up from % in 1Q1 and 7% in 2Q1) and space growth of 5% YoY driven by expansion for the cash-and-carry format. The margin compression all stems from gross margin which is down 18bp YoY with all related to the Extra banner and mix shift toward Assai cash-and-carry format which has structurally lower margins (but higher return on capital). As pointed out before, the 1-2- discount program initiated by Extra banner in April (accounts for c2% of banner food sales) has a negative margin impact near term, due to ramp up period for supplier compliance with program. Valuation: GPA is currently facing margin headwind from 1) weak economy with consumer trading down, 2) repositioning of prices within Extra banner (8% of food segment sales) and ) mix change due to structurally lower margin from cash-and-carry operation (now 7% of net sales) growing 4% YoY versus 1% for other food banners combined. Headwind from mix is now diminishing with Assai margin close to rest of food business (4.4% versus 4.9% in Q1). However, our investment thesis is that we buy a market leader in a fragmented cash generative industry (top only controls 4% of formalized market which again only accounts for c55% of total market), which provides long term tailwind from sector consolidation at a very attractive price. This has been applied very successfully in Russia through X5 Retail Group. Implied valuation of food retailing business is.22x sales and 4.x EBITDA on depressed 21 results (EBITDA margin down 4bp to 4.7% since 214). In contrast, EM food retail sector is valued at median EV/Sales of.x and EV/EBITDA 1.7x. Our 2y forward target price of BRL 1 is based on sum-of-parts with food multiple at 8x for 217e which implies EV/Sales of.4x. 18

19 The 1 largest companies in SKAGEN Kon-Tiki Hyundai Motor is the world's 4th largest car maker, including their 9% 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. 19

20 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 4% 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. Banco do Estado do Rio Grande do Sul, or Banrisul, was founded in It is a multiple service bank controlled by the state of Rio Grande do Sul, and it is among the 7 largest financial institutions in Brazil by branches and total deposits but a clear leader in the regional market. 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 8m 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, 2, ATMs, 4 mil+ accounts and over 22, employees. Upside potential from banking and economic reforms in India. 2

21 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.