L1 Long Short Fund Ltd. · ASX:LSF
L1 Long Short Fund — Investor Presentation (September 2019)
33 slides from L1 Long Short Fund's investor presentation, Sep 16, 2019
Slide 1: L1 Long Short Fund Limited September 2019
For personal use only L1 Long Short Fund Limited September 2019
Slide 2: Fund Performance (2019)
Fund Performance (2019) For personal use only The Fund has delivered strong performance in 2019 (+19.5%)1 These returns have been achieved despite: – maintaining a modest net long position (typically 50-60%) – the continued huge outperformance of ‘growth’ versus ‘value’ stocks – no portfolio benef
Slide 3: LSF Share Price vs NTA (2019)
LSF Share Price vs NTA (2019) For personal use only LSF Share Price vs NTA - Pre Tax $1.80 Fund NTA $1.70 +19% $1.60 $1.50 Share price $1.40 +6% $1.30 $1.20 $1.10 $1.00 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Share Price NTA - Pre Tax Note: Data current as at 10 September 2019
Slide 4: Addressing the Discount to NTA
Addressing the Discount to NTA For personal use only Major share purchase program announced & commenced Specifically designed to address the material discount between the share price and NTA A minimum of $25m (in aggregate) to be bought by Mark Landau & Rafi Lamm by February 28, 2020* Based
Slide 5: Shareholder Friendly Terms
Shareholder Friendly Terms For personal use only Best practice corporate governance – Majority independent board and independent chairman Costs borne by the Manager, not shareholders – IPO costs fully reimbursed by L1 Capital (Manager) – L1 Capital (Manager) pays for all ongoing operating costs
Slide 6: Investment Market Observations
Investment Market Observations For personal use only Equity markets look expensive in absolute terms, but attractive relative to other asset classes. The outlook for the global economy is uncertain due to a number of macro/geopolitical factors: – Trade war, Brexit, Central bank policies, Europea
Slide 7: Lower bond yields driving equities higher
Lower bond yields driving equities higher For personal use only The P/E for Australian stocks has surged this year due to the collapse in bond yields The ASX200 Industrials now trades on 23.8x P/E, versus its 10 year average of 17.1x Source: CLSA, Datastream as at 10 September 2019. P/E multiple use
Slide 8: Portfolio Positioning
Portfolio Positioning For personal use only Net Exposure Gross Exposure Australia/New Zealand 13% 167% North America 27% 44% Europe 14% 14% Asia 7% 11% Total 61% 235% The Fund does not have a large net long to any geography, reflecting risk from full valuations (Australia & U.S.) or risk from stru
Slide 9: Momentum vs Value Stocks
Momentum vs Value Stocks For personal use only Momentum stocks look extremely overbought relative to value stocks “The underperformance of value stocks relative to low volatility and momentum stocks is worse than any historical factor divergence, including during the late ’90s tech bubble” – Marko K
Slide 10: Australian growth stocks – World's most expensive
Australian growth stocks – World’s most expensive For personal use only Growth stocks look expensive globally and Australian growth stocks are the most expensive in the world (P/E 38.9x) and trade at the largest premium to their local Index (almost 150% premium) Source: Goldman Sachs, Bloomberg. Bas
Slide 11: Portfolio Statistics
Portfolio Statistics For personal use only Given the extreme relative valuations between growth & value stocks, the portfolio is intentionally positioned with a larger value bias than usual. We believe this is prudent from both a portfolio risk and return perspective. Portfolio Metrics P/E (x) EV/EB
Slide 12: Key Long Portfolio Position – Chorus (CNU)
Key Long Portfolio Position – Chorus (CNU) Chorus has been one of the largest positions in the Long Short Strategy since inception in Sept For personal use only 2014. Chorus is the monopoly owner of the new ultra-fast fibre network across most of New Zealand (81%) and also owns 100% of the monop
Slide 13: Key Long Portfolio Position – CK Hutchison (1.HK)
Key Long Portfolio Position – CK Hutchison (1.HK) CK Hutchison – HK Listed (US$36b market cap) For personal use only Extremely high quality set of assets - US$40b+ of U.S. infrastructure assets, 51 ports, largest and fastest growing China pharmacy chain, large European telco & towers infrastruct
Slide 14: Key Long Portfolio Position – News Corp (NWS)
Key Long Portfolio Position – News Corp (NWS) NWS is dual-listed (ASX/NYSE) (Mkt Cap A$12.5b/US$8.6b). For personal use only NWS’ 61.6% stake in REA (A$8.6b) + the A$2.3b cash on balance sheet is equal to almost 90% of News Corp’s market cap. On top of that, NWS owns more than a dozen major me
Slide 15: Key Long Portfolio Position – Worley (WOR)
Key Long Portfolio Position – Worley (WOR) Worley is a leading global oil services company. It recently acquired the Energy, Chemicals & Resources For personal use only (“ECR”) division of U.S. peer Jacobs, resulting in a near-doubling of its revenue and earnings. WOR shares fell from around $19
Slide 16: Key Long Portfolio Position – Qantas (QAN)
Key Long Portfolio Position – Qantas (QAN) Qantas owns Australia’s dominant full service and low-cost airlines, and Australia’s most successful loyalty For personal use only program. Exceptional management team and board that has delivered for all stakeholders. Strong cashflows (8-10% free cas
Slide 17: Key Long Portfolio Position – Tempur Sealy (TPX)
Key Long Portfolio Position – Tempur Sealy (TPX) Tempur Sealy is the world’s largest bedding provider (NYSE listed - Market cap US$4.3b). For personal use only Outstanding management team that has invested heavily in product innovation, improved 3rd party distribution and physical store network.
Slide 18: Key Long Portfolio Position – Vivendi (VIV)
Key Long Portfolio Position – Vivendi (VIV) Vivendi (French Listed €30b market cap). For personal use only French music & media conglomerate - main asset is the world’s number 1 music label, Universal (UMG). UMG has 30% market share of global recorded music, which gives it enormous market powe
Slide 19: Appendices
For personal use only Appendices
Slide 20: Strong long-term performance across all L1 Capital Funds
Strong long-term performance across all L1 Capital Funds For personal use only ZENITH AWARD Launched Long Short Fund (Strategy) Long Short: Best ‘Australian Sep 2014 Equities – Alternative 19.7% net return p.a. since inception (5 years)1 Strategies’ 2017. 145.3% cumulative fund return versus 46.
Slide 21: Monthly Performance (Since Inception of Long Short Strategy)
Monthly Performance (Since Inception of Long Short Strategy) For personal use only In the table below, we show the full performance history (net of fees) of the L1 Long Short Strategy since inception on 1 September 2014. Long Short Strategy Performance (Net %) Period Jan Feb Mar Apr* May Jun Jul Aug
Slide 22: For personal use only
For personal use only AFSL 314 302 -6.0 2.0 10.0 -2.0 6.0 -10.0 -2.4 SEP-14 -5.4 3.0 OCT-14 4.4 NOV-14 2.8 -3.3 1.6 DEC-14 2.1 0.6 JAN-15 3.3 9.1 FEB-15 6.9 MAR-15 -0.1 2.4 APR-15 1.7 -1.7 MAY-15 3.7 -0.9 0.4 JUN-15 -5.3 3.3 JUL-15 4.4 2.1 AUG-15 -7.8 SEP-15 -3.0 5.5 OCT-15 8.5 4.4 8.1 NOV-15 -0.7 4
Slide 23: Downside Protection During Down Markets
Downside Protection During Down Markets (Since Inception of Long Short Strategy) For personal use only In the 24 months that the market fell, the Fund returned +23% (vs ASX200AI -60%) Long Short Fund (%) S&P/ASX200 Accumulation Index (%) 10.0 8.1 5.8 5.5 6.0 4.2 3.9 2.8 2.6 2.5 2.4 2.1 1.9 1.7 2.0 0
Slide 24: Positive Returns in Rising and Falling Markets
Positive Returns in Rising and Falling Markets (since inception for Strategy) For personal use only One of the only Long Short Funds in Australia to deliver positive returns in both rising and falling markets Performance in “Down Market” Months Performance in “Up Market” Months (Average of 24 months
Slide 25: Return Analysis (since inception for Strategy)
Return Analysis (since inception for Strategy) For personal use only Strong positive returns across all market caps, regions & position type Market Cap Region Position TOTAL TOTAL TOTAL 145.3% 145.3% 145.3% Over $1b 99.8% Australia 114.8% Long 127.6% Sub $1b 45.5% International 30.5% Short 17.7% The
Slide 26: Sector Contribution (since inception for Strategy)
Sector Contribution (since inception for Strategy) For personal use only Strong positive returns across every sector Materials 37.5% Industrials 30.5% Telco Services 20.3% Utilities 14.2% Energy 12.7% Consumer Disc 10.8% Consumer Staples 9.6% Div Financials 5.5% Health Care 5.5% REITs 4.1% Insurance
Slide 27: Investment Philosophy
Investment Philosophy For personal use only We hold 3 core beliefs: Valuation and qualitative factors are the key drivers of long term 01 share price performance. Both factors are critical and of equal importance. Markets tend to be emotional, short-term and backward looking. 02 Markets continually
Slide 28: Investment Philosophy
Investment Philosophy For personal use only Value (50%) + Quality (50%) = Investment appeal L1 Value Managers VALUE TARGET QUALITY Growth Managers Focus on valuation and PORTFOLIO Focused on earnings stocks that are “cheap”. growth and business quality. Risk: May buy a “value trap” (low quality Risk
Slide 29: Research Process
Research Process For personal use only We invest in high quality businesses trading well below their valuation: VALUE Valuation Upside / Downside 50% DCF, Historical & Peer Multiples, Sum of Parts to share price Management Broad evaluation of entire organization – not just CEO/CFO Senior manag
Slide 30: Shorting
Shorting For personal use only The ideal short Overvalued Poor management, industry structure and operating trends Weak balance sheet Three critical differences for a short (versus a long) 1. Requires a negative catalyst to change the market’s assessment of the stock – Earnings downgrade, capi
Slide 31: Contact
Contact For personal use only Investor Relations Wayne Murray Phone + 61 3 9286 7008 Email [email protected] AFSL 314 302 L1 Long Short Fund Limited 31
Slide 32: Legal Disclaimer
Legal Disclaimer For personal use only Information contained in this presentation The opinions, advice, recommendations and other information contained in this publication, whether express or implied, are published or made by L1 Capital Pty Ltd (ABN 21 125 378 145), Australian Financial Services Lic
Slide 33: For personal use only
For personal use only ABN 21 125 378 145 | AFSL 314 302 Level 28, 101 Collins Street Melbourne Victoria 3000 Australia Phone +61 3 9286 7000 Fax +61 3 9286 7099 Web L1.com.au
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