1. business and industrial

SKAGEN Focus
Statusrapport – september 2015
Hovedtrekk – september 2015
• Fondet er svært konsentrert med et bredt globalt mandat. Målsetningen er å investere i noen få selskaper
med eksepsjonell risk/reward-profil med fokus på absolutt avkastning.
• Målet er 30-35 poster, hvorav de 10 største skal utgjøre 40-50 prosent av porteføljen. Ved utgangen av
august var det 29 poster i fondet, og de ti største posisjonene utgjorde 52 prosent av porteføljen.
• De internasjonale aksjemarkedene var generelt svake i september. SKAGEN Focus falt med 2,1 prosent i
løpet av måneden. Fondet er ned 11,0 prosent siden start 26. mai 2015.
• AirAsia, Hyundai Motor og GCL-Poly var de beste bidragsyterne til fondets absolutte avkastning i
september. Softbank, South32 og AIG var de dårligste bidragsyterne i løpet av måneden.
• Generell svakhet i bilaksjer etter VW skandalen gjorde det mulig å gå inn i Infineon, et tysk selskap som er
markedsleder innen halvledere for bil/industri. Bakgrunn og rasjonale for denne investeringen finnes lenger
bak i statusrapporten.
• Ved utgangen av september hadde SKAGEN Focus 4,7 prosent i kontanter. Vi fortsetter å gradvis
distribuere kontanter inn i våre posisjoner.
• Fondets brede mandat reflekteres i både den geografiske og sektormessige sammensetningen. Fondet kan
også investere uavhengig av markedsverdien på selskapene det investerer i, og i øyeblikket utgjør smallcap** 30 prosent av fondet, mens mid-cap og large-cap utgjør hhv. 31 prosent og 39 prosent. Disse tallene
kan variere mye over tid.
* Med mindre annet er oppgitt er alle avkastningstall for fondet i denne rapporten knyttet til klasse A, og etter fradrag for gebyrer
** Small-cap defineres som selskap med en markedsverdi under 2 milliarder USD, og Large-cap som mer enn 10 milliarder USD
2
Avkastning, september 2015
September
SKAGEN Focus A
MSCI AC World Index
Relativ avkastning
3Q
-2,1%
-2,1%
0,0%
Note: Alle tall utover 12 måneder er annualisert (geometrisk avkastning)
* Startdato: 26. mai 2015
3
Siden start*
-7,3%
-11,0%
-2,2%
-3,1%
-5,1%
-7,9%
Markedsutvikling i september i NOK (%)
India
Sør-Korea
Taiwan
USA (Nasdaq)
USA (S&P 500)
Danmark
Ungarn
Italia
Hong Kong
Kina (Hong Kong)
Mexico
Sør-Afrika
Finland
Thailand
Belgia
Vekstmarkedsindeksen
Polen
Storbritannia
Sveits
Frankrike
Østerrike
Kina (lokal)
Norge
Sverige
SKAGEN Focus A
Verdensindeksen
Canada
Russland
Tyrkia
Singapore
Nederland
Tyskland
Japan
Spania
Indonesia
Brasil
4
4
4
1
0
-1
-1
-1
-1
-1
-1
-1
-1
-1
-2
-2
-3
-3
-3
-4
-7
-9
-3
-4
-2
-2
-2
-2
-2
-2
-2
-2
-2
0
0
0
1
Største bidragsytere, september 2015
Største positive bidragsytere
Selskap
Største negative bidragsytere
NOK (000)
Selskap
NOK (000)
AirAsia BHD
4 165
##### Softbank Group Corp
-5 149
Hyundai Motor Co
4 109
##### South32 Ltd
-2 664
GCL-Poly Energy Holdings Ltd
3 489
##### American International Group I
-2 660
Jenoptik AG
2 553
##### Aryzta AG
-2 562
Carlsberg A/S
1 398
##### SBI Holdings Inc
-2 200
Total verdiskapning i september 2015:
Note: Bidrag til absoluttavkastning
5
NOK -15 millioner
Største bidragsytere 3. kvartal 2015
Største positive bidragsytere
Selskap
Største negative bidragsytere
NOK (000)
Omega Protein Corp
11 630
Selskap
1E+07 Whiting Petroleum Corp
NOK (000)
-11 612
Jenoptik AG
8 313
8E+06 South32 Ltd
-8 229
Ubiquiti Networks Inc
3 484
3E+06 SK Hynix Inc
-7 981
Hyundai Motor Co
2 990
3E+06 Rentech Inc
-7 822
610
610369 Komatsu Ltd
-5 098
Infineon Technologies AG
Total verdiskapning 3. kvartal 2015:
Note: Bidrag til absoluttavkastning
6
NOK -55 millioner
Største bidragsytere hittil i 2015
Største positive bidragsytere
Selskap
Største negative bidragsytere
NOK (000)
Omega Protein Corp
Selskap
NOK (000)
12 752
# South32 Ltd
-16 041
Jenoptik AG
7 069
# SK Hynix Inc
-13 133
Ubiquiti Networks Inc
4 260
# Whiting Petroleum Corp
-10 978
Hyundai Motor Co
3 383
# AirAsia BHD
-10 400
American International Group I
2 851
# Rentech Inc
-9 096
Total verdiskapning hittil i 2015:
Note: Bidrag til absoluttavkastning
7
NOK -88 millioner
Kjøp og salg, september 2015
Kjøp
•
Infineon: Ny posisjon i fondet. Mer informasjon om selskapet
finnes i faktaarket senere i statusrapporten.
•
Fourlis: Etter solide resultater fra den greske IKEA forhandleren,
Fourlis, økte vi vår posisjon i selskapet.
8
Salg
•
Hyundai Motor: Etter en sterk bedring i aksjekursen til Hyundai
Motor Pref, reduserte vi posisjonen noe.
Viktigste endringer i 3. kvartal 2015
Økte poster
Reduserte poster
China Child Care Corp Ltd
Q3
Q3
Aryzta AG
(Ny)
Infineon Technologies AG
(Ny)
Citizens Financial Group Inc
Fila Korea Ltd
SK Hynix Inc
Uniqa Insurance Group AG
Carlsberg A/S
Pan American Silver Corp
Aercap Holdings NV
China Telecom Corp Ltd
Omega Protein Corp
Fourlis Holdings SA
CIT Group Inc
SBI Holdings Inc
Solazyme Inc
9
Hyundai Motor Co
(Ut)
Største poster i SKAGEN Focus per 30. september 2015
American International Group Inc
Omega Protein Corp
Carlsberg AS-B
SK Hynix Inc
SBI Holdings Inc
Citizens Financial Group Inc
Jenoptik AG
China Telecom Corp Ltd
Hyundai Motor
South32 Ltd
Topp 10
Total antall posisjoner (29
posisjoner)
Cash
Totalportefølje
10
Pris
P/E
P/E
P/BV
60
17
502
35 800
1 476
25
12
4
97 000
2
2015e
9,5
13,6
14,7
5,7
11,4
15,6
14,5
16,9
3,7
3,6
2016e
8,9
11,2
11,7
6,0
10,5
12,6
13,4
15,4
3,7
3,9
last
0,8
1,3
1,5
1,3
0,8
0,7
1,7
0,9
0,4
0,4
8,7
8,3
0,8
Kurs Oppside
mål
90
20
822
65 000
3 000
35
20
8
200 000
3
%
49 %
17 %
64 %
82 %
103 %
41 %
66 %
97 %
106 %
97 %
Posisjonens
størrelse, %
7,9%
6,3%
5,7%
5,2%
5,1%
4,8%
4,8%
4,1%
3,6%
3,5%
51,0%
95,5 %
4,5 %
100,0%
Sektor og geografisk fordeling mot indeks, september 2015
Geografisk fordeling
Sektorfordeling
Fond
4
Energi
Asia DM
7
6
Råvarer
5
Kapitalvarer, service
og transport
Inntektsavhengige
forbruksvarer
12
10
13
17
10
3
Medisin
12
26
Bank og finans
22
12
14
Informasjonsteknologi
7
Telekom
Kontanter
11
4
0
3
7
19
21
Europa DM,
ekskl. Nordea
8
Europa EM
1
1
Latin Amerika
0
1
Midtøsten
og Afrika
0
1
35
Nord Amerika
56
3
2
Oceania
6
Norden
2
5
0
Kontanter
Indeks
21
Asia EM
Defensive konsumvarer
Nyttetjenester
10
9
5
0
Nyheter og annet om porteføljeselskaper
– på engelsk
Key earnings releases and corporate news, September 2015
Aryzta
(1,9% weight)
(xxx%)
Investment case update: Swiss bakery company Aryzta, released FY15, where overall sales increased 12,6% for the Food Group, but
underlying growth of -2,2% excluding acquisitions and currency. Within the Food Group, the main negative drag was Food North
America with a 6,2% decline in underlying sales. However, performance was solid in Europe and Rest of the World. Overall EBITA
increased 6% over last year and was basically in line with guidance. The turnaround in the North America is however taking longer than
expected, and the company now guides for positive underlying growth to H216 (prior 1H16). On the bright side, North American margins
were better than forecasts suggesting that the volume rationalization has paid off to some extent. One other concern is the debt level
(3x net debt/EBITDA), which may have pushed them to recently sell the remaining stake in the Irish agri-services company Origin for
EUR 230M. Overall we think management has provided conservative guidance and continue to see current share price as an attractive
opportunity. The company trades at 30-40% discount to the overall consumer staples sector.
Summary: The company reported underlying net profit of EUR360M which was a decrease over last year of about 4%. Food Europe
sales was EUR 1647M (underlying sales up 1%), sales of EUR 1942M in Food North America (-6%), Food Rest of the World sales of
EUR 231M (underlying up 3%). Underlying fully diluted EPS was 402,2 cent, down 5%.
Hyundai
(3,9% weight)
Investment case update: VW scandal should not post a risk for Hyundai in the US (15% of HMC unit sales) but rather an opportunity
as overall diesel sales will likely decline. In Korea, HMC should also benefit from increase in market share, amid expected increase in
scientism to import cars. In India, diesel share is high, but we do not see immediate risk. Overall diesel sales is very low in China and
therefore risk here should minimal.
Summary: The VW emission scandal has put focus on the theme across the global auto industry. Diesel engines empower 32% of
global passenger car sales, with diesel market share being 53% in Europe, 16% in the US, 52% in India and only 0.4% in China. The
market share of diesel cars in Hyundai Motor is 18% globally, with 39% in Europe and close to 0 (zero) in the US. In Korea, which
accounts for 16% of HMC unit sales, diesel penetration accounts for 39% of unit sales, sharply up from 20% in 2011, mainly driven by
increased sales of German diesel import (import cars is c18% of domestic market) after the FTA kicked in from 2011, as 68% of import
cars are diesel fueled. Since 2010, the market share of Hyundai in Korea has declined from +40% to 33% as a result of this. For
Hyundai, diesel sales in Korea accounts of c50% of overall unit sales. For VW, share of diesel sales in Korea was 90% in 1H15.
13
Key earnings releases and corporate news, September 2015
AirAsia
(1,9% weight)
(xxx%)
Carlsberg
(5,7% weight)
AerCap
(3,5% weight)
14
Investment case update: We had a 1-on-1 with Air Asia’s 3 CFO´s during the month, in Hong Kong, and the company claim was clear;
there are no major issues regarding accounting or capital shortage. We spent an hour on accounting treatment of leases and payments
- the reason the company has not yet come with a capitalization proposal is contradicting Indonesian regulatory demands. The reason
for the expected capital raise not yet being in place on the subsidiary level is price - the company is quite confident it is not actually
needed but will do it before year-end. We have so far given the company the benefit of trust on the issue, due to discounted share price
versus underlying assets. Also, late in the week, the company announced an up to 10 percent share buy-back.
Investment case update: Carlsberg, the Danish brewer, investment case core is a stable earner with sub-par profitability to peers
and Carlsberg is on route to be improved. The odd cost elements in the 2Q15 report and the opaque communication around it sent the
stock down 20%. The new CEO since June, Mr Cees Hart from Holland, is pushing a fast cost-cutting agenda and apparently he didn’t
see the CFO as the right person to execute along that road.
Investment case update: AerCap is the largest independent aircraft lessor globally. It is also active within engine leasing, trading and
spare part sales/service of aircrafts. The company manages a fleet of 1300 aircrafts with a current order book of additional 460 aircrafts.
On its investor day Sep 10th the company delivered plans to grow its fleet by 5% annually through 2018 and 20% in total over the next 5
years. Deleveraging target was confirmed towards debt/equity at 2,7-3,0x. Excess capital generation is expected at USD 500M (6% of
current market cap) annually which will be used for share repurchases or aircraft acquisitions. The company guided for 7 - 9% growth in
earnings over the mid-term and target ROE of 1000 bps over the 5 ýear Libor rate. We think this could prove conservative as the
company should be able to receive an investment grade rating and reduce its cost of debt. Also, if current discounted equity valuation
persists, we believe further share buybacks are likely, even after the company bought back 7% of its market cap in the AIG sell-down
earlier this year.
Key earnings releases and corporate news, September 2015
GCL Poly
(2,6% weight)
(xxx%)
Investment case update: Delivered earnings that were slightly negative for the short term given negative earnings revisions and huge
USD sensitivity. The long term case is more or less intact despite some hurdles on the way. The damaging import of polysilicon in 1H15
(to China) which pushed prices down is expected to ease off from September due to 31/8 final cut-off date for trade processing loophole
(Import Duty Levy) and the fact that polysilicon imports become more expensive due to the RMB depreciation. With the recent
commissioning of the captive power plant they are now guiding for 10%+ lower polysilicon costs (cash cost below USD12/kg currently
and will be lower than USD11/kg by end 2015). It is however a little worrying that total debt increased by 18% in 1H15 after weak cash
flow generation (net gearing of 158%, from 147% in 1H14).
During the month GCL Poly announced a proposal to dispose of its non-solar power business for RMB 3.2bn. This is subject to
shareholders approval as it is a connected transaction with the buyer being the Chairman, Mr Zhu. From a balance sheet standpoint this
is a positive transaction. As of 1H15 net debt was HKD30bn, with non-solar power net debt at HKD 4.6bn. With proceeds of HKD 3.9 bn
left after the special dividend net debt can be reduced by 28% to HKD 22bn. They could also save at least HKD 3-500m in interest cost.
However, we are concerned by the fact that this is the second related transaction proposed by the Chairman in one year (the first one
being the wafer business which was rejected by shareholders). It makes strategic sense with the sale of the non-solar business but the
question mark is whether it could have achieved a better price as a spin-off or in a third party transaction.
Fourlis
(0,6% weight)
(xxx%)
Investment case update: Greek Fourlis has two main business activities; they are the operator of IKEA stores in Greece, Bulgaria and
Cyprus and also operate Intersport stores in Greece, Cyprus and Turkey. The company saw its share price peak in the middle of 2007
at EUR 27, and now the shares are trading around EUR 2, valuing the company to EUR 113M market cap. The home furnishing market
has deteriorated 70% since the peak; from 1,5% of GDP to current 0,4% of GDP. During the financial crisis and recession in Greece the
company has managed to become a more efficient operator and also take substantial market share. Intersport has been remarkably
resilient in the downturn. Within the quarter, there were capital controls introduced in Greece, but the disruptions within the company
seem to be limited. Over last year, IKEA sales increased 4% and Intersport grew sales by 6%. EBITDA was up by 6% over last year.
Also, cash flow was strong, with operating cash flow of EUR 23M in the quarter, and net debt fell to EUR 145M from EUR 163M from
last quarter. The company also announced it has discontinued its New Look operations but is continuously searching for new projects.
We continue to believe that
Summary: Fourlis released Q215 numbers with IKEA sales increasing 4% over last year, while Intersport increased 6%. With help from
expansion in gross margins the company delivered higher EBITDA compared to last year (6%). Cash flow was strong at EUR 23M and
net debt fell to EUR 143M.
15
Infineon (IFX GY) EUR 9
History, what they do and how case was found
-
Infineon is a German semiconductor manufacturer founded in1999, when the semiconductor operations of the parent
company Siemens AG were spun off
The company produces semiconductors and systems solutions and operates in four different segments (leading market
shares between10-15% globally in each segment):
Automotive (40% of sales; microcontrollers, sensors, radio-frequency, radar and safety applications; key clients:
Autoliv, Bosch, Continental, Delphi)
Industrial power control (20% of sales; power semiconductors; key clients ABB, Alstom, Delta, Emerson, Schneider)
Power management and multimarket (25% of sales; power semiconductors for smartphone, tablets and telecom
infrastructure; key clients: Ericsson, Hewlett Packard, Huawei, Osram)
Chip, Card and Security (15% of sales; embedded microcontroller solutions for chip card, security and mobile
payments; key clients: Gemalto, Microsoft, Oberthur Tech, Safran)
Rationale for investment
-
-
Structural shift towards increased IFX semi-content per car with move from combustion engine to hybrids (2x)
Overall strong strategic positions within Auto Electrification (inverters, chargers, battery management) and
Autonomous car/Advanced Driver Assistance Systems (ADAS), especially in radar and safety applications with high
barriers to entry
After acquisition of International Rectifier, company now 3x larger than closest competitor, and will be able to fill newly
built capacity rapidly, generating margin expansion
Solid balance sheet with net cash of 100M EUR and free cash flow yield of 6-7% for 2016/2017, also supported by
sustainable low tax rate due to tax-loss carry forwards
Key figures (EUR):
Market cap
EV/EBITDA 2015
EV/EBITDA 2016E
ROE 2015
Net cash position
Dividend yield
P/B
10,5bn
7,5x
6,4x
12,0%
100m
1,5%
2,4x
Owners:
(open) Dodge&Cox 9%, Capital Group
7,7%, Allianz 4%
Potential triggers
-
Recategorization from traditional semi-conductor producer to higher quality industrial player
Removal of overhang - potential settlement in Qimonda court case: an on-going drag for Infineon is its court case with
the administrator of its prior memory business that went bankrupt
Risks
-
Exposure to Chinese car demand and manufacturers
Technological change and constant innovation pressures
Worse than estimated outcome of Qimonda settlement
Target price
Our target price is EUR 14, which is 10x forward EV/EBITDA and 15x forward P/E multiple.
16
Team Focus, September 2015
www.infineon.com
3U addition to fact sheet
Unpopular
17
• Exposure to Chinese auto sales and VW scandal have pushed down most auto related companies as of late,
including IFX. Most analysts remain positive.
Underanalyzed
• The stock is more than well-covered through 45 analysts. The company is often viewed as a traditional semiproducer, despite unique position in niche end-markets.
Undervalued
• The stock is trading at 6x forward EV/EBITDA which is a discount to the higher quality peer group. Our target
price is EUR 14, which is 10x forward EV/EBITDA and 15x forward P/E multiple.
The largest companies in SKAGEN Focus
AIG is an international insurance company serving commercial, institutional and individual customers. The company
provides property-casualty insurance, life insurance and retirement services. AIG was at the very centre of the financial
crisis as the central bank for mortgage insurance – it was bailed out in a USD 180bn bail out. The company has two core
insurance holdings: Sun America and Chartis that it intends to keep. The company has set a target to achieve 10% ROE by
2015.
Carlsberg A/S is an international brewing company. The company produces branded beers and regional brands.
Carlsberg makes most of its beer outside of Denmark and it is sold in markets around the world. The company also
markets and produces soft drinks, water and wine.
Japanese company established in 1999 as an online financial services company, incubation arm of Softbank. Acquired
E*Trade Securities in 2003, Softbank sold out in 2006. Three main businesses: i) Financial services; ii) Asset management,
iii) Biotech Financial services: Building ecosystem to offer full range of financial services: SBI Securities: Dominant provider
of online securities services in Japan #3 in new tax-saving NISA behind Nomura and Daiwa. SBI Sumishin Net Bank: pureplay internet bank. Also active within insurance (Life & Non-life), Mortgages (through securitization), trading system and FX
trading.
The company is one of the oldest financial firms in the US, with headquarters in Providence, Rhode Island, with its roots
going back to 1828. It is today the 13th largest retail bank in the US with a footprint in New England, the Mid West and
the Mid Atlantic, with over 1200 branches in 11 states. The company was listed in September 2014 after being spun off
from the UK-based bank Royal Bank of Scotland (RBS).
SK Hynix Inc. is a Korea-based company engaged in the manufacture of semiconductors. The Company mainly develops
and manufactures memory and non-memory semiconductors. Its memory semiconductors include dynamic random access
memory (DRAM), multi-chip products (MCPs) and NAND flash memory semiconductors, which are used for cellular
phones, PC, digital televisions, digital cameras and other electronic products. The company has the number three market
share (in the current oligopoly) in DRAM, behind Samsung and Micron
18
The largest companies in SKAGEN Focus
Jenoptik AG is a Germany-based company engaged in the field of optoelectronics. Its main activities are divided into three
segments: the Laser & Optical Systems segment, the Metrology segment, the Defense & Civil Systems segment. The
Laser & Optical Systems segment encompasses Laser and Material processing division, which is engaged in
semiconductor materials and diode lasers. The Metrology Segment is engaged in manufacturing of high precision contact
and non-contact metrology systems; and the Traffic Solutions division comprises products and solutions for road safety.
The focus areas of the Defense & Civil Systems are military and civil vehicle, rail and aircraft equipment.
Omega Protein Corporation is a nutritional ingredient company and the United States that markets fish meal and fish oils
from menhaden, an oily, virtually inedible fish found in the Gulf of Mexico and in the Atlantic Ocean. The Company fishes
for its own source of raw material and without their own catch. They are the largest U.S. producer of Omega -3 fish oil and
specialty fish meal products. These heart-healthy fish oils have experienced rapid growth as a dietary supplement and the
fish meal is finding increasing usage nutritional food additives.
Australia based South32 is a diversified mining company. The company is active in Alumina, Aluminium, Silver, Coal,
Manganese and Nickel. The company was demerged from BHP Billiton in May 2015. The operating assets of the
company are located in Australia (Alumina, Silver and Manganese), South Africa (Aluminium, Energy coal, Manganese)
and Brazil (Aluminium). The majority of the assets are in the first or second quartile of their respective cost-curves. It is
one of the few miner majors that do not have exposure to iron ore.
China Telecom is full services integrated information service operator in China. The Company, along with its
subsidiaries, is engaged in the provision of basic communications services, including wireline telecommunications
services, mobile telecommunications services, value-added services, such as Internet access services, integrated
information services and other related services within the service area of the Company. China Mobile, China Telecom
and Unicom are the largest and dominant service providers in the country. China Telecom is the growing 2nd player
behind China Mobile, in a maturing industry, yet with massive growth in data downloads.
Hyundai Motor is the world's 5th largest car maker, including their 39% stake in Kia Motor. Sold 8m cars in 2014 and has
a ca. 5% global market share. Focus on smaller/less expensive cars. Strong position in several countries and in emerging
markets such as India and China.
19
For mer informasjon, vennligst se:
Siste Markedsrapport
Informasjon om SKAGEN Focus på våre nettsider
Historisk avkastning er ingen garanti for framtidig avkastning. Framtidig avkastning vil blant annet avhenge av
markedsutviklingen, forvalters dyktighet, fondets risiko, samt kostnader ved kjøp og forvaltning. Avkastningen kan
bli negativ som følge av kurstap.
SKAGEN søker etter beste evne å sikre at all informasjon gitt i denne rapporten er korrekt, men tar forbehold for
eventuelle feil og utelatelser. Uttalelsene i rapporten reflekterer porteføljeforvalternes syn på gitt tidspunkt, og dette
synet kan bli endret uten varsel. Rapporten skal ikke forstås som et tilbud eller en anbefaling om kjøp eller salg av
finansielle instrumenter. SKAGEN påtar seg intet ansvar for direkte eller indirekte tap eller utgifter som skyldes bruk
eller forståelse av rapporten. Ansatte i SKAGEN AS kan være eiere av verdipapirer utstedt av selskaper som er
omtalt enten i denne rapporten eller inngår i fondets portefølje.