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Investor Update June 2020 For personal use only
Investor UpdateJune 2020
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Disclaimer
This presentation has been prepared by Watermark Funds Management Pty Ltd. The information contained in this presentation is for information purposes only and has
been prepared for use in conjunction with a verbal presentation and should be read in that context.
The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for making an investment decision.
Please note that, in providing this presentation, Watermark has not considered the objectives, financial position or needs of any particular recipient. Watermark strongly
suggests that investors consult a financial advisor prior to making an investment decision.
This presentation is strictly confidential and is intended for the exclusive benefit of the institution to which it is presented. It may not be reproduced, disseminated, quoted or
referred to, in whole or in part, without the express consent of Watermark.
No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions
contained in this presentation. To the maximum extent permitted by law, none of Watermark, its related bodies corporate, shareholders or respective directors, officers,
employees, agents or advisors, nor any other person accepts any liability, including, without limitation, any liability arising out of fault or negligence for any loss arising from
the use of information contained in this presentation.
This presentation includes “forward looking statements”. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks,
uncertainties and other factors, many of which are beyond the control of Watermark and its officers, employees, agents or associates that may cause actual results to differ
materially from those expressed or implied in such statement. Actual results, performance or achievements may vary materially from any projections and forward looking
statements and the assumptions on which those statements are based. Watermark assumes no obligation to update such information.
This presentation is not, and does not constitute, an offer to sell or the solicitation, invitation or recommendation to purchase any securities and neither this presentation nor
anything contained in it forms the basis of any contract or commitment.
This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States. None of the securities discussed in this
presentation have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (Securities Act) or the securities laws of any state or other
jurisdiction of the United States, and may not be offered or sold in the United States except in compliance with the registration requirements of the Securities Act and any
other applicable securities laws or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other
applicable securities laws.
NOT FOR DISTRIBUTION IN THE UNITED STATES
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Agenda
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Market Outlook
Portfolio Review
Investment Manager Update
Questions
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MARKET OUTLOOK
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Our strategy going forward
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• There is still a long way to go in this crisis
• In our view, risks are still to the downsidewith volatility likely to increase
• It will take 3 years for profits to return topre-crisis levels
• We retain cautious settings with a focuson stock selection and sector tilts todrive returns
• We look for an opportunity to get shortas we approach prior highs
• We will look for an opportunity toincrease our net exposure once value isrestored in the market
Bear Markets Through History
Earnings Recovery Post-crash
0
20
40
60
80
100
120
140
160
3 Yrs
3 Yrs
3 Yrs
3 Yrs
EPS did not return
to 1990 level until
1994
EPS did not return
to 2000 level until
2004
EPS did not return to
2007 level until 2011
EPS did not return to 2014
levels until 2018
Source: Bloomberg & Watermark
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Spanish flu deaths in the United States
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Death
s P
er 1
,000 P
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on
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1918 1919
10
20
Source: CDC & JP Morgan
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Where to from here?
• Pause in rally- end of bear market rally or consolidation ahead of aretest of prior highs?
• Bulls Vs Bears- its the battle between an economy in deep recessionVs unprecedented stimulus. Policy makers are winning but theirresources are limited
• Peak stimulus- Labour and Fiscal cliff approaching- will recoverycome through quickly enough?
• Australian Economy in relatively good shape given health outcomes,this has not translated into share market outperformance
• Share Market Outlook: heightened volatility in the short term andlow returns in the medium term
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Global monetary & fiscal stimulus
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Central Bank Liquidity Injection
Govt Fiscal StimulusCentral Bank Liquidity &
Govt Fiscal Stimulus
$ Tln % GDP $ Tln % GDP $ Tln % GDP
US $ 4.80 22.4% $ 2.71 12.7% $ 7.51 35.0%
Eurozone $ 1.10 8.3% $ 1.43 10.7% $ 2.53 19.0%
Japan $ 0.20 3.9% $ 0.99 19.2% $ 1.19 23.1%
UK $ 0.25 9.0% $ 0.07 2.4% $ 0.31 11.4%
China $ 1.27 8.9% $ 0.54 3.8% $ 1.81 12.8%
Others $ 0.65 $ 1.85 $ 2.50
Total $ 8.27 9.5% $ 7.59 8.8% $ 15.86 18.3%
Source: CSM Research & Bloomberg
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Household income is up! 12% this quarter
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240
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21
A$bn
Employment Earnings (ex Job Keeper)COVID bonus to welfare recipientsJob Seeker supplementJob Keeper (net worker benefit)Superannuation access
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What concerns us……
Increasing dependence on policy support:
• Moving deeper into the realm of ‘modern monetary theory’. Direct debt monetisation the next logic step
• Governments have become spenders of last resort
• Debt imbalances in both private and public sectors reaching unsustainable levels
We inevitably end up in Fischer- ‘Debt deflation trap’. Combined with secularstagnation trends (demographics and declining productivity)- growth which wassuboptimal in the last cycle steps lower again
We always worried about how hard it would be to get out of the next downturn,we are about to find out- the V shaped recovery looks ambitious
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Two book ends - we end up somewhere in between
Favourable Outcome- V Shaped recovery:• Everyone is back to work in a few months
• Excess stimulus, low oil prices and interest rates
• Economy quickly recovers to prior activity levels in most sectors
Less Favourable- Zombie Economics:• Recurring outbreaks and suppression measures (Spanish Flu)
• Stimulus doesn’t quite get to the right places requiring ongoing policy support
• Unemployment stays high 15-20%
• Stagnant economy requiring ongoing support (life support) – Debt spirals to unsustainable levels, advanced economies all end up like European/Japanese
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COVID-19: The big unknowns
• We are either in the eye of the storm or the storm clouds are parting withclear skies ahead
• Two key drivers:
Progression of the disease
Shape of the economic recovery
• Currently we are in a hiatus – we won’t know if the disease is contained orif the economy is revving until Q3
• Meanwhile, excess liquidity measures and bearish positioning have drivenshares high
• We are approaching the moment of truth – in terms of disease progression,we need to wait until later in Q3 before we have a clearer picture on theeconomy
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Growth has slowed each cycle
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0%
1%
2%
3%
4%
5%
6%
7%
8%
2000s 2010s Implied 2020s trend
Nominal GDP Real GDP EPS
Source: UBS Estimates
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ASX Industrials vs Earnings
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4000
5000
6000
7000
8000
9000
10000
11000
12000
500
550
600
650
700
Estimated EPS FY3 (L) S&P/ASX 200 Industrials (R)
Source: Bloomberg
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Market EPS
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50
100
150
200
250
300
350
400
450
500
Source: UBS Research
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Dividends are likely to grow less than earnings in
the next cycle
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100
200
300
400
500
600
Source: UBS Research
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Shares follow earnings closely over time
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92
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20
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Profit Margin Median
Peak Margins
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50
100
150
200
0
1000
2000
3000
4000
S&P 500 Index (LHS) S&P 500 EPS (RHS)
2022 Target 3220 (eps 161* P/E 20)
3 Years for eps $161
Source: Bloomberg & Watermark Estimates
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Final phase of 30year bull market in bonds
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60
80
100
120
140
160
180
iShares 20+ Year Treasury Bond ETF
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Value of growth assets increases exponentially
with bonds
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Source: Bloomberg
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80
100
120
140
160
180
200
Ap
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May
-18
Jun
-18
Jul-
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Au
g-1
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Sep
-18
Oct
-18
No
v-1
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Dec
-18
Jan
-19
Feb
-19
Mar
-19
Ap
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May
-19
Jun
-19
Jul-
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Au
g-1
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Sep
-19
Oct
-19
No
v-1
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Dec
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Jan
-20
Feb
-20
Mar
-20
Ap
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May
-20
MS Growth vs Value Index
iShares 20+ Year Treasury Bond ETF
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Market composition explains divergent moves
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+40%
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90
100
110
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Sep-19 Oct-19 Nov-19 Dec-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
Russell 2000
NASDAQ 100
ASX200
MSCI World Bank
MSCI Global Metals & Mining Producers
Developed World ex-US
Source: Bloomberg
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Portfolio Review
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Justin Braitling – CIOJustin has over 26 years’ experience investing in Australian and international
securities. Prior to establishing Watermark in 2003, Justin spent 10 years as an
investment analyst and portfolio manager with the successful equities team at
Bankers Trust. Justin is the Chairman of ALF.
Daniel BroerenDaniel is responsible for coverage of Consumer, Retail and Gaming sectors.
Daniel has over 14 years’ experience in financial markets, in roles including
Head of Consumer Research at RBS (CIMB) and Portfolio Manager of Invesco’s
ASX Small Companies Fund. Daniel has a Masters Degree in Accounting and
Applied Finance and a Bachelor’s Degree in Engineering from RMIT University.
.
Harry DudleyHarry is responsible for coverage of the Financials sector. He comes to
Watermark from Macquarie Equities, where he had responsibility for coverage of
the Australian banks. Harry has also held Investment Analyst roles with IFM
Investors and Evans & Partners. He holds a Bachelor of Commerce, is a CFA
Charterholder and is a Member of the Institute of Chartered Accountants
Australia.
Tim Bolger - COOTim is responsible for all non-investment functions including
sales/marketing, operations, and compliance. Tim has over 17 years’
experience in financial services working across a range of asset classes,
in product development, marketing and distribution. He holds a Bachelor
of Arts and a Diploma in Law.
Tim HoffTim is responsible for coverage of Basic Industries. Prior to this, he was
the lead analyst for gold, base and battery material stocks at Deutsche
Bank. Tim transitioned into the investment industry in 2016 after working
as a geologist at Rio Tinto for 7 years. He holds a Bachelor of Science
and a Bachelor of Commerce and is a Member of the Australian Institute
of Metals and Mining.
Alex GurmanAlex is our dedicated dealer, with trading and execution functions
previously split amongst the analysts. Alex joined Watermark from
Goldman Sachs where he worked with the Institutional Equities Team as
an Associate in the Sales & Trading team. He holds a Bachelor of
Commerce (Finance) / Science (Statistics) from the University of New
South Wales.
Gaston AmorosGaston is responsible for coverage of TMT and Healthcare. Prior to this, he was
a Senior Investment Manager with the Abu Dhabi Investment Authority and has
over 13 years’ experience working across public and private capital markets. He
has held investment roles with Benros Capital, TPG and Morgan Stanley.
Gaston holds a Bachelor’s Degree in Economics from the Universidad Catolica
(Argentina) and a Masters in Finance.
Watermark’s Team
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The ‘fiscal cliff’ is coming on October 1st, yet the short-term stimulus sugar hit is too much for investors to ignore.Bombed out cyclical shares have rallied hard
● Store spending back to growth. Recent payment datademonstrates that in-store spending is now back to year-on-year growth. Partly due to pent-up demand and driven bystimulus payments from late April
● Consumers waste stimulus as expected. Data has shown thatrather than save, consumers are spending stimuluspayments on somewhat frivolous categories such asgambling, alcohol and car parts. Spending by lower socio-economic groups has increased by 30%, while spending byhigh socio-economic groups has increased by 10%. Willconsumers be in a position to smooth the pending drop-offin incomes?
● Stimulus payments to accelerate into the September quarter.We estimate that stimulus payments accelerate near-term,which could drive a continuation in artificial spendingpatterns
Tyro data shows consumers are back in store
Payments go to Food, Booze & Gambling
Source: Tyro Payments
Source: AlphaBeta
-50
-40
-30
-20
-10
0
10
20
30
40
y/y day on day
%
0 2 4 6 8 10 12 14 16
Debt repayments
Food
Gambling
Clothing, dept store
Furniture, office
Rent
Restaurant, cafe
Telco
Home improvement
Automotive
Apps. games, music
Gov & council services
Alcohol & tobacco
Utilities
Other
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Fiscal cliff approaching. Stimulus payments are expected to increasein the September quarter largely driven by JobKeeper. This couldsee recent aggressive spending patterns continue. However, manystimulus programs conclude on 1 Oct
Consumer Discretionary: Valuations are now assuming an almostcomplete recovery. Management teams are focused on the fiscalcliff however, investors are playing chicken. If the economy doesnot recover as expected and is weak in 2021 this sector will quicklyretrace recent gains
Consumer Defensive: Quality defensives caught up in short-termlock-down issues are providing capital growth opportunities withprotection
We like Coke- CCL and Metcash (IGA)
Consumer Growth: The recent rally in cyclicals has resulted inemerging relative value in quality global growth businesses
We like IDP Education, Freedom Foods
Jun-20 Sep-20 Dec-20JobKeeper 22 48 8JobSeeker 6 9
SME Cash Payments 15 17Household Cash
Payments4 4
Loan Interest Deferrals
12 10
Super Withdrawals 20 10Total 79 98 8
% of GDP 16% 20% 2%
Stimulus payments
Source: Watermark estimates
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90s recession indicates bank provisioning remains optimistic
The recent value rally sees banks present as expensive again
● Bad debts remain unknown. With deferrals on mortgages, credit cardsand business loans, visibility on bad debt outcomes will remain at largefor 6-12 months. Experience in the 90’s would suggest provisioning isoptimistic
● Dividends at risk. As seen with dividend cuts over the recent reportingseason, bank dividends are no longer certain. Alongside a watchfulregulator on the capital front, this makes valuation from a yieldperspective unreliable
● Margins outlook is benign. With significant central bank stimulus,liquidity has pushed short term funding costs materially lower. Banksshould see a tailwind on margins moving into fiscal 2021 to offsetimpact of lower rates which are a headwind
● Value emerged, then disappeared. Multiple headwinds make it opaqueas to whether the banks represent value or a value trap. However, therecent rally appears overdone on a number of valuation metrics. Wethink the sector should trade below book value while uncertaintiesremain. 1x book value is a clear buy signal in the new environmentwhere ROE ≈ 10%
Australian Price to Book ratio vs ROEs
Source: Goldman Sachs
Source: ABS & Macquarie Research
FINANCIALSF
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Sezzle’s hardship requests are falling
Pureplay USA Buy Now, Pay Later (BNPL) with 1.3m customers
SZL allows investors to capture the major structural acceleration to online shopping that has arisen from COVID-19
● COVID-19 is accelerating online commerce. Globally eCommercetrade has nearly doubled in some verticals during COVID-19. Thisaccelerates digital penetration and expands BNPL’s key endmarket immediately
● BNPL in the USA reaching an inflection. Over the past year, peopleusing BNPL has gone from ~2m to over ~10m. As BNPL reachesthis inflection point growth accelerates as merchants move to‘have to have’mode for BNPL at checkout
● Market cap per customer remains cheap. Sezzle remains thecheapest listed BNPL on a per customer basis. At ~$500 percustomer, this presents SZL as a key play in a value sense but alsoa strategic opportunity by financial incumbent
● Credit losses remain manageable given short duration product.Like Afterpay in the USA, Sezzle (SZL) has a 4 fortnightly paymentssystem. With the first payment upfront and an ability to quicklytighten standards, BNPL defaults should prove resilient through arecessionary period
Listed BNPL Market Cap/Customer numbers
Source: SZL
Source: Watermark
SZL APT Z1P + Quad
Market cap $655m $14,327m $3,813m
Active customers - 31 Mar 1.3m 8.4m 3.5m
Mkt cap per customer $518 $1,705 $1,092
US e-comm retail was up +80% yoy May 18th to 24th
Source: Second Measure
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The long/short game in commodities
COVID-19 has caused severe supply issues and demand destruction.Oil prices were hit first and hardest due to the tight link betweenproduction, consumption and limitations on storage. We continue tomonitor the commodities for delayed demand destruction and supplydisruptions
Iron ore: Neutral – Look to sell into Q3
● Supply/demand balance in deficit in 1H, 2H surplus expected
● Prices to ease in 2H as China construction slows however this maybe limited as inventories are low and demand robust
● Wildcard in the sector is Brazil, where COVID-19 is spreadingthrough the population
Copper: Bullish (Oz Minerals)
● Price has recovered as global markets looked to stimulus andsupply disruptions in South America
● Chinese smelters having trouble sourcing concentrate, refinedcopper likely to remain tight, supporting higher prices
● We are cautious on consumption later in the year but it remainsone of the metals with solid mid-term fundamentals
Source: Nickel Mines Ltd
Iron ore has been a strong out performer. Thermal coal remains challenged
China steel demand has recovered strongly driving iron ore demand
Source: Watermark Funds Management
-25%
-20%
-15%
-10%
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5%
10%
15%
20%
25%
Jan
-20
Feb
-20
Mar
-20
Ap
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May
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Jun
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Change in metal AUD metal prices
Copper Zinc
Nickel Aluminium
62% Iron ore Thermal Coal
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Source: JP Morgan
Source: Bloomberg
Coal inventories in China remain high
US debt not likely to fall in the near term, supporting gold prices
Aluminium/Alumina: Avoid
● Subdued market conditions but China’s overbuild of capacity willweigh on prices
● For Australian producers, the falling currency has not beenenough to offset prices and margins have compressed
● We remain cautious of exposure to this sector
Thermal coal: Avoid
● China has high levels of inventory and adequate supply
● New Russian supply has displaced some Australian coal
● The shift to renewables and reduce industrial activity remains ahandbrake on demand
● Prices have fallen and equities suffer from a lack of investorinterest due to poor FCF, management failures and ESGrestrictions
Oil: Neutral (Senex Energy Limited)
● Rallied from the expected lows due to the oversupply andconstraints on oil storage
● Demand returning but supply is waiting on the sidelines
Gold: Bullish (Saracen SAR; Newcrest NCM)
● Has acted as a safe haven asset, particularly in AUD terms,through the COVID-19 crisis
● Gold producers have rallied strongly on solid EBITDA margins andno/little production impacts
● US Fed policy and continued uncertainty remains a favourabletailwind for the sector
Source: Bloomberg
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China - six major power generators coal stocks (MT) Days burn - RHS
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The leading independent provider of diagnostic imaging in Australiabenefiting from long-term trends and accretive roll-up opportunities
● Long-term market growth. Ageing demographics continue todrive higher utilisation of complex more expensive imagingmodalities (MRI, PET, CT)
● Australian MRI utilisation lags OECD peers. Australia currentlydoes 48 MRIs per 1,000 inhabitants compared to c.120 in theUSA and c.80 in Europe, highlighting the under-utilisation androom for catch up
● Profit margins to be supported by indexation from FY21. Fees formost diagnostic imaging services have not been indexed since1998. Around 90% of Medicare imaging items are going to beindexed from July 2020 supporting profit margins.
● Attractive growth / valuation equation. Integral currently tradesat 23x NTM PE for 17% EPS growth or 1.4x PEG for a well-managed, defensive business with potential for upside fromaccretive M&A opportunities
Sustained industry growth
Australia has very low MRI utilisation vs peers
Source: Integral Diagnostic, Medicare data
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90
100
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130
Australia Netherlands Canada Italy Spain France USA
Tota
l Per
10
00
Inh
abit
ants
Magnetic Resonance Imagining Exams
Source: Integral Diagnostics, Macquarie Research
-2%
0%
2%
4%
6%
8%
10%
12%
12 month rolling growth rate by services
Average - services
12 month rolling growth rate by benefits
Average - benefits
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● Technology: Secular growth companies with sector and company specific product drivers. The Tech sector as awhole re-rates higher/lower with movements in bond yields.
Our strategy here is to own long term winners and let them compound earnings. A good example isXero, the leading cloud-native accounting solution provider for SMB clients.
● Media: Traditionally the most cyclically geared sector in TMT to the swings in economic activity. Within mediasome sub-sectors are under structural pressure (print, linear TV), others are neutral (Out-of-Home) and othershave structural tailwinds (digital)
Our strategy here is to take advantage of market dislocations to build positions in structurally soundbusinesses. A good example is oOh!media, where we participated in a capital raise in the midst of theCoronavirus pandemic, at $0.53 per share.
● Telecom: Traditionally defensive businesses, essentially unaffected by the ongoing pandemic. They provide a mixof (low) growth and yield (dividends) at decent valuations
Our strategy here is to use Telecom shares defensively to generate income and park cash when wecannot find attractive risk-rewards elsewhere within TMT (e.g. Telstra or TPG pre- Vodafone merger)
TECHNOLOGY, MEDIA & TELECOMMUNICATIONS (TMT)
Bond Yields driving growths strong performance
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INVESTMENT MANAGER UPDATE
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Investment manager update
A simpler business has allowed for greater focus
• 2 strategies & 3 funds
• Single geographic focus
• More resources/experience dedicated to the Australian market than ever before
• Attribution from Australian mid & small cap companies has increased
Business Operations have continued uninterrupted through COVID-19 crisis
• All staff transitioned to remote working
• Critical systems and processes operated seamlessly through lock-down
Watermark is well equipped to navigate the challenging period ahead
• Variable Beta/Market Neutral strategies are well-suited to difficult markets
Both strategies are delivering the risk/reward profile that are intended
• Cautious settings protected the funds when the Coronavirus crisis hit
• Process development in 2019 provided tools to monitor/manage portfolio risk exposures
• Major stress-test of our risk management has predicated additional enhancements
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Directional Long/Short – Variable Beta [ALF & Watermark Absolute Return Fund]
• Investment objective is to deliver double digit returns with a focus on capital preservation
• Returns are driven by stock selection, sector tilts and exposure to the market (Beta)
• Average net exposure through a market cycle will be 40-50% [typical range 100% to -20%]
• Volatility should be ≤ the share market
• Net exposure settings a function of market valuation and macroeconomic backdrop
Where fundamental view on market value aligns with a favourable macro outlook, ALF/WARF will be net long the market
Equity Market Neutral – Watermark Market Neutral Trust
• Investment objective is to deliver attractive returns with significantly less volatility than the share market
• Returns are a function of the spread between the long and short portfolios
• Net market exposure (cash and risk adjusted) between ±10% (typically zero)
• Volatility generally less than half that of the share market
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Watermark’s investment strategiesF
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Strategies will vary over a market cycle
-250%
-200%
-150%
-100%
-50%
0%
50%
100%
150%
200%
250%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Long Exposure Short Exposure Net Exposure
Maximum divergence when markets are cheap & rising
Strategies converge when market valuation is full and risks are elevated
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Performance in up/down markets – Variable beta strategy
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Net data used. ALF data is from since inception (Feb 2004)
3.02%
-3.52%
2.02%
-1.32%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
Performance in upmarket
Performance in downmarket
XAO ALF
‒ Variable beta strategy provides some correlation & volatility benefits
‒ Capital preservation is a clear focus
‒ Beta contribution allows for a higher return target than market neutral
9.90%
8.10%
0%
2%
4%
6%
8%
10%
12%
Australian Leaders Fund All Ords Accumulation
Compound Annual Return
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Performance in up/down markets – Market neutral strategy
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2.85%
-3.26%
0.46%0.83%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
Performance in up market Performance in downmarket
XAO WMNT
‒ Market neutral strategy provides lower (negative) correlation with the share market
‒ Pure alpha strategy means return target is lower
6.90%
1.90%
0%
1%
2%
3%
4%
5%
6%
7%
8%
Watermark Market NeutralTrust
RBA Cash Rate
Compound Annual Return
Net data used. WMNT data is from since inception (Aug 2012)
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Fund performance in FY20
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• Pre-Crisis performance on track to meetannual target ≈10%
ALF gross return was 6.14% vs ASX 8.37%
ALF average net exposure from Jul 19 –Jan 20 was -5%
This perfectly describes our task in a late-stage bullmarket – try to keep up with the market whileretaining cautious settings
• Portfolio was short into the crisis. Marketslooked expensive and vulnerable
• Small exposures in the travel/leisure sectorand a modest small cap size bias impactedreturns
• Risk settings have been adjusted to reflectincreased volatility
Gross exposure significantly reduced
Sector/factor exposures tightly controlled
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20
FY20 Fund Performance - Pre Crisis
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
Feb-20 Mar-20 Apr-20 May-20
FY20 Fund Performance - Post Crisis
Gross data used
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Premiums & Discounts a reality for LIC sector
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-30%
-20%
-10%
0%
10%
20%
30%
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
ALF Premium/Discount to NTA
• Issues of premiums and discounts is one ofthe longest running in the history ofmanaged investments
• ALF is one of few LIC’s that has traded atsignificant premiums to NTA
Can deliver returns that are very differentfrom the market
• Average discount stretched to >25% duringMarch 2020 as the market fell
• Average discount contracted to medium-term average of 10% as NTA’s were reviseddown
• ALF SP has recovered some of the COVID-19 losses
• NTA has remained virtually unchanged,with discount remaining around 20% [15%after Deferred Tax Asset]
Peak discount of -23% to net assets
Pre
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Pre
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Net
Ass
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Source: Bloomberg & Watermark & Zenith Investment Partners
Premium & Discounts – All ASX LICs/LITs (data to 30 April 2020)
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Capital management summary
• Off-market buy back completed in March 2020
27 million shares tendered for the value of $29.8 million
Shares purchased at a price reflecting the liquidated value of ALF
NTA accretion benefit for remaining shareholders of 0.3 cents per share
• On-market buy back has continued in 2020
Over 19 million shares purchased at a discount to NTA
NTA accretion benefit for remaining shareholders of 1.65 cents per share
9 million shares still to be bought back before November 6, 2020
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Thank YouQUESTIONS?
Tim Bolger
Chief Operating Officer
+61 2 9251 8227
Rani Singh
Business Development Manager
+61 2 8047 7744
For more information, please contact:
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