Arctic Norwegian Value Creation Monthly Report January 2020
FUND COMMENTS Arc c Norwegian Value Crea on (Class B) declined by 2.2% in January. Since incep on in August 2014, the fund has returned 82% compared to a return of 55% for the Norwegian OSEFX benchmark. The largest posi ve contribu ons to fund performance in January came from Gjensidige, Scatec Solar and Telenor. Gjensidige reported a strong Q4 with healthy underwri ng results with improvements in claims as well as cost ra o. Moreover, run-off gains as well as improved results from the investment por olio gave addi onal support. General Insurance Private and General Insurance Commercial in Norway delivered par cularly good figures. The company con nues to adjust its prices and is sa sfied with the renewals in the Commercial business. The Board has proposed NOK 12.25 in dividend, of which NOK 5 will be an extraordinary dividend due to its strong solvency ra o. Scatec con nued its rapid growth through Q4 as its power produc on, on a propor onate basis, increased by 176% y-o-y. Addi onally, the management highlighted several growth opportuni es. However, a 50% increase in the share price since mid-December must also be seen in the light of increased investor appe te for “pure-play” renewable energy companies. Telenor reported a Q4 slightly ahead of expecta ons, driven by solid performance in Norway, Thailand and Myanmar. In addi on, the company’s guidance for 2020 was roughly in line with expecta ons, keeping capex guidance at 15% of sales, which some had feared would be increased. In September, Telenor ended nego a ons on a merger of their Asian assets with Axiata without any results. In January, there were rumors that Telenor had restarted discussions, but the company has not confirmed this. The most nega ve contribu ons to performance last month came from XXL, BW Offshore and Aker BP. XXL issued a profit warning for Q4 due to weak sales with 12% nega ve like-for-like growth. The company guides for an EBITDA (ex IFRS 16) of NOK 335-365 mill in 2019, which is considerably weaker than the, at that me disappoin ng, NOK 541 mill in 2018. Inventories as well as campaign ac vity remain high, increasing the risk of a write down of inventories. Moreover, an equity issue can not be ruled out. XXL has appointed Pål Wibe, currently CEO of Europris, as new CEO. An Extraordinary General Assembly approved a new long-term management incen ve program, including Restricted Shares Units and an equity based investment program. Its main compe tor in the Norwegian market, Gresvig, filed for bankruptcy on February 3rd, 2020. BW Offshore and Aker BP declined as the price of Brent crude fell by close to USD 13/barrel during the month. BW Offshore announced its inten on to spin off its oil produc on subsidiary, BW Energy, during the first quarter. Aker BP recorded all- me high produc on of 191.1 thousand barrels per day, up 31% sequen ally, on the back of a successful start-up of the giant Johan Sverdrup field as well as strong opera ons on other hubs. We increased our investments in Norsk Hydro and Yara and sold close to half of our posi on in Scatec Solar. At the end of January, the por olio was valued at 13.4 mes earnings (12m fwd) and 1.5 mes book value. Corresponding figures for the Norwegian market were 14.2 and 1.8, respec vely. Oslo, February 2020 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).
15% 11.9 % 11.6 % 10.4 % 10.3 % 11.0 % 9.8 % 9.1 % 10% 8.4 %
5%
0%
-1.8 % -1.8 % -5% -2.2 % -2.2 % 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 12.3% Leroy Seafood Group AS 5.3 % Aker BP ASA 3.7 % Industrials 13.9% Kongsberg Gruppen ASA 5.2 % Telenor ASA 3.7 % Health Care 0.0% Europris ASA 4.7 % Storebrand ASA 3.2 % Consumer Discretionary 9.9% Schibsted ASA 4.4 % Yara International ASA 3.2 % Materials 12.0% Aker ASA 4.2 % DNB ASA 3.1 % Information Technology 5.2% Financials 23.4% 5 largest overweights +/- 5 largest underweights +/- Consumer Staples 6.6% Europris ASA 4.3 % Equinor ASA -8.7 % Telecommunication Services 11.0% Kongsberg Gruppen 4.1 % Mowi ASA -6.6 % Utilities 1.0% Lerøy Seafood Group 3.8 % DNB ASA -6.2 % Aker 3.0 % Telenor -5.1 % 0% 5% 10% 15% 20% 25% 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 -2.2 % 3.9 % 6.8 % -2.2 % 10.4 % 34.1 % 82.1 % Benchmark -1.8 % 2.5 % 7.5 % -1.8 % 11.9 % 32.2 % 54.9 % Difference -0.5 % 1.4 % -0.7 % -0.5 % -1.5 % 1.8 % 27.2 % Vinx Nordic Net, NOK 3.7 % 6.1 % 15.7 % 3.7 % 24.0 % 44.2 % 87.6 % Euro Stoxx 600, EUR -1.2 % 3.8 % 7.3 % -1.2 % 17.9 % 24.0 % 39.3 % S&P 500 TR, USD 0.0 % 6.7 % 9.3 % 0.0 % 21.7 % 50.3 % 80.4 % MSCI AC World, LC -0.6 % 5.0 % 7.2 % -0.6 % 17.0 % 36.6 % 55.7 %
5 top contribut. Fund Fund Contri- 5 bottom contribut. Fund Fund Contri- year to date weight return bution year to date weight return bution Gjensidige Forsikrin 2.9 % 9.1 % 0.26 % Xxl Asa 1.6 % -29.3 % -0.59 % Scatec Solar Asa 1.2 % 26.8 % 0.25 % Bw Offshore Ltd 1.9 % -23.0 % -0.46 % Telenor Asa 3.4 % 6.0 % 0.19 % Aker Bp Asa 4.0 % -9.3 % -0.37 % Kongsberg Gruppen As 5.2 % 3.6 % 0.18 % Norsk Hydro Asa 2.6 % -11.1 % -0.32 % Tietoevry Oyj 2.2 % 7.7 % 0.17 % Nrc Group Asa 1.7 % -14.5 % -0.26 %
Standard Sharpe Tracking Information Portfolio characteristics Deviation Ratio Error Ratio Arctic Norwegian Value Creation 10.8 % 1.0 4.4 % 0.2 Benchmark 9.6 % 1.1 *) Based on 36 months performance Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2020 -2.21 % -2.21 % 2019 6.64 % 4.75 % 0.42 % 1.88 % -3.92 % 2.27 % -1.84 % -0.34 % 1.98 % 1.18 % 1.74 % 4.41 % 20.41 % 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 % *) August performance from 22.08.14 - 31.08.14
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 02/15 08/15 02/16 08/16 02/17 08/17 02/18 08/18 02/19 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.