Arctic Norwegian Value Creation Monthly Report November 2019
FUND COMMENTS Arc c Norwegian Value Crea on (Class B) increased by 1.7% in November, bringing return year to date to 15.3%. Since incep on in August 2014, the fund has returned 78.3% compared to a return of 52.7% for the Norwegian OSEFX benchmark. The largest posi ve contribu ons to fund performance in November came from Europris, Veidekke and Tomra. Europris reported third quarter numbers above expecta ons. Sales and like-for-like growth were 9.2% and 7.5% respec vely. Gross margin increased by 0.7%-points to 44.3% and opera ng margin increased by 1.2%-points to 8.4%. Logis cs cost overruns in advance of start-up of the new warehouse fell from NOK 35 mill in the second quarter to NOK 5 mill in the third quarter. The first phase of the new warehouse is running according to plan. The turn-around in the 20% owned Översko sbolaget is developing slower than expected. Veidekke reported Q3 numbers slightly shy of expecta ons, construc on in Sweden being the weak point, while Industry was strong and the recovery story in Norwegian civil engineering seemed intact. The report, however, was overshadowed by the company’s decision to separate out its property development opera ons, sending the stock up more than 10% the first day of trading a er announcement. The company argues that the differences in business models will increase value crea on in both parts as separate businesses. Tomra gained on con nued interest in use of recycled materials. There are several ini a ves from major beverage companies to increase use of recycled materials in their bo les. Product innova on remains high, with the launch of a mul feed reverse vending machine with a capacity of at least 100 bo les in one go as one example. Tomra made its debut in the bond market and issued NOK 1 bn in 3 and 5 years bonds on favorable terms. The most nega ve contribu ons to performance last month came from XXL, Schibsted and Lerøy Seafood Group. XXL con nued to weaken due to massive discounts in the sports equipment sector. XXL is targe ng a reduc on in its excessive inventories. Moreover, the second largest player in the Norwegian market, Gresvig, is in the process of rebranding the majority of its G-Sport stores to Intersport and closing the rest of the stores, consequently selling out at heavy discounts the brands that will not be in the Intersport range. XXL raised equity in a private placement and replaced its Chairman. Schibsted’s main holding, Adevinta, comprising more than 50% of its gross assets, declined by 10% in November. Schibsted’s third quarter report published ul mo October was slightly weak for News Media, and the company also hinted at a weaker job and real estate market for Finn. Lerøy Seafood delivered weaker numbers than expected for the third quarter, sending the share price markedly down. The produc on of salmon for the next 12 months is already in the cages, and during the warmest months, when the salmon stock is gaining the most, many regions experienced high sea lice levels. Lerøy was delousing fish during this period, which means the salmon was not ea ng op mally, causing future volumes to fall and cost per kg to increase. There is currently a posi ve sen ment in the sector as demand growth is strong and supply growth from Europa is easing over the next six months, but Chile might harvest quite high volumes over the same period. Year to date, Bonheur, Europris and Aker BP have been the largest posi ve contributors to fund performance, while XXL, B2 Holding and Northern Drilling have been the largest detractors. Sparebanken Vest entered the por olio in November, while we sold our remaining shares in Entra and Ocean Yield. We increased our investments in XXL, SalMar and NRC, while we reduced our investment in Evry. At the end of November, the por olio was valued at 13.5 mes earnings (12m fwd) and 1.5 mes book value. Corresponding figures for the Norwegian market were 14.4 and 1.8, respec vely. Oslo, December 2019 Sindre Sørbye Ole E. Dahl Tore Mengshoel Thomas Rasmussen Por olio Manager Por olio Manager Por olio Manager Analyst
ABOUT THE FUND Arc c Norwegian Value Crea on is research driven and truly index-independent UCITS fund. The investment process focus on iden fying companies which are considered to be value-crea ng over me at a reasonable price. The por olio is con- structed by bo om up stock picking. There are no constraints regarding sectors and the goal is to achieve the best possible long-term risk-adjusted return. The funds benchmark is Oslo Stock Exchange Mutual Fund Index (OSEFX).
20% 15.3 %15.4 % 15% 11.6 %11.1 % 12.0 % 11.6 % 9.9 % 10% 8.4 % 7.4 % 7.0 %
5% 1.7 % 1.0 % 0% Month YTD 12m 36m p.a. 60m p.a. Incep. p.a. Arctic Norwegian Value Creation Class B (25/8-14) OSEFX FUND COMPOSITION END OF MONTH
Real Estate 0.0% 10 largest positions Energy 13.0% Leroy Seafood Group AS 5.4 % Aker ASA 3.9 % Industrials 14.2% Kongsberg Gruppen ASA 5.3 % Telenor ASA 3.6 % Health Care 0.0% Europris ASA 4.9 % Storebrand ASA 3.2 % Consumer Discretionary 10.2% Aker BP ASA 4.0 % DNB ASA 3.1 % Materials 11.6% Schibsted ASA 3.9 % SpareBank 1 SR-Bank AS 3.1 % Information Technology 5.7% Financials 23.0% 5 largest overweights +/- 5 largest underweights +/- Consumer Staples 8.3% Europris ASA 4.4 % Equinor ASA -8.4 % Telecommunication Services 10.3% Kongsberg Gruppen 4.1 % Mowi ASA -7.3 % Utilities 1.5% Lerøy Seafood Group 3.8 % DNB ASA -5.1 % Sbanken ASA 2.7 % Orkla -4.7 % 0% 5% 10% 15% 20% 25% Aker 2.7 % Telenor -4.3 %
FUND PERFORMANCE AND RISK FIGURES —CLASS B NOK (FORMER CLASS A)
3 6 Since Month months months YTD 1 year 3 years launch Fund 1.7 % 5.0 % 5.0 % 15.3 % 7.4 % 38.8 % 78.3 % Benchmark 1.0 % 5.3 % 7.0 % 15.4 % 7.0 % 37.1 % 52.7 % Difference 0.7 % -0.3 % -2.0 % -0.1 % 0.5 % 1.7 % 25.6 % Vinx Nordic Net, NOK 1.8 % 9.3 % 16.1 % 22.9 % 19.6 % 46.0 % 80.1 % Euro Stoxx 600, EUR 2.8 % 7.7 % 11.4 % 24.2 % 17.4 % 29.6 % 38.0 % S&P 500 TR, USD 3.6 % 7.9 % 15.3 % 27.6 % 16.1 % 51.6 % 75.2 % MSCI AC World, LC 2.8 % 7.3 % 12.2 % 22.9 % 14.0 % 39.3 % 52.6 %
5 top contribut. Fund Fund Contri- 5 bottom contribut. Fund Fund Contri- year to date weight return bution year to date weight return bution Bonheur Asa 2.2 % 105.9 % 1.79 % Xxl Asa 2.7 % -39.0 % -1.29 % Europris Asa 4.0 % 49.1 % 1.75 % B2 Holding Asa 1.5 % -27.0 % -0.46 % Aker Bp Asa 4.3 % 30.2 % 1.42 % Northern Drilling Lt 0.6 % -60.2 % -0.43 % Schibsted Asa-B Shs 4.2 % 20.8 % 1.10 % Leroy Seafood Group 4.7 % -8.7 % -0.29 % Kongsberg Gruppen As 4.9 % 19.6 % 1.06 % Nrc Group Asa 0.8 % -17.1 % -0.24 %
Standard Sharpe Tracking Information Portfolio characteristics Deviation Ratio Error Ratio Arctic Norwegian Value Creation 10.8 % 1.0 4.4 % 0.1 Benchmark 9.7 % 1.1 *) Based on 36 months performance Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2019 6.64 % 4.75 % 0.42 % 1.88 % -3.92 % 2.27 % -1.84 % -0.34 % 1.98 % 1.18 % 1.74 % 15.32 % 2018 -0.75 % -0.84 % -0.69 % 6.85 % 4.70 % -0.03 % 0.80 % 2.02 % 1.70 % -7.32 % -0.19 % -6.84 % -1.47 % 2017 1.70 % 0.29 % -2.35 % 4.19 % 0.70 % -0.07 % 3.81 % -0.48 % 4.53 % 3.17 % -2.03 % 3.09 % 17.51 % 2016 -7.33 % 2.60 % 2.10 % 4.08 % 3.70 % -3.14 % 3.81 % 1.29 % 1.71 % 3.60 % 1.99 % 3.96 % 19.23 % 2015 4.66 % -1.15 % 1.42 % 3.48 % 0.13 % -2.25 % 1.62 % -5.13 % -1.22 % 3.68 % 4.05 % -0.76 % 8.34 % 2014 0.44 % 0.28 % -0.88 % 1.49 % 2.05 % 3.39 %
Disclaimer: Historical returns are no guarantee for future returns. Future 100.0 % returns will depend, inter alia, on market developments, the fund man- ager’s skill, the fund’s risk profile and subscrip on and management fees. 80.0 % The return may become nega ve as a result of nega ve price develop-
60.0 % ments. Arc c Fund Management AS seeks to the best of its ability to ensure that all informa on given in this report is correct, however, makes reserva- 40.0 % ons regarding possible errors and omissions. Statements in the report reflect the por olio managers’ viewpoint at a given me, and this view- 20.0 % point may be changed without no ce. The report should not be perceived as an offer or recommenda on to buy or sell financial instruments. Arc c 0.0 % Fund Management AS does not assume responsibility for direct or indirect loss or expenses incurred through use or understanding of the report. -20.0 % Employees of Arc c Fund Management AS may be owners of securi es 08/14 01/15 06/15 11/15 04/16 09/16 02/17 07/17 12/17 05/18 10/18 03/19 08/19 issued by companies that are either referred to in this rapport or are part of Arctic N orwegian Value Creation Class B (Start 22.08.14) OSEFX the fund's por olio.