Arctic Norwegian Value Creation Monthly Report March 2019
FUND COMMENTS Arc c Norwegian Value Crea on (Class B) increased by 0.4% in March bringing return year to date to 12.2%. Since incep on in August 2014, the fund has returned 73.5% compared to a return of 43.7% for the Norwegian OSEFX benchmark. The largest posi ve contribu ons to fund performance in March came from Tomra, Aker BP and Bonheur. Tomra benefits from increased acceptance of the need for addi onal recycling ini a ves. The European Parliament last month approved the Single‐Use Plas cs Direc ve including plas c bo le collec on targets of 77% by 2025 and 90% by 2029. In addi on, there is a target to incorporate 25% or recycled plas c in PET bo les as from 2025 and 30% in all plas c bo les by 2030. Thus, there might be business opportuni es for Tomra’s Collec on as well as Sor ng so‐ lu ons. The Aker BP share con nued to perform well as the Brent crude price edged up, while the company reported a suc‐ cessful explora on well on the “Froskelår” prospect. Furthermore, according to data from the Norwegian Petrole‐ um Directorate, produc on at the “Valhall” field was up by 22% in January y‐o‐y indica ng a strong start for the year for Aker BP. Bonheur announced the acquisi on of 50% of United Wind Logis cs adding to their offshore wind service and installa on capabili es. Following deconsolida on of Dolphin Drilling, Bonheur is now largely a compa‐ ny involved in wind power. Moreover, Bonheur announced refinancing of GBP 400 mill. of debt at favourable terms, thereby lowering net interest expenses. The most nega ve contribu ons to performance last month came from XXL, B2 Holding and Europris. XXL declined due to fears of con nued LFL contrac on and gross margin pressure. Spor ng goods sta s cs for February showed nega ve growth figures in Norway and Sweden. In addi on, Kesko in Finland also showed lower sales y/y in the leisure category that month. XXL’s main compe tor in Norway, Gresvig, reported heavy losses in 2018. Following a disappoin ng Q4‐18 report released at the end of February and a con nued investor skep cism towards the debt collec on industry, the share price of B2Holding con nued its lackluster development. Europris fell 4% in March a er strong performance in the first two months of the year. The share price is up 19% year‐to‐date. Relevant retail sta s cs for Europris showed 2.6% sales growth in February following 3.1% growth in January. Europris opened its first City store in downtown Oslo last month. Year to date, Aker BP, Aker ASA and Elkem been the largest posi ve contributors to fund performance, while Lerøy Seafood, Veidekke and Norsk Hydro have been the largest detractors. The media company, Polaris Media, the railway infrastructure entrepreneur, NRC, and the E&P and FPSO company, BW Offshore, entered the fund in March. We increased our investments in Mowi and divested the remaining shares in Mul consult. At the end of March, the por olio was valued at 14.2 mes earnings (12m fwd) and 1.6 mes book value. Corre‐ sponding figures for the Norwegian market were 14.9 and 1.8, respec vely. Oslo, April 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% 16.8 %
15% 13.1 % 13.7 % 12.2 % 12.7 %
10% 8.6 % 8.7 % 8.2 %
5% 0.4 % 0.1 % 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 0.5% 10 largest positions Energy 18.9% Aker BP ASA 5.1 % Lerøy Seafood Group 3.9 % Industrials 10.2% Kongsberg Gruppen ASA 5.0 % Europris ASA 3.8 % Health Care 0.0% Schibsted ASA 4.7 % Elkem ASA 3.7 % Consumer Discretionary 5.5% Aker ASA 4.2 % Telenor ASA 3.7 % Materials 11.6% Yara International ASA 4.1 % DNB Bank ASA 3.3 % Information Technology 6.1% Financials 25.5% 5 largest overweights +/‐ 5 largest underweights +/‐ Consumer Staples 14.2% Kongsberg Gruppen 3.8 % Equinor ASA ‐8.8 % Telecommunication Services 3.8% Elkem ASA 3.7 % Mowi ASA ‐6.7 % Utilities 1.6% Europris ASA 3.4 % Telenor ‐5.6 % Oslo Børs VPS Holding A 3.2 % DNB ASA ‐5.4 % 0% 5% 10% 15% 20% 25% 30% Sbanken ASA 2.7 % Orkla ‐4.4 %
FUND PERFORMANCE AND RISK FIGURES —CLASS B NOK (FORMER CLASS A)
3 6 Since Month months months YTD 1 year 3 years launch Fund 0.4 % 12.2 % ‐3.3 % 12.2 % 13.1 % 59.5 % 73.5 % Benchmark 0.1 % 8.6 % ‐6.9 % 8.6 % 8.7 % 47.1 % 43.7 % Difference 0.3 % 3.5 % 3.6 % 3.5 % 4.4 % 12.4 % 29.8 % Vinx Nordic Net, NOK 1.2 % 8.7 % ‐0.4 % 8.7 % 7.3 % 25.7 % 59.3 % Euro Stoxx 600, EUR 2.1 % 13.0 % ‐0.1 % 13.0 % 5.2 % 22.2 % 25.6 % S&P 500 TR, USD 1.9 % 13.6 % ‐1.7 % 13.6 % 9.5 % 46.3 % 56.0 % MSCI AC World, LC 1.6 % 12.3 % ‐1.8 % 12.3 % 5.6 % 37.4 % 39.4 %
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 % 43.2 % 1.88 % Leroy Seafood Group 3.4 % ‐5.1 % ‐0.19 % Aker Asa‐A Shares 3.7 % 42.4 % 1.33 % Veidekke Asa 1.8 % ‐6.6 % ‐0.14 % Elkem Asa 3.5 % 37.7 % 1.18 % Norsk Hydro Asa 1.1 % ‐10.9 % ‐0.10 % Schibsted Asa‐B Shs 5.0 % 17.7 % 0.85 % Fjord1 Asa 1.7 % ‐1.6 % ‐0.02 % Tomra Systems Asa 2.7 % 31.9 % 0.81 % Nordea Bank Abp 1.8 % ‐0.7 % ‐0.01 %
Standard Sharpe Tracking Information Portfolio characteristics Deviation Ratio Error Ratio Arctic Norwegian Value Creation 10.9 % 1.5 4.3 % 0.7 Benchmark 10.0 % 1.3 *) 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 % 12.17 % 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 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.