MUNROGLOBALGROWTHFUNDSEPTEMBERQUARTER2017
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DisclaimerNeitherMunroAssetManagementLimited,MunroInvestmentHoldingsPtyLtd,MunroPartners(together“Munro”)norGrantSamuel FundsManagementPtyLtd(GSFM)AFSL317587areprovidinganygeneraladviceorpersonaladviceregardinganypotentialinvestmentinanyfinancialproductswithinthemeaningofsection766Bofthe CorporationsAct.
MunroAssetManagementLimitedistheholderofanAustralianFinancialServicesLicence(AFSL)number480509.OurFinancialServicesGuidecanbelocatedonourwebsite:www.munropartners.com.au.Thispresentationisnotanadvertisementandisnotintendedforpublicuseordistribution.Assuch,itisnottobereleasedor madeavailabletoanyotherparty,exceptingGrantSamuelFundsManagementPtyLtd(GSFM)AFSL317587orusedforanyotherpurpose.GrantSamuelFundsManagementPtyLimitedABN14125715004AFSL317587(‘GSFM’)hasadistributionarrangementwithMunrotorepresenttheirproductsintheAustraliaandNewZealandmarkets.
Munrohasissuedaproductdisclosurestatement(PDS)on1March2017offeringinvestorsanopportunitytosubscribeforunitsintheMunroGlobalGrowthFund(Fund).IfyouwouldliketoreceiveacopyofthePDS,thenpleasecontactMunroon(03) [email protected] andMunrowillarrangeforacopyofthePDStobeforwardedtoyou. Alternatively,acopyofthePDSfortheFundisavailableonourwebsitewww.munropartners.com.au/access.AllprospectiveinvestorsshouldconsiderthecontentsofthePDSinfullpriortomakingadecisionregardinganinvestmentintheFund.
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Itcontainsselectedinformationanddoesnotpurporttobeall-inclusiveortocontainalloftheinformationthatmayberelevant.TheinformationcontainedinthePresentationhasnotbeenindependentlyverified,norhavetheyconductedanyduediligenceinrespectoftheinformationprovided.ItshouldbenotedthatanyprojectionsorpastperformanceareprovidedforgeneralreferencepurposesandarebasedonassumptionsrelatingtothegeneraleconomyandotherfactorsbeyondthecontrolofMunro.ReturnsoftheMunroGlobalGrowth Fundarenetofapplicablefees,costsandtaxes.Pastperformanceisnotareliableindicatoroffutureperformance.TheMSCIACWorldTRIndex(AUD)referstotheMSCIAllCountryWorldNetIndexinAustraliandollars.TheTop5Holdingsdepictendofmonthfiguresandmayhavechangedmateriallyfromholdingsduringthemonthornotdisclosedduetoconfidentialityreasons.Numbersmaynotsumduetorounding,compoundingreturnsorGSTandRITC.PleasealsoseeourFinancialServicesGuide,PrivacyPolicyandTermsofUseviawww.munropartners.com.au/legals/.
TherecipientrepresentstoMunrothatitiscapableofmakingitsownindependentassessmentastothevalidityandaccuracy of thefinancialassumptions,data,results,calculationsandforecastscontained,presentedorreferredtointhePresentation,andtheeconomic,financial,regulatory,legal,taxationandaccountingimplicationsofsuch.TherecipientfurtherrepresentstotheMunrothatitisnotrelyingonanyrecommendationorstatementbyMunro.Therecipientacknowledgesthatnoindependentthird-partyauditorreviewhasbeenobtainedbyMunroorhasbeenundertakenbysuchanindependentthirdpartyofthefinancialassumptions,data,results,calculationsandforecastscontained,presentedorreferredtointhePresentation.
ThisPresentationmaycontainforward-lookingstatements,forecasts,historicalperformance,estimates,projectionsandopinions ("ForwardStatements").NorepresentationismadeorwillbemadethatanyForwardStatementswillbeachievedoriscorrect.ActualfutureresultsandoperationscouldvarymateriallyfromtheForwardStatements.SimilarlynorepresentationisgiventhattheassumptionsdisclosedinthisPresentationuponwhichForwardStatementsmaybebasedarereasonable.Therecipientacknowledgesthatcircumstancesmaychange andthecontentsofthisPresentationmaybecomeoutdatedasaresult.
CONTENTSMUNROPARTNERSBUSINESSUPDATE 4
MGGFPERFORMANCEANALYSIS 5
MGGFEXPOSURE&MARKETOUTLOOK 10
KEYINVESTMENTTHEME:INTELLIGENTINDUSTRY(LONG) 14
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MUNROPARTNERSBUSINESSUPDATEMunro Partners is excited to announce the inclusion of Jeremy Gibson to the investment team and our partnership with Grant Samuel Funds Management for Distribution and Business Support.
NickGriffin(CIO)
JamesTsinidis(PM)
KieranMoore(PM/Dealer)
JeremyGibson,CFA(PM)
RonaldCalvert(CEO)
JonSpensley(COO)
Business&Sales:GrantSamuelFunds
Management
Financialmarketsexperience 21 12 3 14 13 16
Previousexperience K2AssetManagement,DeutscheBank,CFS
K2AssetManagement,BellPotter,Zenith
PartnersK2AssetManagement Pictet AssetManagement
IlukaResources,EyeManagementPtyLtd,Ernst
&Young
EclipseFunds,SAITeysMcMahon,ANZ,
AXA,MerrillLynch
PrimeBroker Custodian Administrator Registry Auditor
Leadingserviceproviders
THEMUNROPARTNERSTEAM
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MGGFPERFORMANCEANALYSIS
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HANGSENGINDEX HANGSENGCHINAENTINDX
DOWJONESINDUS.AVG
SHANGHAISECOMPOSITE
S&P500INDEX STXE600€Pr NIKKEI225 FTSE100INDEX MSCILocal MGGFLocal
July1toSeptember302017(%)
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MGGFVS.MAJORMARKETINDICES- QUARTERLYLocalcurrencyreturnsofvariousglobalmarketsandthereturnoftheMSCIWorldACIndexinAUDnexttothereturnoftheMGGF inAUD.
=FXContribution
IndexReturn2.8%
FundReturn7.0%
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MGGFLONG/SHORTATTRIBUTION- QUARTERLYJuly1toSeptember30basispointattributionoftheMGGFbyinvestmentcategory.
Pastperformanceinformationgiveninthispresentationisgivenforillustrativepurposesonlyandshouldnotbereliedupon as (andisnot)anindicationoffutureperformance.
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LongEquities
ShortEquities
OptionHedging
FX
MunroGlobalGrowthFundAttribution(bps)
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MGGFSTOCKANDREGIONATTRIBUTION- QUARTERLYJuly1toSeptember30basispointattributionoftheMGGFbystockandbyregion.
Top5Performers Bps
BluePrism 117
ASML 81
MicronTechnology 70
AppliedMaterials 65
KidmanResources 59
Bottom5Performers Bps
Next -26
Netease -24
Middleby -18
Datalex -16
Swatch -16
Pastperformanceinformationgiveninthispresentationisgivenforillustrativepurposesonlyandshouldnotbereliedupon as (andisnot)anindicationoffutureperformance.
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RegionalPerformance(bps)
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Snapshot of Munro Global Growth Fund since inception – 30 September 2017
MGGFPERFORMANCESINCEINCEPTION
PerformanceSummaryasat30September2017 1MTH 3MTHS 6MTHS 1YR SINCEINCEPTION
SINCEINCEPTION(p.a.)
MUNROGLOBALGROWTHFUND(AUD) 1.7% 7.0% 13.8% 18.0% 20.8% 17.6%
MSCIACWorldTRNetIndex(AUD) 3.0% 2.8% 6.6% 15.7% 16.0% 13.6%
OVER/UNDERPERFORMANCE -1.3% 4.2% 7.2% 2.3% 4.8% 4.0%
Pastperformanceinformationgiveninthispresentationisgivenforillustrativepurposesonlyandshouldnotbereliedupon as (andisnot)anindicationoffutureperformance.
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FUNDEXPOSURE&MARKETOUTLOOK
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GLOBALMARKETOUTLOOKTheMunroGlobalGrowthFundhasincreasedbothnetandgrossexposuretoahighlevelinanticipationofstrongQ3reporting.
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Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17
NetExposure(trailing10dayaverage) GrossExposure(trailing10dayaverage)
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GLOBALMARKETOUTLOOKEarningsgrowthhascontinuedtoinflectpositivelyandlookslikelytocontinueinto2018,whilevaluationsremainreasonableversuscurrentinterestrates.
Source:BloombergConsensusData
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S&P500IndexForwardValuation(RHS)andEPS(LHS)
S&P500FwdEPS(LHS) S&P500FwdP/E(RHS)
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MGGFCURRENTEXPOSURESnapshot of Munro Global Growth Fund – as at 30 September 2017
GrossSectorExposureandCashasat30September2017
InformationTechnology,53.2%
Industrials,14.4%
ConsumerDiscretionary,25.3%
Financials,2.8%
ConsumerStaples,1.8%
RealEstate,2.1%Cash,10.8%
Materials,3.3% Options,0.2%
CurrencyRegion GrossExposure NetExposure Currency
Exposure
Australia 1.4% 1.4% 70.1%
NorthAmerica 66.2% 62.6% 28.3%
UnitedKingdom 4.3% 4.3% -0.5%
EuroArea 19.2% 13.5% 1.5%
Ireland 5.3% 5.3%
France 1.9% 1.9%
Italy 1.9% 1.9%
Germany 4.6% 1.9%
Spain 1.5% -1.5%
Netherlands 4.0% 4.0%
Taiwan 1.3% 1.3% 0.0%
Sweden 3.7% 1.8% 0.6%
Israel 1.9% 1.9% 0.0%
HongKong/China 2.5% 2.5% 0.1%
Switzerland 2.3% -0.3% -0.1%
EExxppoossuurree 110022..88%% 8899..00%% 110000..00%%
DeltaAdjustedExposure 110.6% 93.2%
Stock Country Sector Weight(%)
Amazon US ConsumerDisc. 4.4
BluePrism UK InfoTech. 4.3
Facebook US InfoTech. 4.3
ActivisionBlizzard US InfoTech. 4.0
ASMLHolding NE InfoTech. 4.0
Top5Holdingsasat30September2017
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CASESTUDY:INTELLIGENTINDUSTRY
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CASESTUDY1:INTELLIGENTINDUSTRYIntelligentIndustryisfocusedontheautomationandcomputationoftypicalindustrialfunctions.Thisincludesrobotics,warehouseautomation,machinevisiontechnologyandprocesscontrols.
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AsE-commercegrowstowards20%ofglobalretailpenetration,thereisanincreasingneedforwarehousesandfulfilmentcentres tobeheavilyautomatedtoimproveprocessingtimeandefficiency,andalsoreducecosts.Warehouseswillcontinuetoseethissecularincreaseinroboticautomationinvestment,as90%ofthefinal‘picks’arestilldonebyhand.Traditionalwarehousefunctionsasshownbelowarenowbeingautomatedwiththeuseofroboticsandsoftware.
WAREHOUSEAUTOMATION...WEAREINAFULLFILMENTARMSRACE
Source:CitibankResearch
AGV
WAREHOUSEAUTOMATIONSTORAGE
SYSTEMS
PALLETISINGSYSTEMS
CONVEYORSYSTEMS
PICKINGSYSTEMS
SUPPLYCHAINSOFTWARE
SORTINGSYSTEM
AmazonDistributionCentreToronto:https://www.youtube.com/watch?v=M5xvCGGDISk
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Drivenbyrobotics,warehouseautomationspendinghasincreasedsignificantlyinrecentyears.Globalroboticshasgrownover 15%p.a.since2010,andissettocontinuetogrow.TocompetewithcompaniessuchasAmazoninfulfilment,corporatesneedtoautomatetheirbackgroundfunctionsinordertoimprovefulfillmentspeedsandcosts.
WAREHOUSEAUTOMATION...WHOWINS?
Therearemanyglobalwarehouseautomationproviderswhichhaveconsolidatedoverrecentyearsleavinguswithonlytwopureplays.
Inrecentyearsweareseeingconsistentsolidgrowthinwarehousingequipmentunits,demonstratingashifttowardsautomatedwarehouseequipment.
Source:CitibankResearch
Others 23%
Jungheinrich 2%
Witron 2%
Grenzebach 2%
TGW 3% Swisslog 3%
FivesGroup 3%
Honeywell(Intelligrated) 4%
Beumer 4%
Mecalux 5%
Vanderlande 5%
Murata 6%
Kion(Dematic)11%
Schaefer 13%
Daifuku 14%
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KEYSTOCKIDEA:KION(LONG)Kion provides material handling solutions. The company offers forklifts, warehouse equipment and other industrial trucks. Through its acquisition of Dematic, the company has established itselfas a leader in warehouse automation.
KeyStock KionKeyDetails Market Cap:EUR9.6bn
Listed:GermanyRevenue2016:EUR5.6bn
Qualitative Tests Growth: ThemajorityofKion’s businessisthemanufactureandserviceofforklifts.Kion’s growthisbeingdrivenbyitssupplychainsolutionsbusiness,whichincludesanacquisitionofDematic.Dematic providesfactoryautomationsoftwareforlogisticsbusinessesandwarehousesandrepresentsjustunder30%ofrevenues.Thesupplychainsolutionsbusinesswilldrivetherevenuegrowthratehigherovertime.EconomicLeverage: ManagementhaveindicatedanadjustedEBITmargintargetof12%fortheoverallbusinessinthemediumterm.Thiscompareswitha9.6%marginin2016.ApositivemarginimprovementinQ22017hasgiveninvestorsconfidencethemargincanreachthistarget.Sustainability:Kion’s recentacquisitionplacesthecompanyinadominantpositioninregardstothegrowingtrendtowardsfactoryautomation.WiththeintegrationofDematic softwareandultimatelyprogressingtoautonomousdrivingforklifts,Kion isabletoofferthelogisticsmarketacompletesolutionforautomationimprovingefficiencyandloweringcosts.Control:ChinesecompanyWeichai Powerowns43%.CustomerPerception:CustomerperceptionispositiveandwillincreaseasDematic isabiggerfocusforthebusiness.
Quantitative Tests Earnings upside:GrowthinearningsistobedrivenbytheaccretivevalueoftheDematic acquisitionandalsocontinuedoperatingleverageasmanagementisabletoachievetheirEBITmargintarget.Multipleupside:Growthintoplineandmarginexpansionshouldenablemultipleexpansionabove20x.Kion hasre-ratedsincetheDematic acquisition,whichwebelievewillcontinuetooccur.Catalysts/Sizing:Earningsresults,accretiveM&A,furtherannouncementsregardingtheintegrationandapplicationofDematic.
Outcome Stockdiscovered:June2017tradingbelow70EUR.
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MUNROGLOBALGROWTHFUNDSeptemberquarterconclusion
Septemberquarterperformance:SeptemberwasagoodquarterfortheMunroGlobalGrowthFunddelivering+7.0%returnafterallfeesandexpensesversustheMSCIWorldACIndexinAUDat2.8%
Capital:Weremainpositivelydisposedtomarketsandhencemaintainareasonablyhighequityexposure.Earningsgrowthisimprovingandthislookslikelytocontinueinto2018baringanymajoreconomiccalamityorsharplyrisinginterestrates.
FX:WeseesomeupsidefortheUSDversustheAUD,butdonothaveastrongviewonothercurrenciesversustheAUD,consequently thefundremainspredominatelyhedgedbacktoAUD(70%)witha30%holdinginUSD.ImportantlyasanabsolutereturnfundtheMGGFisunlikelytofullyunhedge itscurrencyexposuresduetothepotentialforlargecapitallosses.
Stocks:Weremainconfidentintheearningsgrowthofourinvestmentsandweexpectsharepricestotrackearningsgrowthoverthelongerterm.Wecontinuetofindnewandexcitingareasofstructuralearningsgrowthatreasonablevaluationsamongstouruniverseandhenceremainconfidentofmeeting ourreturnobjectivesoverthemediumterm.