SKAGEN Vekst. Statusrapport april 2014

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1 SKAGEN Vekst Statusrapport april 214

2 Hovedtrekk april 214 SKAGEN Vekst* var ned,7 prosent i april, mens fondets referanseindeks (MSCI Nordic og MSCI ACWI ex Nordic) steg,8 prosent. Så langt i år er SKAGEN Vekst opp 4,1 prosent, mot referanseindeksen 2,4 prosent. De største bidragsyterne i april var Norsk Hydro, Statoil og Orange, mens Norwegian Air Shuttle, Teva og Royal Caribbean Cruises var de største negative bidragsyterne. Fondet økte postene i Philips, Avance Gas Holding Ltd, Volvo AB og Nippon Seiki Co Ltd. Innehavene i Orange, Bank Norwegian, Danske Bank, Mahindra & Mahindra og Kongsberg Gruppen ble redusert, mens Deoleo SA, Sistema og Akzo Nobel ble solgt ut av porteføljen. Basert på forventet inntjening i år prises SKAGEN Vekst til en P/E på 9,5x mot 15,3x for referanseindeksen. De respektive tallene for pris i forhold til bokført egenkapital er 1,6 mot 2,1. For 214 og 215 forventer vi at selskapene i porteføljen viser en inntjeningsvekst på mer enn 2 prosent, 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 Viktige begivenheter som påvirket utviklingen i april Til tross for at den geopolitiske uroen fortsetter i Ukraina, og Nord-Korea forbereder en underjordisk atomsprengning, samt at flyet fra Malaysian Airline fremdeles er savnet, kunne de fleste aksjemarkeder vise til en liten oppgang. Renten for statsobligasjoner med 1 års løpetid viste en fallende trend, mens ledende råvarepriser steg. Det var med andre ord ikke noe entydig bilde. Etter en solid oppgang siden bunnen i september 211 er det greit med en pause for å konsolidere, og finne veien videre. Utviklingen i 213 var i stor grad drevet av høyere verdsettelser, slik at selskapene nå må levere høyere inntjening for å kunne forsvare videre kursoppgang. Så langt viser offentliggjorte 1. kvartalsrapporter for 214 en beskjeden inntektsvekst, god kostnadskontroll og bedre og bedre balanseregnskaper (mindre gjeld). Det er ikke overraskende at M&A aktiviteten er høy siden selskapene har god finansiell stilling og ser etter muligheter til å vokse. I slutten av april preget Pfizer/AstraZaneca og GE/Alsthom overskriftene og viser appetitten på megatransaksjoner. Det forventes at dette vil fortsette og for SKAGEN Vekst forventer vi M&A drevet konsolideringer i segmentene for norsk oljeserviceindustri. Guidingen for 214 viser en beskjeden inntektsvekst, men fortsatt god lønnsomhet. Hvis den økonomiske aktiviteten tar seg opp, og selskapenes inntekter øker, vil en stor del ende opp på regnskapets bunnlinje, Og resultatet kan bli bedre enn hva analytikerne i dag forventer. 3

4 Avkastning - april 214 A april Hittil i kv. Hittil i år 1 år 3 år 5 år 1 år Siden start* SKAGEN Vekst A -,7% -,7% 4,1% 25,% 4,7% 12,2% 11,2% 14,8% Referanseindeks**,8%,8% 2,4% 19,1% 1,4% 18,% 11,9% 9,7% Meravkastning -1,4% -1,4% 1,8% 5,9% -5,7% -5,9% -,6% 5,1% 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 4

5 Årlig avkastning siden start (%)* SKAGEN Vekst har gjort det bedre enn indeks* i 11 av 2 år SKAGEN Vekst* (NOK) Referanseindeks** (NOK) Hittil i år * Startdato: 1. desember Referanseindeks før var OSEBX - Referanseindeks før var MSCI AC World/OSEBX 5

6 Markedsutvikling i april 214 (%) Tyrkia Storbritannia Thailand Norge Brasil Frankrike Canada Finland Sør-Afrika Spania Sør-Korea MSCI Nordic/MSCI AC ex. Nordic Danmark Tyskland Sverige Østerrike Verdensindeksen USA (S&P 5) Vekstmarkedsindeksen Indonesia Nederland Mexico Belgia Taiwan Ungarn Hong Kong SKAGEN Vekst A USA (Nasdaq) India Polen Kina (lokal) Japan Kina (Hong Kong) Russland

7 Markedsutvikling så langt i 214 (%) Indonesia Danmark Italia Tyrkia Thailand India Spania Norge Sør-Afrika SKAGEN Vekst A Frankrike Brasil Canada Singapore MSCI Nordic/MSCI AC ex. Nordic Finland Sverige Storbritannia USA (S&P 5) Verdensindeksen Nederland Polen Taiwan Tyskland USA (Nasdaq) Vekstmarkedsindeksen Østerrike Sør-Korea Mexico Kina (lokal) Ungarn Japan Kina (Hong Kong) Russland

8 Største bidragsytere, april 214 Største positive bidragsytere Største negative bidragsytere Selskap Norsk Hydro Statoil Orange Hitecvision Casino Guichard Hexagon Composites Kongsberg Gruppen Austevoll Seafood Bank Norwegian Danske Bank NOK (m) 28m 23m 13m 12m 8m 6m 5m 5m 5m 4m Selskap NOK (m) Norwegian Air Shuttle -25m Teva Pharmaceutical -2m Royal Caribbean Cruises -19m Sberbank -19m Philips -18m REC Silicon -17m AirAsia -15m Stolt-Nielsen -8m Continental AG -8m GCL Poly -7m Total verdiskapning i april 214: NOK -77m Note: Bidrag til absoluttavkastning 8

9 Viktigste bidragsytere så langt i 214 Største positive bidragsytere Største negative bidragsytere Selskap Teva Pharmaceutical Norwegian Air Shuttle Statoil Norsk Hydro Danske Bank Royal Caribbean Cruises Orange Kongsberg Gruppen REC Silicon Continental AG NOK (m) 78m 69m 67m 66m 59m 57m 38m 27m 25m 25m Selskap NOK (m) Sberbank -61m Bonheur/Ganger Rolf -36m DOF -26m Sevan Drilling -24m Solstad Offshore -21m SAP -2m Philips -16m Raffaisen Bank International -14m Odfjell -14m Wilh Wilhelmsen Hld -11m Total verdiskapning så langt i 214 : NOK 384 million Note: Bidrag til absoluttavkastning 9

10 Største poster i SKAGEN Vekst, ultimo april 214 -SKAGEN Vekst har 54 prosent i de nordiske landene Vekt i Kurs P/E P/E P/E P/B Kursmål porteføljen 214e 215e 216e trailing Samsung Electronics 7,1 % ,2 4,9 4,6,9 1 5 Royal Caribbean Cruises Ltd 6,7 % 53 14,2 11,8 8,9 1,3 75 Norsk Hydro 5,3 % 32 23,6 15,9 1,6,9 42 Teva Pharmaceutical 5,2 % 49 1,6 1,5 9,8 1,8 65 Continental AG 4,9 % ,4 11,6 1,7 3,7 225 Statoil 4,3 % 18 12, 11,6 11,3 1,6 2 Norwegian Air Shuttle 4,1 % ,8 5,9 4,6 3, 34 Danske Bank A/S 3,6 % ,9 1,5 9,5 1, 185 Kia Motors 3,4 % , 5,4 5, 1,1 15 Philips NV 2,8 % 23 14,9 12,5 11,3 1,9 4 Vektet gjennomsnitt 1 47,5 % 1,2 8,6 7,4 1,38 4 % Vektet gjennomsnitt 35 84,6 % 9,6 7,8 6,8 1,5 52 % Referanseindeks 17,3 15,4 13,7 2,1 1

11 Kjøp og salg, april 214 Kjøp Avance Gas Holding Ltd Avance Gas har en flåte på 6 VLGCs med en gjennomsnittlig alder på 6 år. I tillegg kjøpte de 8 nybygde VLGC fra Frontline 212. De nye skipene vil bli levert fra Jiangnan Changxing Shipyard i Kina i midten av 214 og slutten av 215. Selskapets første LPG skip, Stolt Avance, ble kjøpt i 21. I oktober 212 inngikk Frontline 212 en avtale med Stolt-Nielsen/ Sungas og ble dermed aksjonær i Avance Gas. Selskapet ble tatt opp for notering på Oslo Børs i april 214. Philips NV Vi fortsatte å kjøpe i Philips NV etter at aksjen svekket seg etter 1. kvartalsrapporten for 214. Selskapet er verdensledende innen medisinske systemer (scannere), forbrukerapparater og lys, men viste lavere enn forventet salg og lønnsomhet innen området for Helsetjenester. Vi ser dette mer som en tids forskyvning av ordrer enn noe reelt. Philips historiske kjerne er lyspærer som varer lenge og over årene har selskapet gått fra lyspærer til å ha mange andre aktiviteter i sin portefølje. I 214 fremstår Philips som mer fokusert enn på mange år og med et klart mål på finansielle prioriteringer for hvordan drive selskapet. Aksjen handles til en P/E 214(e) på under 15x og 215(e) på 12,5x. 11

12 Kjøp og salg, april 214 Salg Deoleo SA Det spanske matvareselskapet og verdens største olivenoljeprodusent ble solgt etter at den spanske regjeringen ga sin tillatelse til salg av aksjemajoriteten til CVC. Siden investeringen ble gjort sent i 212 har aksjekursen hatt en pen oppgang på ca. 8 prosent. Akzo Nobel Malingsprodusenten Akso Nobel som er notert på den nederlandske børsen ble solgt etter at kursmålet ble nådd. Siden investeringen ble gjort i 211 har aksjekursen steget fra ca. 3 til over 6. 12

13 Viktigste endringer i 214 Økte poster Reduserte poster Q1 Q2 Casino (ny) Raiffeisen Bank Intl (ny) Toshiba (ny) Kinnevik (ny) SBI Holding (ny) Volvo (ny) Kinnevik (ny) GCL Poly (ny) Air Asia Teva IM Skaugen Kia Motors Sberbank FLS Sistema (ny, men gammel) Philips (ny) Sodastream (ny) Avance Gas Holding Ltd Volvo AB Nippon Seiki Co Ltd Q1 Q2 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) R Domstein (ut) Remora (ut) Fortum (ut) Norwegian Car Carriers (ut) Deoleo SA (ut) Sistema (ut) Orange Norwegian Bank Danske Bank Mahindra & Mahindra Akzo Nobel (ut) Kongsberg Gruppen 13

14 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 ex Japan 15 4 EMEA 2 1 Japan 1 4 Core EU North America 12 Norway 7 Peripheral EU 11 South America Oceania 1 2 Cash 1 27 Fond Indeks

15 Nyheter og annet om porteføljeselskaper på engelsk

16 Key earnings releases and corporate news, April 214 Samsung Electronics (7.1%) Samsung s smartphone shipments in the first quarter were greater than shipments from all of its top competitors combined. Samsung reported 1Q14 net income rose 5.9% to 7.6 trillion KRW, slightly better than the median estimate. Operating profit was 8.49 trillion KRW (~ $8 bn), almost in line with the 8.4 trillion KRW pre-lim report Samsung now ships more smartphones than all competitors combined The implied valuation of the smartphone business indicates a profitability level below the darkest days during 28/9 recession, so lot s of bad news are in the stock price today Investment case Figures in line with expectations, strong margins on sale of phones combined with strong sales from Galaxy S5 should show further improvements for 214. Chip business seem to be back on track with strong expected growth and stronger sales for Samsung. The company now holds a gross cash pile of USD 6bn (~3% of market cap 192bn USD) and hence one of our triggers more cash to shareholders will boost share price from low valuation 16

17 Key earnings releases and corporate news, April 214 Norsk Hydro (5.3%) Strong numbers, confirming outlook Norsk Hydro reported underlying EBIT of NOK 772 mill, 3% above market expectations. Key for better than expected numbers is higher bauxite production and somewhat lower costs in bauxite and alumina. Primary metals also better than expected due to lower costs. Clean EPS of NOK.16. NHY indicates a somewhat tighter market balance with more capacity closure and demand ex-china up 2-4%. They also see that the Indonesia export ban is taking effect. NHY is expanding capacity for the automotive growth market as regulations are forcing light-weighting of vehicles to reduce CO2 emissions. New production line at Grevenbroich will bring total capacity to 2kmt. Completion ultimo 216, total capex of EUR 13 mill. Investment case Q1 report shows that Norsk Hydro is on track to improve profitability. Operational efficiency is superb and the market balance is expected to tighten. 17

18 Key earnings releases and corporate news, April 214 Statoil (4.3%) Q1 report significantly above market expectations Statoil reported an adj EBIT of NOK 46bn (1% above consensus) and EPS at NOK 4.97 (27% above consensus). Main reasons for better than expected result; 1) Lower costs (both absolute and per unit) 2) Higher trading results within MPR(trading unit), explaining ca 7% of the positive deviation and 3) Lower tax rate (66% vs guidance of 7%) due to higher contribution from International and Trading. Strong free cash flow of NOK 24 bn. Statoil kept its guidance unchanged and still targets capex of USD 2bn and production CAGR of 3% Q1 production of 1.979k boe/day. Investment case update Statoil recognizes their need for change and that they will have to reduce unit costs and improve ROIC. The stakeholder meeting confirms our investment case cash flows will improve but the standardization issue will take time to get to the bottom line. Although perhaps easier said than done, once the thinking embeds the performance should start to improve. Statoil trades with a P/E14 of 12x and the dividend yield is 4%. 18

19 Key earnings releases and corporate news, April 214 Orange (1.9%) 5% more customers, 3% lower revenues and stable cash earnings, so seems worst is behind Orange (former France Telecom) reported 1Q14 revenues of 9.8bn, down 4%. Number of customer relationship rose 4% to 239 million, primarily driven by 1 million new mobile customers in African operations. The good news in the report was stable EBITDA and at 3.8% margin and capex was 11.8% of revenues, so gross cash formation was close to 2bn. Stock rose 4% to on the news. Orange continues to expand fiber broadband infrastructure (not regulated, so more secure cash flows) in France and Slovakia. 43. fiber customers. Normal DSL broadband was 16 million customers, up 6. and driven by Spain, France and Slovakia. 182 million mobile subscribers, up 6% driven by Africa and Middle East. Orange Mobile Money had 1m customers, up 3.2 million. Cost and capex to be contained and management focus on bringing net debt down to below 2x EBITDA by end 214. Net debt is around 3bn and estimated 214 EBITDA is 12bn, which means all cash flow in 214 will go towards debt reduction.unless they sell some assets with low EBITDA contribution for a high price.or reduce dividend from 5% payout to 25% payout. Invest case update Orange has mobile and fixed line assets in many former French colonies, however most of the group cash comes from the French/European operations. In 212 Orange lowered mobile ARPU in France from 35 towards 25 as they wanted to stay competitive versus newcomer Iliad. Cash flow fell 2% and since mid- 212 Orange management has been busy reducing cost not an easy job to lay off former public servants on life-time contracts in France. Nevertheless, 214 seems to be the turning point and sell-side has still not taken management actions for good, so there s upside to estimates and perception. 19

20 Teva Pharmaceuticals (TEVA US) 49 $ Mean reversion Special situation Long term value builder 4% % 6% History and what they do Teva history can be tracked back to Jerusalem in the 193 ies. Today Teva is the worlds largest producer of drugs that have gone off-patent. 28% of revenues from branded/patented drugs, with Copaxone as the biggest (patent expires in 214 and 23 for new version). Estimated operating profit from Copaxone is bn $/year. 213 sales 2bn $ and with US 55%, Europe 28% and RoW 17%. Teva strategy is to focus on 1) central nervous system, 2) respiratory and 3) improved versions of existing drugs (not just Teva drugs) and 4) production of biosimilar drugs and 5) female drugs 47. employees will be cut by 1% in Business model and rationale for investment Copy or make branded pharmaceuticals and sell with own salesforce or close partners. Cost of goods sold is 48% of revenues, R&D is 7% (up from 5% earlier), sales & marketing is 19% and admin etc is 6% => operating margin is 2% As the company is priced on the upcoming expiration of patent for Copaxone, it currently profiles an attractive, highly cash generative and low earnings volatility investment case. If Copaxone is eliminated and cost cutting plans not effectuated, then Teva s valuation would be in line with large pharma i.e. 16x 213 earnings. Triggers: 1. Cost cutting starts to be visible and Copaxone off-patent have slow impact. Copx is difficult to copy 2. Several big drugs going off patent , generates huge potential for Teva. Industry grows 7% from 211 to 216 and Teva is in pole position 3. Lower government spending i.e. more use of generic drugs 4. Unchanged enterprise value with big drop in net debt = jump in market cap Key figures: Market cap USD 47bn NOK 288bn Net debt (cash) USD 1.9bn No. of shares 849m No. of pref P/E x P/E x P/BV 1.85x ROE % Yield 2.9% Altman Z-score 3.x Risks: 1. 4% of EBIT is from Copaxone and the patent expires in May 214 i.e. 215 earnings could be lower 2. Europe is pushing all drug prices lower, even already cheaper generic drugs 3. Future drugs are much bigger molecules and regulatory authorities are likely to demand more test before copy products are released into the market place i.e. higher cost for generic producers in future 4. Production facility and FDA inspections not living up to standards Target price On 215 sales (ex Copaxone) of 21bn $ (Copaxone sales goes from 4bn $ to 1.5bn $, so other goes up by almost 5bn) $). Cost base is reduced 2.bn $ in production, distribution etc and Copaxone income goes from 2.5bn $ to zero. Net debt goes from 9bn $ to 3bn $ (net cash after dividend is est at 3bn $/year) = net cash income in 215 of 5bn $ => with 9% return requirement it justifies a price of mid-6 ies. Daily turnover NOK 1.3bn No of analysts 31 % with sell/hold 52% Owners Capital 5.5%, Wellington 4.8%, inst owners 6% 2

21 HitecVision (HITV NS) 8 NOK Mean reversion Special situation Long term value builder % 5% 5% History and what they do Established in the 198 ies as Hitec AS serving the drilling industry. In 2 ies it developed into it s current form as a Private Equity asset management company specializing in products and services for the oil and gas industry. PE model is hurdle rate 8%, target is exit at 3x entry capital = 25% p.a. ROIC. 22 year history shows exit is on average 4x entry capital. Productivity improvement, innovation and new technologies/methods for oil/gas industry is success factor Business model and rationale for investment Take money into Private Euity pools with 7-1 year lifetime. Funds out: 42m $ in two funds in 26, 816m $ in one fund in 28, 42m $ in one fund in 21, 1.5m $ in one fund in 211 and 1.9bn $ in one fund in 214. Targets 1bn $ AuM in 218. Company gets paid a moderate annual admin fee. Other sources of income are performance fee over 8% hurdle rate and company s own holding in the PE Funds (varies). Consequently the biggest revenues are paid only when a PE fund close is revenues of 25-4m NOK year. After 216 it s also participation and success fees so goes to 5-1.bn NOK. With current ambitions it can generate 3bn NOK per year in 215. Triggers: Success full closure of PE funds and underlying asset sales Time is on HitecVision side as they get the big pay only at PE fund closure Risks: Sensitivity finding the right individuals to run the individual projects/assets in the PE funds. Cash restrains in segments of their target industry exposures. Target price Paying 1.5bn NOK for a company with a potential high-margin revenue stream of up to 1.bn in is good value. In the financials look even better provided they perform as planned. Key figures: Market cap NOK 1.5bn Net debt (cash) NOK 18m No. of shares 19m No. of pref P/E 214e 15x P/E 215e 12x P/BV trailing 1x ROE % Yield % Altman Z score 12.2x Daily turnover NOK NM No of analysts with sell/hold NM Owners Real Capital 61%, HV Capital 8%, C3 Holding 8%, Skagen 4% 21

22 The largest companies in SKAGEN Vekst 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. RCL is the second largest cruise company globally with a 25% market share. It sailed 5m passengers in 213. 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. 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 5 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, people. Teva is the largest generic (off patent) pharmaceutical company worldwide, however more than half it s 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 212 management focus has been to clean the organisation, optimise the drug portfolio and production units, sell channels and cut costs. Continental AG produces tires 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. 22

23 The largest companies in SKAGEN Vekst Statoil is a Norwegian government controlled oil/gas company with a global reach. The main assets are based in the North Sea, however Statoil has diversified in US Shale, Tanzania Gas, Brazil Offshore, etc. Statoil is focused on increasing daily energy production; however, in 214 it is expected to focus more on cash flows as the costs of extracting more oil/gas have been going up without a similar increase in oil price. Norwegian Air Shuttle is the leading Nordic-based low cost airline, which in 213 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. 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 28, the bank has struggled with high loan losses and a sub-optimal cost structure. In 212 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.m cars in 214 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. 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 23

24 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.