QV Equities Limited
Investor Update For personal use only use personal For
March roadshow 2015 - 1 - QV Equities Limited – Intro & Business Update
• Managed by Investors Mutual
• Focused on Ex-20 stocks
• Listed 22 August 2014
• Quality and experienced Independent Board
• Dedicated to developing a robust long term dividend stream for clients For personal use only use personal For
- 2 - About IML
• Boutique manager established in 1998
• Circa $5.8b FUM- retail and institutional clients
• Disciplined ‘true to label’ value style
• Large investment team with experienced leadership
• Consistent performance over 16 years For personal use only use personal For
- 3 - IML: Australia’s most awarded value manager
2008 Nominations Awards 2015 2015 Domestic Overall Fund Domestic Equities Manager of the Year Equities Small Caps 2015 Domestic Equities- Small Cap 2012 2002 Domestic Emerging 2013 Domestic Equities Australian Awards Nominations Equities 2013 Equities 2012 Australian Equities Fund Australian Large Cap Manager of Equities 2011 the Year Large Cap Australian Equities Small Cap
2002 2010 Golden Calf Australian Equities Awards Small Cap 2012 Award 2009 Australian Equities Australian Equities (Broad Cap) Small Cap
2003 Rising Star Award
2002 Domestic Equities Firm-wide
Awards 12 Awards 2012 Australian Equities + many other nominations For personal use only use personal For Large Cap
2009 Australian Equities Small Cap
- 4 - Retail Investor Needs
• Capital preservation
• Reasonable capital growth
• Income focused For personal use only use personal For
- 5 - Investment Philosophy: focus on quality
We seek to buy and own:
Companies with a competitive advantage,
with recurring earnings,
run by capable management,
that can grow,
...... at a reasonable price. For personal use only use personal For
- 6 - Top 20 sector composition
The S&P/ ASX 20 Index is heavily concentrated amongst the financial and resource sectors which represent approximately 69% of the Index
Breakdown of S&P/ ASX 20 Index by Industry
Property Industrials 4% 2% Healthcare 4%
Telco & IT 8%
Staples 9%
Fin ex Property 55%
Energy & Resources
For personal use only use personal For 18%
Source: IRESS as at 28 February 2015 Note: Based on free float adjusted market capitalisation, Industrials include basic materials - 7 - The ASX Ex-20 segment investment opportunity
In comparison, Ex-20 entities are more diversified by industry and companies and offer greater investment opportunities
Breakdown of S&P/ ASX Ex-20 Index by Industry
Staples Utilities/Infra. 3% Telco & IT 5% Industrials 6% 17%
Fin ex Property 8%
Discretionary Healthcare 14% 9%
Non Resource Energy & Resources
Materials 14% For personal use only use personal For 10% Property 14%
Source: IRESS as at 28 February 2015 Note: Based on free float adjusted market capitalisation, Industrials include basic materials - 8 - Why focus on an ex 20 managed portfolio?
• More diverse entities in terms of market capitalisation and industry
sectors
• Less researched opportunities
• Clients typically underweight in this segment
• Solid yields on offer
• IML has a long record of significant value add in this segment For personal use only use personal For
- 9 - QVE Portfolio Strategy
• Buying quality stocks
• Buying on weakness
• Focus on industrial stocks
… patiently building a portfolio that can deliver consistent dividends For personal use only use personal For
- 10 - Where are we today?
• US economy continuing to expand
• Japan & EU still sluggish
• China slowing sharply
• Interest rates at record lows
• Many share markets at record highs For personal use only use personal For
- 11 - Australia
• Consumer sluggish – high debt and no real wage growth.
• Mining sector struggling
• Interest rates at record lows
• $A has fallen significantly from its peak
….Australia muddling through For personal use only use personal For
- 12 - What is happening with earnings?
HY Dec EPS growth 20% 20% 20%
15% 15% 15%
10% 10% 10%
5% 5% 5%
0% 0% 0%
-5% -5% -5%
-10% -10% -10%
-15% -15% -15%
-20% -20% -20% -25% -25% -25% ASX200 Industrials -30%
HY Dec EPS growth Resources For personal use only use personal For
Source: Deutsche Bank as at 28 February 2015 - 13 - Portfolio Update
• Over 60% invested
• Disciplined & prudently selecting stocks
• Many stocks trading at a premium to IML’s assessed valuation
• Six month extension granted by the Board For personal use only use personal For
- 14 - Taking time to prudently invest the portfolio
QVE: Proportion of the portfolio invested
70.00
60.00
50.00
% 40.00
30.00
20.00
10.00
0.00
15/08/2014 15/09/2014 15/10/2014 15/11/2014 15/12/2014 15/01/2015 15/02/2015 For personal use only use personal For QVE Portfolio
Source: IML as at 6 March 2015 - 15- - Portfolio positioning - company specific
Cost-outs Orora
Acquisitions Ansell
Contracted growth Energy Developments
Market share gains Trade Me
Restructuring GWA For personal use only use personal For
- 16 - Ansell (ASX: ANN)
Key Highlights
Leader in industrial hand safety, surgical gloves and condoms globally
Strong branding and innovation
Growing in emerging markets due to increasing OH&S standards
Ansell trades on 15.1x FY16 For personal use only use personal For
Source: Investors Mutual Limited beliefs compiled by historical research & analysis. PE estimates based on IML forward looking estimates - 17 - Ansell (ASX: ANN)
EPS DPS 1.200
1.000
0.800
0.600
0.400
0.200 For personal use only use personal For 0.000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Investors Mutual Limited, beliefs and historical research as at 31 January 2015 - 18 - Ansell purchase chart
Ansell (ANN) 27.00
25.00
23.00 $
21.00
19.00
17.00
Ansell Share Price QVE Entry Points For personal use only use personal For
Source: IRESS and Investors Mutual Limited, as at 09 March 2015 - 19- - Bank of Queensland
• Growth opportunities through broker distribution of mortgages
• Queensland economy improving
• Acquired on a P/E of 11 ½ ~ 12x with 6% yield For personal use only use personal For
- 20- - BOQ purchase chart
Bank of Queensland (BOQ) 15
14
13 $ 12
11
10
9
9-Jan-15 2-Jan-15
3-Oct-14
5-Sep-14 6-Feb-15
5-Dec-14
7-Nov-14
6-Mar-15
16-Jan-15 23-Jan-15 30-Jan-15
31-Oct-14 10-Oct-14 17-Oct-14 24-Oct-14
26-Sep-14 13-Feb-15 12-Sep-14 19-Sep-14 20-Feb-15 27-Feb-15
12-Dec-14 19-Dec-14 26-Dec-14
22-Aug-14 15-Aug-14 29-Aug-14
14-Nov-14 21-Nov-14 28-Nov-14
BOQ Share Price QVE Entry Points For personal use only use personal For
Source: IRESS and Investors Mutual Limited, as at 09 March 2015 - 21- - IML Stock picks: Sonic Healthcare (ASX: SHL)
Key Highlights
Largest pathology player in Australia & Germany, no. 3 in the US
Defensive growing earnings and solid yield
Scale advantage provides opportunities for accretive acquisitions
Very strong and capable management team
Currently trading on FY15 PE of 16.9x
& Dividend yield of 3.7% For personal use only use personal For
Source: Investors Mutual Limited Beliefs & forward looking estimates - 22 - Sonic Healthcare: growing earnings and dividends
Sonic Healthcare (SHL)
$1.20
$1.00
$0.80
$0.60 DPS
$0.40 EPS
$0.20
$0.00
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 For personal use only use personal For
Source: Investors Mutual Limited, beliefs and historical research as at 31st January 2015 - 23 - SHL purchase chart
Sonic Healthcare (SHL) 20
19.5
19
18.5 $ 18
17.5
17
16.5
16
2-Jan-15 9-Jan-15
3-Oct-14
5-Sep-14 6-Feb-15
5-Dec-14
7-Nov-14
6-Mar-15
16-Jan-15 23-Jan-15 30-Jan-15
10-Oct-14 17-Oct-14 24-Oct-14 31-Oct-14
26-Sep-14 12-Sep-14 19-Sep-14 13-Feb-15 20-Feb-15 27-Feb-15
12-Dec-14 19-Dec-14 26-Dec-14
15-Aug-14 22-Aug-14 29-Aug-14
14-Nov-14 21-Nov-14 28-Nov-14
SHL Share Price QVE Entry Points For personal use only use personal For
Source: IRESS and Investors Mutual Limited, as at 09 March 2015 - 24- - Top 10 stocks
KEY EQUITY YIELD YIELD INVESTMENTS P/E 2015 2015 P/E 2016 2016
AGL Energy 16.4 4.2% 13.5 4.2%
Orica 12.5 4.9% 12.1 5.5%
Sonic Healthcare 19.4 3.6% 16.9 3.7%
Bank of Queensland 15.2 5.0% 14.4 5.7%
ASX 21.4 4.2% 20.0 4.5%
Ansell 16.2 2.2% 15.3 1.7%
Fletcher Building 15.7 5.0% 14.5 5.0%
Energy Developments 15.2 6.3% 14.5 6.5%
Steadfast Group 15.7 3.5% 13.4 4.6%
For personal use only use personal For Chorus 11.7 N/A 11.2 N/A
As at 28 February 2015 - 25- - QVE Sector Weights
QVE as at 12 March 2015 Cash
Telecommunication Energy Services 35 Stocks in Utilities 4.06% 2.15% LPT the Portfolio 4.60% Financials Ex. LPT Health Care 7.43% Cash 36.50% Industrials
Consumer Materials Discretionary 7.69% Consumer Discretionary Health Care Materials 7.85% LPT
Energy Industrials
8.26% For personal use only use personal For Financials Ex LPT Utilities Telecommunication 10.24% 11.21% Services
Source: IRESS and Investors Mutual Limited, as at 12 March 2015 - 26 - Performance & NTA- February
NET TANGIBLE ASSETS (NTA) AMOUNT
*NTA before tax $1.0715* *NTA after tax $1.0463* *pre option exercise
PERFORMANCE QVE’s NTA BENCHMARK
1 Month +2.7% +7.1%
Since Inception** +7.5% +7.4%
**Inception date: 22 Aug 2014
Performance calculated after tax For personal use only use personal For
As at 28 February 2015 - 27- - Interim Result
• QV Equities operating profit before tax of $1.97m
• Operating profit after tax of $1.56m
• Inaugural fully franked interim dividend of 0.5 cents per share
Interim dividend dates
Ex Dividend Date 16th March 2015
Payment Date 2nd April 2015 For personal use only use personal For
- 28 - QVE Options: QVEO
• 184.7m issued at IPO
• Exercised at any time up until & including 15th March 2016 at $1.00 per
option
• 3.5m exercised to date*
• Option exercise forms available on the website For personal use only use personal For
*as at 13 March 2015 - 29 - Shareholder engagement - focus on communication
• Monthly communication schedule – monthly videos and updates
• IML sales team – supporting adviser and broker relationships
• QVE shareholder roadshow – across all capital cities
• Website – communication & information portal for shareholders
… We want informed and engaged shareholders For personal use only use personal For
- 30- - QVE Summary
• Relevant for investors (ex20)
• Competitive fees
• Buy & hold proven strategy
• Consistent dividends
• Transparent with investors
• No extra expenses For personal use only use personal For
- 31 - QVE Summary – key competitive strengths
• Delivers much needed diversification - focused on ex20 stocks
• The Board – high quality and independent
• The Manager – IML – solid experience and track record
• Focused on shareholder outcomes
• Informed shareholder base For personal use only use personal For
- 32 - DISCLAIMER
QV Equities Limited ACN 169 154 858 (QVE) has prepared the information in this presentation. This presentation has been prepared for the purposes of providing general information only and does not constitute an offer, solicitation or recommendation with respect to the purchase or sale of any securities in QVE nor does it constitute financial product or investment advice nor take into account your investment objectives, taxation situation, financial situation or needs. An investor must not act on the basis of any matter contained in this announcement in making an investment decision but must make its own assessment of QVE and conduct its own investigations and analysis. Past performance is not a reliable indicator of future performance. QVE Equities is an Authorised Representative of Investors Mutual Limited (AFSL Number 229988) QV Equities Limited (QVE), its directors, employees and consultants do not warrant the accuracy, reliability or completeness of information contained in the presentation and, to the extent permitted by law, accept no responsibility for any loss or damage arising in any way (whether arising in contract, or tort or negligence or otherwise) from any representation, error or omission in the information or from any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this material or any other person. The information provided within the presentation is not intended to be a complete description of matters described. However, QVE will endeavour to ensure that the information on this presentation is updated as soon as practicable when it becomes aware that material changes have occurred. 2. This presentation is for general information purposes only and is not intended to be relied upon for the purpose of making an investment decision. The presentation does not constitute an offer of any investment or an invitation or solicitation to buy or sell securities to any person. In particular, the information provided does not take into account the particular information an individual investor may require to make an investment decision. Consequently, QVE recommends that potential investors seek independent financial and taxation advice before making any investment decisions so as to determine whether an investment is appropriate having given an investors’ investment objectives, financial position and needs. 3. Usage and linking to the QVE presentation is at the users own risk. QVE will not be liable for any loss or damage from any cause (including negligence) to a users system or presentation, or to people linking to QVE from a users presentation, caused by or in connection with the use of or a link to the QVE presentation. Any such loss or damage is at the responsibility of the user. QVE advises users to take their own precautions in relation to protecting their system or presentation from viruses or malfunction. 4. Copyright in the information contained in this presentation is owned by QVE. Use of this information or reproduction of it in any form is allowed for personal use only. The material may be viewed on-line by means of an HTML browser and may be reproduced in hard copy only for a users personal reference. No part of this information may be otherwise reproduced, adapted, distributed or transmitted in any form by any process or incorporated in any way in any other document or material. Except to the extent otherwise permitted by the Copyright Act 1968 (Cth), the material may not otherwise be reproduced or displayed in public and may not be distributed or transmitted electronically to any other person or incorporated by any means into another document or material, including other presentations without the express written permission of QVE. Without limiting the generality of the foregoing, QVE does not permit reproductions of its material in other presentations in conjunction with advertising, trademarks, logos on material of other financial planners or competitors without the express written permission of QVE.
5. Thisonly use personal For presentation is prepared for and provided to residents of Australia only. All currency references are references to Australian dollars (unless otherwise specified) and any reference to law is to the law of Australia. The financial products described in this presentation are available for investment by Australian residents only and should not be relied on by residents of any other jurisdiction.
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