Arctic Norwegian Value Creation Monthly Report February 2019
FUND COMMENTS Arc c Norwegian Value Crea on (Class B) increased by 4.8% in February, bringing YTD return to 11.7%. Since incep- on in August 2014, the fund has returned 72.7% compared to 43.6% for the Norwegian benchmark. The largest posi ve contributors to fund performance in February were Schibsted, Elkem and Kongsberg Gruppen. Schibsted once again delivered a decent report. The main online marketplaces, France (Leboncoin), Norway (Finn) and Spain delivered sales growth of 16%, 17% and 13%, respec vely. Sweden, however, is struggling with a slight decline in sales. Losses in investment phase companies were sharply reduced. Publishing, the tradi onal media houses, delivered 9% earnings growth and a 10% EBITDA-margin. There is increased focus on the demerger of its interna onal marketplaces into a new company, Adevinta, which will take place in April. Elkem reported reasonably strong Q4 profits despite very weak Chinese silicones markets in the la er part of 2018. An annual dividend of NOK 2.6 was announced, corresponding to a yield of 11.4% on the day prior to the results release. Addi onally, costs are cut to the tune of NOK 500 million, and the silicones market has shown signs of re- newed strength a er the Chinese New Year. Kongsberg reported an increase in quarterly earnings of 25% year-over -year. Most notably, its defense area reported excep onally strong margins. In its Mari me business, profitability con nued its upward trend, while revenues increased following a three-year slump. Cash flow was excep onally strong, albeit boosted by prepayments in its defense business. The most nega ve contributors to fund performance in February were B2Holding, Lerøy Seafood Group and Norsk Hydro. Debt collector B2Holding reported another quarter with disappoin ng cash collec on. Moreover, the mar- ket disapproved of the company’s sale of claims with a loss of NOK 61 mill. The share price of Lerøy lagged those of its aquaculture peers as the company reported lower Q4 profits than expected, driven by weak realized trout pric- es, lower produc on volumes than expected, as well as poor profitability in white fish processing. Hydro reported a disappoin ng loss in Q4. The financial impact of the con nued mandatory produc on stop at Alunorte proved to be even bigger than expected. Furthermore, Hydro’s downstream segments reported mediocre results, and sen - ment towards aluminum con nued to be uninspiring. Year to date, Aker BP, Aker and Elkem have been the most significant posi ve contributors to performance, while Veidekke, Norsk Hydro and Lerøy have been the largest detractors. In February, we increased our holding in Lerøy while we reduced our posi on in Telenor. At the end of February, the por olio was valued at 14.5 mes 12 months forward earnings and 1.7 mes book val- ue. Corresponding figures for the Norwegian market were 14.9 and 1.8, respec vely. Oslo, March 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% 17.5 % 14.0 % 15% 12.8 % 11.7 % 11.8 %
10% 8.5 % 8.3 % 6.3 % 4.7 % 5% 3.7 %
0% Month YTD 12m 36m p.a. 60m p.a. Incep. p.a. Arctic Norwegian Value Crea tion II Class B (25/8‐14) OSEFX FUND COMPOSITION END OF MONTH
Real Estate 0.6% 10 largest positions Energy 17.7% Kongsberg Gruppen ASA 5.1 % Europris ASA 3.8 % Industrials 9.6% Schibsted ASA 5.1 % Elkem ASA 3.7 % Health Care 0.0% Aker BP ASA 5.0 % Lerøy Seafood Group 3.7 % Consumer Discretionary 4.7% Yara International ASA 4.0 % Telenor ASA 3.5 % Materials 11.4% Aker ASA 3.9 % Oslo Børs VPS Holding A 3.4 % Information Technology 5.9% Financials 26.1% 5 largest overweights +/‐ 5 largest underweights +/‐ Consumer Staples 13.6% Kongsberg Gruppen 4.0 % Equinor ASA -8.6 % Telecommunication Services 3.7% Elkem ASA 3.8 % Mowi ASA -7.5 % Utilities 1.6% Oslo Børs VPS Holding A 3.4 % DNB ASA -6.7 % Europris ASA 3.3 % Telenor -5.4 % 0% 5% 10% 15% 20% 25% 30% XXL ASA 2.7 % Orkla -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 4.7 % 4.1 % -2.1 % 11.7 % 11.8 % 62.2 % 72.7 % Benchmark 3.7 % 0.6 % -4.0 % 8.5 % 6.3 % 48.3 % 43.6 % Difference 1.0 % 3.5 % 1.9 % 3.2 % 5.5 % 13.9 % 29.2 % Vinx Nordic Net, NOK 4.2 % 4.6 % -3.4 % 7.5 % 3.0 % 26.0 % 57.5 % Euro Stoxx 600, EUR 4.2 % 4.7 % -1.8 % 10.7 % 1.1 % 21.4 % 23.1 % S&P 500 TR, USD 3.2 % 1.4 % -3.0 % 11.5 % 4.7 % 53.2 % 53.0 % MSCI AC World, LC 3.1 % 2.5 % -2.8 % 10.5 % 1.6 % 42.8 % 37.2 %
5 top contribut. Fund Fund Contri‐ 5 bottom contribut. Fund Fund Contri‐ year to date weight return bution year to date weight return bution Aker Bp Asa 5.1 % 35.3 % 1.57 % Veidekke Asa 1.8 % -6.9 % -0.15 % Aker Asa-A Shares 3.6 % 40.0 % 1.25 % Norsk Hydro Asa 1.1 % -9.6 % -0.09 % Elkem Asa 3.4 % 32.7 % 1.04 % Leroy Seafood Group 3.2 % -2.2 % -0.07 % Schibsted Asa-B Shs 4.9 % 20.8 % 0.98 % Telenor Asa 4.3 % -0.4 % -0.03 % Europris Asa 3.7 % 23.8 % 0.83 % Fjord1 Asa 1.7 % -1.2 % -0.02 %
Standard Sharpe Tracking Information Portfolio characteristics Deviation Ratio Error Ratio Arctic Norwegian Value Creation 10.9 % 1.6 4.3 % 0.8 Benchmark 10.0 % 1.4 *) Based on 36 months performance Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2019 6.64 % 4.75 % 11.70 % 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 issued by companies that are either referred to in this rapport or are part of Arctic Norwegian Value Creation Class B (Start 22.08.14) OSEFX the fund's por olio.