For personal use only - ASX...2020/03/24 · Investor Webinar COVID 19 Pandemic –March 2020 For...
Transcript of For personal use only - ASX...2020/03/24 · Investor Webinar COVID 19 Pandemic –March 2020 For...
@ForagerFunds
Forager Funds Management
@forager_funds
Investor WebinarCOVID 19 Pandemic – March 2020
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Disclaimer
General advice onlyForager Funds Management Pty Ltd (ABN 78 138 351 345, AFSL 459312) provides general information to help you understand our investment approach. Any financial advice we provide has not considered your personal circumstances and may not be suitable for you.
Product Disclosure StatementThe Trust Company (RE Services) Limited (ABN 45 003 278 831 and AFSL No. 235150) is the Responsible Entity and the issuer of the Forager Australian Shares Fund (ARSN No. 139 641 491). Fundhost Limited (ABN 69 092 517 087 and AFSL No. 233045) is the Responsible Entity and the issuer of the Forager International Shares Fund (ARSN No. 161 843 778). Before investing you should read the relevant Product Disclosure Statement and seek advice from investment and taxation professionals to determine if the product is appropriate for your needs. The PDS can be accessed on the website (https://foragerfunds.com/international-shares-fund-pds/) or by calling +61 (2) 8305 6050.
PerformancePast performance is not a reliable indicator of future performance. The Trust Company (RE Services) Limited, Fundhost Limited and Forager Funds Management do not guarantee investment performance or distributions, and the value of your investment may rise or fall. Total returns and estimated valuations have been calculated using the mid-point of unit prices, before taxation, after ongoing fees, and assuming reinvestment of distributions. We encourage you to think of investing as a long-term pursuit.
DisclaimerThis material has been prepared by Forager Funds Management. To the extent permitted by law, The Trust Company (RE Services) Limited, Fundhost Limited and Forager Funds Management, their officers, employees, consultants, advisers and authorised representatives, are not liable for any loss or damage arising as a result of any reliance placed on this document. Information has been obtained from sources believed to be reliable, but we do not represent it is accurate or complete, and it should not be relied upon as such.
Forward-looking statementsThis presentation contains some forward-looking statements which reflect the expectations of Forager Funds Management about the future prospects of companies held within the portfolios of the funds. While Forager Funds Management considers its expectations to be based on reasonable grounds, there is no guarantee that those expectations will be met. Actual performance of the portfolio companies will be impacted by a variety of factors, including circumstances that cannot be foreseen, and could differ significantly from the expectations of Forager Funds Management. These statements should therefore not be relied upon as an accurate representation or prediction as to any future matters. Where portfolio companies do not perform in line with Forager Funds Management’s expectations, the funds could be adversely impacted.
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Global meltdown
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ASX All Ordinaries
S&P 500
Source: S&P Capital IQ
1,700
1,900
2,100
2,300
2,500
2,700
2,900
3,100
3,300
3,500
Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017 Mar 2018 Jun 2018 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Dec 2019
S&P 500
-31.9%
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Global meltdown
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ASX All Ordinaries
S&P 500
Source: S&P Capital IQ
4,500
5,000
5,500
6,000
6,500
7,000
7,500
Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017 Mar 2018 Jun 2018 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Dec 2019
ASX All Ordinaries
-33.1%For
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Global meltdown
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ASX All Ordinaries
S&P 500
Source: S&P Capital IQ
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017 Mar 2018 Jun 2018 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Dec 2019
ASX Small Ordinaries Industrials
-43.2%
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FASF NAV Performance – March month to date*
-45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
FASF ASX All Ords. Index
Source: Forager, S&P Capital IQ*Performance to 20/03/2020
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FASF stock performance
7Source: Bloomberg
-90% -80% -70% -60% -50% -40% -30% -20% -10% 0%
THORN GROUP LTD
EXPERIENCE CO LTD
ECLIPX GROUP LTD
APOLLO TOURISM & LEISURE LTD
MSL SOLUTIONS LTD
TOURISM HOLDINGS LTD
AMA GROUP LTD
MMA OFFSHORE LTD
GENTRACK GROUP LTD
WEBJET LTD
ENERO GROUP LTD
MOTORCYCLE HOLDINGS LTD
SG FLEET GROUP LTD
ISELECT LTD
NZME LTD
MAINSTREAM GROUP HOLDINGS LTD
PACIFIC SMILES GROUP LTD
MACMAHON HOLDINGS LTD
WPP AUNZ LTD
LOGICAMMS LTD
CARSALES.COM LTD
RPMGLOBAL HOLDINGS LTD
SMARTGROUP CORP LTD
NATIONAL TYRE & WHEEL LTD
CTI LOGISTICS LTD
MATRIX COMPOSITES & ENG
BOOM LOGISTICS LTD
VIVA ENERGY GROUP LTD
FASF stock performance March month to date
All Ordinaries
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Liquidity crisis
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Stock ASX Code FASF weighting March price fall* % shares traded in March1
RPM Global RUL 14.0% -26% 6.4%
Macmahon MAH 8.6% -35% 7.3%
WPP AUNZ WPP 6.0% -33% 1.6%
Enero EGG 5.7% -47% 2.5%
Mainstream MAI 5.1% -40% 1.4%
CTI Logistics CLX 4.9% -22% 0.3%
NZME NZM 4.5% -42% 1.7%
Matrix MCE 4.5% -22% 2.3%
iSelect ISU 4.2% -45% 4.6%
Eclipx ECX 3.9% -66% 19.6%
Source: Bloomberg* Price fall to 20/03/20201. % of total shares outstanding
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FASF key stock discussion
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Business resilience
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Stock ASX Code
Key points Valuation comments
Largest holdings
RPM Global RUL - All clients from mining sector, relatively low exposure- Recurring revenue, significant net cash
- Great recent result- No change in base estimate > $2 per share
Macmahon MAH - Revenue underpinned by long-term mining contracts, low cost mines- Low net debt, all equipment finance
- Recent upgrade- No reason to change estimates, trading 3x EV/EBIT
Enero EGG - Revenue will take significant hit as advertising budgets slashed- Large cash balance, operational flexibility
- In strong position to weather difficult market- Expect relatively quick recovery
WPP AUNZ WPP - Same as EGG, will be hit hard by advertising slowdown- Sale of Kantar leaves balance sheet well placed to navigate crisis
- Trades ex 4.4c ff dividend next week, 11% of current price- Remains exceptionally cheap, going to a difficult year
Significantly impacted
Thorn Group TGA - SME business finance segment significantly impacted. Probably worthless- Two thirds of assets in Radio Rentals. Likely to be resilient to beneficiary
- Still awaiting update but trading discount to cash and roughly one tenth of RR assets
Experience Co EXP - Revenue will fall to close to zero in the short term- Strong balance sheet thanks to recent asset sales- Decisive management action, flexible cost base
- More confident than market that this business survives- Trades 2x normal earnings, tangible asset backing largely
realisable
Financial market exposure
Eclipx ECX - Revenue underpinned by corporate and govt auto leases- Novated leases significantly impacted, relatively small part of business- Key issue is balance sheet funding
- Elevated risks due to balance sheet weakness- New management executing well- Industry consolidation still likely, attractive valuation
Mainstream MAI - Revenue directly impacted by markets and clients closing funds- Net cash and significant growth spend in cost base
- Can navigate crisis but valuation significantly impacted by financial market turmoil
- Remains a valuable strategic asset
New additions
Smartgroup SIQ - Clients mostly health sector and not for profit- Some impact on novated leases but net cash and highly resilient business
- Significant insider buying- 9% FF yield and history of growth and special divs
AMA Group AMA - Smash repairs likely impacted by less driving, less traffic- Debt taken on for acquisition leaves balance sheet vulnerable
- Long term opportunity remains intact- Worth 5-8 times current price if management can navigate
the next 12 months
All opinions and estimates constitute judgments of Forager Funds Management and are subject to change without notice. These statements should therefore not be relied upon as an accurate representation or prediction as to any future matters.
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FISF stock performance
10Source: Bloomberg
-60.00% -50.00% -40.00% -30.00% -20.00% -10.00% 0.00%
GMS LN
HLG NZ
HSW LN
ULTA US
ROS AV
CELH US
BLTG LN
CRH LNMOTR LN
DCI LN
LEA US
CDW US
AUTO LN
BAB LN
TSL LN
LNR CN
BON NO
GOOG US
636 HK
FLU AV
ZBRA US
398 HK
IPGP US
NORBIT NO
KEYS US
GAN LN
6758 JT
303 HKSPOT US
YUMC US
FISF stock performance March month to date
MSCI ACWI IMI (local)
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FISF key stock discussion
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Business resilience
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All opinions and estimates constitute judgments of Forager Funds Management and are subject to change without notice. These statements should therefore not be relied upon as an accurate representation or prediction as to any future matters.
Stock Ticker Key points Valuation comments
Largest holdings
Zebra Technologies NASDAQ:ZBRA - Key clients in logistics and retailing - Relatively resilient business- Strong balance sheet and cash flow
- Price has been relatively strong- USD strength has increased weighting
Blancco Technologies AIM:BLTG - Impact on mobile salesforce, but limited on rest of business- Largely recurring revenues but volume dependent- Net cash, recently reiterated guidance
- Price held up for first few weeks, sold meaningful percentage of investment
- Still love the business
Alphabet NYSE:GOOG - Likely to be significant impact from advertising slowdown. - Large travel exposure- $115bn of net cash
- Attractive, but not surprisingly has held up well- Potential source of capital for more attractive ideas
Spotify NYSE:SPOT - Minimal impact from virus- Potential benefit from people staying home, evidence so far the opposite
- One of the best performers. Also a source of cash for more attractive ideas
Yum China NYSE:YUMC - Chinese economy recovering- Likely accelerate long-term trend to modern fast food
- Been robust through meltdown- Attractive long-term prospects
Significantly impacted
Flughafen Wien WBAG:FLU - Dramatic impact on 2020 revenue- Strongest balance sheet of any listed airport. Minimal net debt
- Attractive opportunity given retraction and business strength
Ulta Beauty NASDAQ:ULTA - All stores currently closed. Focus on online- Strong net cash balance sheet. No solvency issues
- Share price has fallen 50%. Highly attractive long-term opportunity
New additions
Uber NYSE:UBER - Significant impact from coronavirus- Highly variable cost base, strong balance sheet- Likely consolidation in food delivery as competitors suffer
- Highly attractive business- New CEO focussed on profitability and return on capital
Keysight NYSE:KEYS - World leader in IT and telco testing equipment- Resilient business, large exposure to 5G rollout
- World-class business available at attractive price- Strong capital allocation record
Vtech SEHK:303 - Manufacturer and brand owner in childrens’ educational toys and baby monitoring- Legacy handset business becoming immaterial- Strong balance sheet
- 10x earning and 8% yield- Expect growth over medium and long term
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Previous market retractions
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-100.00% -90.00% -80.00% -70.00% -60.00% -50.00% -40.00% -30.00% -20.00% -10.00% 0.00%
1929-32
2007-09
1937-38
2000-02
1973-74
1939-42
1932-33
1968-70
1933-35
1987
2020
1961-62
1946-48
1980-82
1966
1956-57
1948-49
Peak to trough return
S&P 500 Bear Markets
Source: Bloomberg, Morgan Stanley Research
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