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PSG Equity Fund Update

PSG Equity Fund Update. Shaun le Roux June 2012. PSG Equity Fund – ten years, one manager. 4.47% p.a. out performance of the benchmark. 19.31%. Top Quartile performance since manager inception 4 out of 34 funds. 14.84%. Investment Process summarized. Structured process

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PSG Equity Fund Update

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  1. PSG Equity Fund Update Shaun le Roux June 2012

  2. PSG Equity Fund – ten years, one manager 4.47% p.a. out performance of the benchmark 19.31% Top Quartile performance since manager inception 4 out of 34 funds 14.84%

  3. Investment Process summarized Structured process (‘the 3 M’s”) Detailed analysis High conviction Buy List Portfolio

  4. How our process deals with risk

  5. Portfolio Segmentation Compounding Returns (CR) Mean reversion (MR) Long term holding. Value of growth in franchise Ruthless on valuation. High margin of safety Moat

  6. Crisis valuations versus Bubble valuations Woolies (PE) Anglos (PE)

  7. Current portfolio segmentation – PSG Equity

  8. Mean reverters: BHP, Anglo and Sasol. High margin of safety. Long investment horizon required.

  9. Compounders: Quality mid and small caps. Nampak, Brimstone, EOH.

  10. Offshore: 78% quality compounders: Tesco, Berkshire, Labcorp, eBay, Heineken. 22% mean-reverters: Alstom, ING, BP. very high margin of safety.

  11. Anglo – great opportunity for patient investors Valuation: trading at book value 7 x PE Cashflow: 9% FCF yield Low cost producer. Significant discount to value of assets Book value per share Price to book value

  12. BHP Billiton Book value per share Price to book value

  13. Sasol Book value per share Price to book value

  14. Steinhoff – misunderstood, great roadmap 80% of profits The Ikea model: 10-12% of a market. Benefit of scale: sourcing, distribution. List next year, then debt free. Significant property value. Economic situation provides great opportunity to grow the business.

  15. Steinhoff – misunderstood, great roadmap Diversified industrial assets. Unitrans is a good business. Earnings low in raw materials.

  16. Steinhoff – misunderstood, great roadmap Leverage group and Europe experience. Remodel consumer finance. Grow into Africa

  17. Steinhoff – misunderstood, great roadmap Exciting roadmap. Partner management. Trades at 8 times earnings. Property underpins value. Value discovery on listing? Lverage group and Europe experience. Remodel consumer finance. Grow into Africa

  18. Nampak – compounding an attractive dividend • Now a different company. • Focus on businesses with a sustainable competitive advantage. • Excellent management. • Africa is flying. • 5% dividend yield, growing double digits. Nampak dividend

  19. Heineken World’s best premium beer brand. Big market position in fastest growing markets (Africa, Latam, Asia). Buy at 12.9 times earnings (SAB 25 times).

  20. Material portfolio changes last 12 months: Removed from buy list: Reunert, Tiger Brands, MTN. Added to the buy list: Grindrod, Nampak. Offshore stocks added to the portfolio.

  21. Attribution* Very good breadth. Resources have materially detracted. Offshore has added. Underweight in quality large cap industrials has impacted relative performance. * Twelve months to end May 2012.

  22. Top ten holdings

  23. Salient fund features Relatively high concentration. Diversification: Resources (select) Mid and small cap quality Offshore quality

  24. The way forward • The Investment Process is: • structured • delivering high impact ideas • Leverage extended opportunity set: • Offshore • Smaller companies • Valuations of portfolio holdings are attractive.

  25. Consistent Conservative Contrarian Questions?

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