SKAGEN Kon-Tiki Statusrapport for desember 2016

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1 SKAGEN Kon-Tiki Statusrapport for desember 216

2 Hovedtrekk desember 216 SKAGEN Kon-Tiki gikk opp 4 prosent i desember, og gjorde det bedre enn vekstmarkedsindeksen som gikk opp 1,5 prosent. Vekstmarkedene gjorde det dårligere enn de utviklede markedene i desember. I 216 har fondet en avkastning på 6,5 prosent, referanseindeksen 8,1 prosent. Vekstmarkedene gjorde det bedre enn de utviklede markedene i 216. Det er første gang siden 212. De tre beste bidragsyterne i desember var Samsung Electronics, den russiske dagligvarebutikken X5 og det ungarske farmasiselskapet Richter. Samsung Electronics fortsatte å stige etter en strategisk oppdatering, som et motsvar til brevet fra Elliot Management. Indikasjoner på økt fokus på avkastning til aksjonærene, og økt etterspørsel etter virksomhetens komponenter, ser lovende ut for 217. For X5 ser vi nok en gang fortjenester etter gode salgstall. Det var ingen spesielle nyheter fra Richter i denne perioden. De svakeste bidragsyterne i desember var den brasilianske banken Banrisul, polysilikon-produsenten GCL Poly og det indiske teleselskapet Bharti Airtel. Banrisul fortsatte nedover etter å ha rapportert svake Q-resultater med en reversering av tidligere gode tegn på kredittkvalitet. For GCL Poly var det ingen selskapsspesifikke nyheter som preget nedgangen, men Kina annonserte sine avsluttende tariff-kutt. Bhartis svake resultat skyldes markedsfokus på den nye konkurrenten Jio s, som er en trussel mot monopolistene i India. Vekstmarkedenes rabatt til de utviklede markedene er høyt basert på historiske tall, med en 216e P/E på 1,4x og Pris/Bok på 1,4x for vekstmarkedene, og 19x og 2,2x for de utviklede markedene. De 12 største posisjonene er nå mer enn 51 prosent av fondet (opp fra 45 prosent fra begynnelsen av 215). Porteføljen** er fortsatt attraktivt verdsatt til en 216e P/E på 11,1x og P/B på 1,x og vi ser nå en 41 prosent oppside for vår portefølje over en tidshorisont på to år. * 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, desember 216 A Desember Q4 216 år 5 år 1 år Siden start* SKAGEN Kon Tiki A 4,% 5,% 6,5% 5,5% 8,2% 7,1% 14,4% Vekstmarkedsindeks 1,5%,% 8,1% 9,5% 9,% 5,2% 8,7% Meravkastning 2,5% 2,% -1,6% -4,% -,8% 1,9% 5,7% 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 22 4

5 Utviklingen i desember 216, NOK (%) RUSSLAND 16 COLOMBIA 14 POLEN EGYPT MOROCCO UNGARN INDONESIA SØR-AFRIKA 6 6 THAILAND BRASIL 4 4 SKAGEN Kon-Tiki A 4 TSJEKKIA TYRKIA PERU KOREA FILIPPINENE MEXICO 4 INDIA CHILE 2 2 MSCI EM 2 MALAYSIA TAIWAN KINA - 2 5

6 Utviklingen i vekstmarkedene hittil i 216, NOK (%) BRASIL PERU RUSSLAND MOROCCO UNGARN THAILAND COLOMBIA TAIWAN SØR-AFRIKA INDONESIA CHILE MSCI EM SKAGEN Kon-Tiki A KOREA KINA POLEN INDIA MALAYSIA TSJEKKIA FILIPPINENE TYRKIA MEXICO EGYPT

7 Største bidragsytere i desember 216 Største positive bidragsytere Company NOK Millions Samsung Electronics 18 X5 Retail Group 115 Richter Gedeon 16 Samsung SDI 78 Borr Drilling 76 LG Electronics 71 Største negative bidragsytere Company NOK Millions Banrisul -6 GCL-Poly Energy -24 Bharti Airtel -22 State Bank of India -11 Golar LNG -6 China Shipping Development -6 Mahindra & Mahindra 47 Kinnevik -4 Cosan 47 Apollo Tyres - Sistema 45 Lenovo Group - Enka Insaat 4 Asia Cement China -2 Value Creation MTD (NOK MM): 157 NB: Bidrag til absoluttavkastning 7

8 Største bidragsytere hittil i 4. kvartal 216 Største positive bidragsytere Company NOK Millions Samsung Electronics 25 X5 Retail Group 27 CNH Industrial 16 Richter Gedeon 16 Marfrig Global Foods 121 SBI Holdings 119 Største negative bidragsytere Company NOK Millions Mahindra & Mahindra -166 Haci Omer Sabanci -14 Naspers -121 Hyundai Motor -96 OCI -45 Apollo Tyres -5 Cosan 116 Yazicilar Holding -27 Tech Mahindra 12 Aberdeen Asset Management -22 Sistema 86 EIS Eczacibasi Ilac -18 Borr Drilling 76 Ghana Commercial Bank -1 Value Creation QTD (NOK MM): 1848 NB: Bidrag til absoluttavkastning 8

9 Største bidragsytere hittil i 216 Største positive bidragsytere Største negative bidragsytere Company NOK Millions Company NOK Millions X5 Retail Group 556 Cosan 51 Samsung Electronics 49 Banrisul 41 GPA 215 Kiatnakin Bank 215 UPL 2 Moscow Exchange 192 JSE 169 Frontline -69 Hyundai Motor -216 Great Wall Motor -16 Lenovo Group -15 Mahindra & Mahindra -149 LG Chem -141 Haci Omer Sabanci -14 Bharti Airtel -1 Kinnevik -11 ABB 154 Korean Reinsurance -111 Value Creation YTD (NOK MM): 26 NB: Bidrag til absoluttavkastning 9

10 Viktigste endringer 4. kvartal 216 Q4 Økte poster Q4 Reduserte poster Aberdeen Asset Management Borr Drilling Bollore Golar LNG (Ny) (Ny) DIA Podravka Rec Silicon Toray Industries Suzano Frontline ABB China Shipping Development Marfrig Global Foods Samsung Electronics (Ut) (Ut) (Ut) (Ut) (Ut) 1

11 Beholdninger økt og redusert i løpet av desember 216 Kjøp Borr Drilling (NY): Vi kjøpte oss inn i Borr Drilling, etter å ha deltatt i den første finansieringen av riggselskapet, som ble etablert av Tor Olav Trøim. Han var medvirkende i oppbyggingen av Seadrill da han jobbet for Fredriksen-gruppen. Det ble verdsatt til bare 4 prosent av tilsvarende selskap, uten gjeld, noe som gir et lavt break even punkt, og muligheten til å ta på seg gjeld for å kjøpe opp lavt verdsatte eiendeler. Salg Frontline: Vi fortsatte å selge oss ut på grunn av bekymringer rundt tilbudssiden i bransjen. Marfrig: Vi reduserte posten da selskapet har hatt positiv utvikling i det siste. Samsung Electronics: Vi solgte for å beholde vektingen nede. ABB: Vi reduserte posisjonen da selskapet nærmer seg kursmål. Toray (UT): Vi solgte oss ut av selskapet etter siste opptur i aksjekursen, da vi er bekymret over de kortsiktige utsiktene og ser bedre risk-reward andre steder. 11

12 Største poster i SKAGEN Kon-Tiki Per 1 desember 216 NB: Verdiestimater er basert på SKAGEN Kon-Tikis uavhengige analyser og kan variere fra konsensus estimater. Konverterte aksjekurser til rapporterte kurser for Naspers, X5 and Cosan. 12 Holding Price P/E P/E P/BV Div. yield Price Upside size, % 216e 217e last 15 (%) target % Hyundai Motor 7, ,,8,4 4, Samsung Electronics 7, ,2 8,4 1,1 1, Richter Gedeon 4, ,7 17, 1,8 1, Mahindra & Mahindra 4, ,8 11,8 2,5 1, 2 69 Naspers 4, ,6 22,5 5,7, X5 Retail Group 4, ,1 15, 4,, Sabanci Holding 4,2 9,15 6, 5,7,8 1, Cosan Ltd.,4 24,6 8,2 7, 1, 1,4 2 State Bank of India 2, ,6 11,4,9 1, 2 SBI Holdings 2, ,6 9,9,8, Kinnevik 2, ,7 6,4,8, ABB 2, , 16,7,6, 2 4 Weighted top 12 51,4 9,7 8,6 1, 1,2 42 Weighted top 5 85,1 11,1 9,4 1, 1,8 41 Emerging market index 1,4 12, 1,4 2,9 Top price target 15,9 1, 1,5 1,

13 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-1 Jun-1 Sep-1 Dec-1 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 P/BV for SKAGEN Kon-Tiki versus vekstmarkeder,5, P/B Kon-Tiki P/B EM Index 2,5 2, 1,5 1,,5 1 Top 12 positions, as of 1 December, 216

14 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-1 Jun-1 Sep-1 Dec-1 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 P/E for SKAGEN Kon-Tiki versus vekstmarkeder 2 18 P/E FY1 Kon-Tiki P/E FY1 EM Index Top 12 positions, as of 1 December, 216

15 Aggregate weight in portfolio (%) Number of holdings SKAGEN Kon-Tiki porteøljekonsentrasjon 12% 12 1% 1 8% 8 6% 6 4% 4 2% 2 % Number of companies Top 12 weighted positions Top 5 weighted positions Source: SKAGEN AS as of 1 December

16 Sektor og geografisk fordeling mot indeks (%) Energy Materials Industrials Consumer Discretionary Consumer Staples Health Care Financials Information Technology Telecommunication Services Utilities Real Estate Cash Sektorfordeling 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 16

17 Nyheter på engelsk

18 Key earnings releases and corporate news, December 216 Naspers (4.5% weight) 1HFY17 results Implications for the investment case: The results highlighted softer than expected profitability in the unlisted assets (representing 48% of revenues) due to the macroeconomic impact on Pay-TV in Africa and incremental development spend in e-commerce. We thought 217 would be the year when the Naspers s stub would be re-valued on the back of more of the assets turning profitable. After meeting the company, however, it is clear they will continue to invest heavily in 217/18, and hence the overall stub profitability is postponed. Given our long-term perspective (which has served us very well so far in this case) we agree with this decision as we see good opportunities for Letgo (which has already disrupted the US classifieds market) and in other new areas in which they are investing. This year Naspers has shown its willingness to crystallise value through the Allegro sale and consolidation (ibibo and MakeMyTrip, CitrusPay acquisition and Letgo/Wallapop) and we expect to see more of these transactions. We see signs of enhanced disclosure now that more assets are maturing which is something which in itself should be helpful for a rump re-evaluation down the road. Summary: Naspers reported 1H17 results without major surprises. Total revenues were down 1% YoY to USD.bn (+11% ex currency) as a negative currency effect and disposals reduced revenues. Based on an economic interest basis (equity accounted investments are proportionally consolidated) revenues were up 16/27% YoY incl./excl. currency. Consolidated development spend of USD 87m was up 8% but with spend on operating assets down do USD 188m as particularly Classifieds reduced investments which led to better profitability. Spend on newer ventures Letgo, India Travel and ShowMax increased materially to USD 2m. Core headline earnings increased by 1% YoY to USD 914m, driven mainly by accelerating growth from Tencent (reported with 1Q lag). Valuation: Target of ZAR k implies 49% upside. Based on our fair assessment of Naspers other businesses, we get the Tencent stake at a % discount to the market price (after deducting a 2% holding discount). 18

19 Key earnings releases and corporate news, December 216 (cont.) GPA (1.7% weight) Green shoots appearing at investor day Implications for the investment case: Positive. Management are making the right steps to reposition the food operation, improve sales and margins as well as enhance cash flow. The food retailing margin has suffered from an economic downturn with consumers trading down and a mix shift with lower margin (but higher capital return) cash-and-carry business outgrowing traditional food formats as well as impact from 1-2- price cuts to improve competitiveness. Since 214, the adjusted EBITDA margin has fallen by 4bp to c4.7% which is well below the EM average of 6.6%. We see FY16 as the trough and expect improvements in FY17 due to 1) cost reductions 2) improving same-store-sales ) increased supplier commitments to the 1-2- program and 4) bottoming out of Brazilian consumer spending helped by falling inflation and lower interest rates. Summary from annual investor day: Management has adjusted corporate overheads and expects annual savings of BRL 12m from 217 (25bp on food format margins). They aim to improve the margin for traditional food format by at least 5bp for FY17. CAPEX for food operation is expected to be BRL 1.2bn p.a. for FY17-19 versus a guidance of BRL 1bn for FY16. Around 5% will be used for store maintenance and conversions. It plans to convert 15-2 Extra hypermarket stores into Assai cash-and-carry format versus a current store count for the format of 1. GPA has put its 4% stake in home goods retailer Via Varejo up for sale. Proceeds will be reinvested into the core food retailing business (worth around 1% of its market cap and would almost wipe out the net debt of food retail operations). Valuation: Food operation is currently valued at EV/Sales of.24x. This is exceptionally low for a market leader in a fragmented market under consolidation and should be compared to the EM average of.77x. Implied EV/EBITDA for food retailing is 5.2x on an exceptionally weak FY16 versus an EM average of 11x. TP of BRL1 based on EV/EBITDA of 8x for food operation in

20 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. Hungarian pharmaceutical company established in 191 with focus on Central and Eastern Europe. Transitioning from genericfocused 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. 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). 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. 2

21 The 1 largest companies in SKAGEN Kon-Tiki (continued) 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. 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. 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, 2, ATMs, 4 mil+ accounts and over 22, employees. Upside potential from banking and economic reforms in India. SBI Holdings is a Japanese financial services group established in 1999 (as Softbank Investment). They manage a venture capital fund which mainly invest in Internet related venture companies. They also provide brokerage, investment banking and financial services. 21

22 Borr Drilling (MAGNI NS) USD 2. History and business description Borr Drilling was established in 216 following the acquisition of two jack-up rigs from Hercules Offshore in Chapter 11. The acquisition was funded through issuing 77.5m shares at USD 2.. The company was initiated by Tor Olav Troim (Magni Group) who was instrumental in building up Seadrill while working for Fredriksen Group and will be staffed by 2- persons with significant industry experience. The rigs were built at Keppel in 21 and have a fairly high spec with drilling depth of 5, feet. The rigs are air cooled and are therefore suitable for deployment in the Middle East. Business model, investment rationale and target price Borr acquired the two rigs for a price of USD 65m each which compares to a historic newbuild price of USD 24m, current new build price of USD 16-18m and implied EV of USD 156m for listed peers. Operating costs are USD 51k per day which will give unleveraged cash yield of 9% at current market rates of USD 7k per day and utilisation of 98%. Reactivation and mobilisation fees estimated at USD 8m per unit. Current rates are at 2-2 low. Average of peers is USD c7k in OPEX and USD 12k including interest costs and debt amortisation. Magni Group has provided a revolving credit facility of USD 2m to end of 22. Shares will be registered on Norwegian OTC with intention to list on a reputable stock exchange during 217. ESG: No issues identified. Target price of USD 4. based on 1% discount to peer group valuation (USD 14m per rig) due to lack of operation, liquidity and size, but plus for no leverage and track record of founding shareholder. Catalysts Jack-up market improvement with increase in pre-tenders and a very old fleet. Further asset acquisition at distressed prices as Borr will clearly be in deal flow. Deployment of rigs. Longer term contract awards when market improves would allow for adding leverage to each rig and thus creating ammunition for further distressed acquisitions. Valued at only 4% of peers with no debt leaves a very low breakeven point and plenty of upside in asset valuation. If valued at average of peers, this implies a share price of USD 4.8. Key figures: Market cap: USD 155m No. of shares: 77.5m P/E (16e): n.a. P/E (17e): n.a. P/BV (a): 1.x P/TBV (a): 1.x P/NAV:.4x RoE (17e): n.a. Div. Yield (16e):.% Magni Group owns 2%, SKAGEN Kon-Tiki 8.1% Risks Lack of contract awards would leave CF negative. Lack of operational organisation. If Magni wants to grow its business, it will need to hire an operational team. However, current market situation eases the challenge. 22

23 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.