saf student-run investment fund team july 30, 2014 · 255 – 200 – 0 127 – 127 – 127 155 –...
TRANSCRIPT
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All figures shown in $CAD millions except share price or otherwise noted
Spring 2014 Advisory Board Presentation
SAF Student-Run Investment Fund Team
July 30, 2014
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Agenda
▲ Spring 2014 SAF Student-run Investment Fund Team
▲ New Initiatives
▲ Overview
▲ Macro and Sector Outlook
▲ Fund Performance
▲ Recommendations
▲ Partners and Industry Mentors
▲ Alumni Success Stories
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3
Spring 2014 SAF Student-run Investment Fund Team
Team Picture
L-R (Front): Sean Zheng,
Kevin Yu, Rudder Zhang,
Adam Yan, Sophia Chen,
Derek Wan, Sean Bak,
Michael Wang
L-R (Middle): Taha Shayeq,
Tiffany Chung, Lynn Wu,
Shumiao Wang, Michael
Blake, David Chan, Eric
Sherifi, Arthur Chan,
Rebecca Yao, Oliver Chan,
William Ye
L-R (Back): Mobeen Malik,
Alan Cheung, Ben Krever,
Jason Chen, Hasanain
Habib-Nayany, Bojan
Joncevski, Wendy Cai,
Rocken Wong, Henry Yu
Spring 2012
Inception
Fall 2012
Winter 2013
Spring 2013 New Team Structure
Fall 2013 Course Credit Enter into U.S.
Winter 2014
Spring 2014 New Analyst
Program
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4
Overview – Current Team Structure
Derek Wan Bojan Joncevski Rudder Zhang Tiffany Chung
Rebecca Yao
David Chan
Sophia Chen
Alan Cheung
Michael Blake
Arthur Chan
Kevin Yu
Rocken Wong
William Ye
Sean Bak
Mobeen Malik
Sean Zheng
Lynn Wu
Shumiao Wang
Henry Yu
Wendy Cai
Jason Chen
Consumer Healthcare Energy TMT
Materials &
Consumer
Industrials &
Healthcare Energy & Utilities Financials & TMT
Andrew Ecclestone: Financials, Healthcare, & Materials
Craig Geoffrey: TMT, Energy, & Utilities
Ranjini Jha: Consumer & Industrials
Faculty
Michael Wang
Macro & All Sectors
Hasanain Habib-
Nayany
Eric Sherifi
N/A Benjamin Krever
Adam Yan
Taha Shayeq
Oliver Chan
Materials Industrials Utilities Financials
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5
Current Initiatives
Communication to Stakeholders
Learning and Growth
Annual Report
(2013-2014 is in
progress)
Report to
Industry
Mentors
Advisory Board
Presentation
Meet and Greet
with Industry
Mentors
Investment
Boot Camp
Guest
Speakers
Weekly
Meetings
with Faculty
Bloomberg /
Capital IQ
Training
Sessions
SAF Student-
run
Investment
Fund Panel
Presentation to
Representatives
from Fairfax
Financial
The Stacey-
Muirhead
AGM
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6
Overview – The Fund
1 The weight will change depending on the portfolio allocation for the
period
Purpose
Objective
“To provide students with an investment management
experience in an institutional setting. Specifically, it will provide
students hands-on-training in equity valuation and portfolio
management with guidance from industry experts and with
supervision by finance faculty.”
“To generate long-term growth of the Fund’s assets. The Fund
will invest in a broadly diversified portfolio of Canadian and US
equities that may provide capital gains and/or income.”
Benchmark 50% S&P/TSX Total Return Index and 50% S&P 500 Total
Return Index1
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7
Overview – Investment Philosophy
1 Trading on TSX, NYSE, or NASDAQ
2 S&P rating of B or greater
Restrictions Constraints
Asset Class Canadian & U.S.
Equities1
Market Capitalization Above $300 mm
Debt Rating Greater than B2
Cash & Equiv Weight 0-15%
Total Securities 10-25
Sector Weight
Maximum 25%
Stock Weight
Maximum 10%
U.S. Weight Maximum 50%
Ownership of Shares
Less than 5% of
average daily
trading volume
over 10-day
period
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Overview – Selling Discipline
Fundamental
Price
Movement
Material change in the business or in the industry
Exceed 25% capital gain from the time of purchase
or
Exceed 15% capital loss from the time of purchase
or
Exceed 25% decline in price from the highest price attained since
initial purchase
Valuation Reached 12-month target price
We will review our holdings if…
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Overview – Investment Process
• Break down industries and further divide into sectors or sub-sectors
• Remove any stocks within the universe that do not meet the Fund’s restrictions
• Select and apply relevant industry metrics for each stock
• Rank all stocks and select the top four
• Select one stock within the top four and conduct detailed research to determine the recommendation (“Buy”, “Sell”, or “Hold”)
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Macro and Sector Outlook
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11
Macro Outlook
Key Themes
Sectors
Stable Political
Environment
Fairly Strong
Economic Growth
Canada
Dynamic Political
Environment
Fairly Strong
Economic Growth
U.S.
Emerging Markets
Turmoil in Ukraine
Conflicts in Syria, Gaza
and Iraq
Other
Healthcare
TMT
Consumer
Overweight
Financials
Energy
Utilities
Neutral
Materials
Industrials
Underweight
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12
Industry Outlook: Utilities & Energy
▲ Energy: balance between upward and
downward pressures on oil prices & trends
in the industry, we have a neutral view on
the energy sector
Savings Rate Energy: Current Trends
U.S Oil Exports
Revert back
to core/prune
assets
Russia/
Ukraine Crisis
Sluggish
economic
growth =
lower demand
Capacity constraints
0
50
100
150
200
250
300
Jun-0
8
Oct-
08
Feb
-09
Jun-0
9
Oct-
09
Feb
-10
Jun-1
0
Oct-
10
Feb
-11
Jun-1
1
Oct-
11
Feb
-12
Jun-1
2
Oct-
12
Feb
-13
Jun-1
3
Oct-
13
Feb
-14
Unemployment & Participation Rates
Pipelines
▲ Utilities: cautious view on direction of
interest rates due to various pressures
and “uncharted territory”; continue to hold
utilities until uncertainty clears
64.5%
65.0%
65.5%
66.0%
66.5%
67.0%
67.5%
68.0%
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%
10.0%
Jan-0
0
No
v-0
0
Sep-0
1
Jul-0
2
Ma
y-0
3
Ma
r-0
4
Jan-0
5
No
v-0
5
Sep-0
6
Jul-0
7
Ma
y-0
8
Ma
r-0
9
Jan-1
0
No
v-1
0
Sep-1
1
Jul-1
2
Ma
y-1
3
Ma
r-1
4
Unemployment Rate
Participation Rate
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Q1 2000 Q1 2003 Q1 2006 Q1 2009 Q1 2012
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13
Industry Outlook: Financials & TMT
Interest Rates: Falling 30Y Treasury Cons. Electronics – Phablet Sales (mm)
Regulatory Environment Global Smartphone Market Share
▲ Technology Sector Themes:
IDC expects smartphone shipments = 1.2
billion for 2014 (+19.3% YoY)
Samsung, Apple, Huawei, Lenovo, LG
▲ Financial Sector Themes:
Uncertain interest rate outlook
Complex regulatory environment threatens
returns
2.5%
3.0%
3.5%
4.0%
Jul-13 Oct-13 Jan-14 Mar-14 Jun-14
US 30Y Cdn 30Y
▲ Basel, Dodd-Frank drive lower returns
▲ Healthcare Reform and Tort Reform have
drastically changed the relevant insurance
landscapes going forward
0
10
20
30
2013 Q1 13 Q2 13 Q3 13 Q4 2014 Q1
Samsung Other
30.2%
15.5%
4.9% 4.6% 4.4%
40.5%
SMSG APPL Huawei Lenovo LG Other
2013 Q1 2014 Q1
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-4%
0%
4%
8%
12%
Jan-14 Mar-14 May-14 Jul-14
14
Industry Overview: Consumer & Materials
Consumer Confidence 10Y Trend Base Metals and S&P 500
Global GDP and Consumer Staples Recovery in Gold
▲ Materials Sector Themes:
Sluggish base metal performance on
global growth and supply concerns
Precious metals finding short term support
▲ Consumer Sector Themes:
Rising consumer confidence driven by
wages is bolstering discretionary spending
Increasing GDP continues to drive staples
-50%
0%
50%
100%
150%
2009 2010 2011 2012 2013 2014
Base Metals S&P 500
40
60
80
100
$0
$200
$400
$600
2004 2007 2010 2013
Consumer Discretionary Consumer Confidence
-50%
0%
50%
100%
150%
2004 2007 2010 2013
Consumer Staples World GDP
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15
Industry Overview: Healthcare & Industrials
WTI Crude Oil Price
US Manufacturing PMI
▲ Industrials Sector Themes:
Upward pressure on oil prices due to
political unrest
Growing US manufacturing sector
Percent of US Population over 65
Affordable Care Act Enrolment by Age
▲ Healthcare Sector Themes:
Aging Population
Affordable Care Act rolled out in 2014
11.0%
12.0%
13.0%
14.0%
15.0%
2003 2005 2007 2009 2011 2013
6%
11%
17%
17% 23%
26%
<18
18-25
26-34
35-44
45-54
55-64
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Fund Performance
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Portfolio Returns Since Inception
• Includes 2.8% dividend yield
All figures are C$ basis
Net Asset Value
13.97
Fund NAV NAV Return TRI Benchmark Relative Return Avg. Cash % of Portfolio
Spring ’12 9.98 -0.16% 2.65% -2.81% 75.10%
Fall ’12 10.17 1.86% 5.21% -3.35% 44.99%
Winter ’13 10.33 1.62% 1.20% 0.42% 25.74%
Spring ’13 10.54 2.01% 2.63% -0.62% 15.22%
Fall ’13 11.53 9.33% 8.79% 0.54% 14.40%
Winter ’14 12.26 4.78% 5.31% -1.80% 31.41%
Spring ’14 12.55 3.89% 8.72% -5.03% 44.42%
Since Inception 12.55 25.46%* 39.70% -14.24% 35.90%
Total Returns
9.90
10.40
10.90
11.40
11.90
12.40
12.90
13.40
Fund NAV 85% S&P TSX and 15% S&P500 TRI from Jan 2014 - C$ return
12.55
17
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Portfolio Characteristics
All figures are C$ basis
Average Portfolio Return 0.96%
Portfolio Standard Deviation 1.63%
Average Benchmark Return 1.42%
Benchmark Standard Deviation 1.93%
Portfolio Beta 0.68
Portfolio Alpha 0.21%
Sharpe Ratio 0.42
All returns are listed on a monthly basis
Historical
Looking Forward
Weighted Average Beta 1.05
18
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19
Security and Sector Returns (Winter 2014)
All figures are C$ basis
Security Returns Sector Returns
-10% 0% 10% 20%
Consumer Discretionary
Consumer Staples
Energy
Financials
Healthcare
Industrials
Materials
TMT
Utilities
All Sectors
Benchmark Return SIF Fund Total Return
-20% -10% 0% 10% 20%
TSX: AGU
NYSE: ALK
TSX: AX.UN
TSX: BNS
TSX: BDI
TSX: CCO
TSX: CPX
TSX: CCA
TSX: D.UN
TSX: FTS
TSX: GIL
TSX: G
TSX: NA
NYSE: PRA
TSX: SU
Capital Return Dividend Return
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20
Sector Attribution (Winter 2014)
All figures are C$ basis
Sector
Consumer
Discr.
Consumer
Staples Energy Financials
Health
Care Industrials Materials
Tech &
Telecom Utilities All Sectors
Weighting 7.61% 0.00% 10.58% 30.29% 0.00% 15.70% 19.16% 6.36% 10.30% 100.00
%
Apr 1, 2014 Value 7,216 0 10,039 28,737 0 14,897 18,181 6,038 9,768 94,875
Jul 25, 2014 Value 8,512 0 11,814 30,221 0 13,992 17,421 6,402 10,207 98,570
Portfolio Return (%) 17.96% 0.00% 17.69% 5.16% 0.00% -6.07% -4.18% 6.03% 4.49% 3.89%
Benchmark Weighting 7.17% 4.85% 23.70% 30.79% 4.46% 7.65% 10.16% 8.66% 2.57% 100.00
%
Benchmark Return (%) 2.71% 7.27% 10.10% 6.91% -6.07% 10.75% 7.69% 1.64% 0.27% 6.55%
Difference 15.25% -7.27% 7.59% -1.74% 6.07% -16.82% -11.87% 4.40% 4.22% -2.65%
Pure Sector Allocation -0.02% -0.03% -0.47% 0.00% 0.56% 0.34% 0.10% 0.11% -0.48% 0.11%
Allocation Selection 0.07% 0.35% -1.00% 0.01% -0.27% -1.35% -1.07% -0.10% 0.33% -3.04%
Within Sector Selection 1.09% -0.35% 1.80% -0.54% 0.27% -1.29% -1.21% 0.38% 0.11% 0.27%
Value Added Return 1.14% -0.03% 0.34% -0.53% 0.56% -2.30% -2.17% 0.39% -0.05% -2.65%
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Portfolio Breakdown July 25, 2014
All figures are C$ basis
Note: According to the Fund SIPP, portfolio
weighting in any one security should be no greater
than 10%.
Ticker Name Value (in $CAD)
TSX: SU Suncor Energy 11,848.20
NasdaqGS: MYGN Myriad Genetics 10,635.20
TSX: BNS Scotiabank 9,117.72
TSX: GIL Gildan Activewear 8,626.80
TSX: BDI Black Diamond 7,724.48
TSX: G Goldcorp 7,322.40
TSX: CCA Cogeco 6,355.65
TSX: AX.UN Artis REIT 5,547.50
Nasdaq: SAFM Sanderson Farms 5,486.45
NYSE: VSI Vitamin Shoppe 5,256.04
NasdaqGS: OLED Universal Display 5,306.56
TSX: D.UN Dream Office REIT 5,281.20
TSX: CPX Capital Power 5,150.00
TSX: NA National Bank 5,230.44
NYSE: PRA Proassurance 5,069.03
TSX: RRX Raging River 4,900.00
TSX: FTS Fortis 4,944.00
TSX: AGU Agrium 4,980.50
Market Value 118,782.18
Cash & Fixed Income Securities 58,219.75
Portfolio Value 177,001.93
SU 10%
MYGN 9%
BNS 8%
GIL 7%
BDI 7%
G 6% CCA
5%
AX.UN 5%
SAFM 5%
VSI 5%
OLED 5%
D.UN 4%
CPX 4%
NA 4%
PRA 4%
RRX 4%
FTS 4%
AGU 4%
21
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Portfolio Breakdown July 25, 2014 Cont’d
All figures are C$ basis
CDN 73.3%
US 26.7%
Small Cap 24.2%
Mid Cap 43.4%
Large Cap 32.4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
ConsumerDiscretionary
ConsumerStaples
Energy Financials Healthcare Industrials TMT Materials Utilities
SIF S&P 500 S&P/TSX
Consumer Discretionary
11.7%
Consumer Staples
4.6%
Energy 14.1%
Financials 25.5%
Healthcare 9.0%
Industrials 6.5%
TMT 9.8%
Materials 10.4%
Utilities 8.5%
22
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228 – 108 – 10
Buy Recommendations
255 – 200 – 0
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0 – 70 – 130
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134 – 170 – 109
148 – 138 – 84
228 – 108 – 10 Valuation
Company Overview
Universal Display Corp (NASDAQ:OLED)
▲ Patented technology (PHOLED)
▲ Key customer relationships (Samsung, LG)
▲ Patent pipeline
Share Performance
Drivers & Risks
Drivers
Risks
▲ Revenue dependency on critical customers
▲ Technology obsolescence
▲ Patent expiration
R&D and commercialize OLED tech and materials
Market Data Revenue by Segment
Share Price
EV (mm)
P/E
EV/EBITDA
ROE
Div Yield
D/E
Debt Rating
Beta
$29.96
$1,126
16.9x
17.3x
21.4%
0.0%
0.0%
NR
1.53
DCF
WACC
Revenue CAGR (2014 – 2019)
Historical CAGR (2011 – 2013)
EV/EBITDA Multiple
12.25%
33%
55%
18.5x
Target Share Price
Weighting
Current Price
Upside
$38.31
100%
$29.96
27.9%
Tech Development
3%
Materials
65%
Royalty
& License
32%
(30%)
(10%)
10%
30%
Jul-2013 Nov-2013 Mar-2014 Jul-2014
Universal Display iShares U.S. Tech
$34.18 $42.57
24
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155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10 NAV Comps
WACC
Decline Rate
WTI Range
NAV Multiple
10.0%
38.0%
$92.0 - $100.0
1.0x
N.A.
Share Price
Weighting
Target Price
Current Price
Upside
$11.24
80%
$11.75
$9.87
19.0%
$13.32
20%
Oil 96%
N. Gas 4%
Share Price
EV (mm)
P/E
EV/EBITDA
ROE
P/3P NAV
D/E
Debt Rating
Beta
$9.87
$1,813
28.6x
12.5x
18.4%
0.88x
16%
NR
1.20
Valuation
Company Overview
Raging River Exploration (TSX:RRX)
▲ Management team
▲ Pure-play on light oil
▲ Operating efficiencies (vertical waterflooding)
Share Performance
Drivers & Risks
Drivers
Risks
▲ Shareholders cashing out
▲ Volatility
▲ Reliance on WTI
Junior E&P in Southwest Saskatchewan
Market Data Revenue by Segment
-25%
15%
55%
95%
135%
Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Raging River Dow Jones Junior Oil Index
$9.34 $12.81
25
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127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10 Valuation
Company Overview
Myriad Genetics (NYSE:MYGN)
▲ Market growth in Molecular Diagnostics
▲ Product mix transition to new segments and
products
Share Performance
Drivers & Risks
Drivers
Risks
▲ Change in technology
▲ Insurer reimbursement risk
▲ Competitive landscape going forward
Market Leader in Molecular Diagnostics
Market Data Revenue by Segment
Share Price
EV (mm)
P/E
EV/EBITDA
ROE
Div. Yield
D/E
Debt Rating
Beta
$35.93
$2557.8
15.7x
8.2x
21.6%
0.0%
0.0%
NR
0.78
DCF
WACC
Revenue CAGR
EV/EBITDA Multiple
8.0%
11-13%
9.6x
Share Price
Weighting
Target Price
Current Price
Upside
$45.15
100%
$45.15
$35.93
25.6%
Molecular
Diagnostics
Companion
Diagnostic
5%
(35%)
(15%)
5%
25%
45%
Aug-13 Nov-13 Feb-14 May-14
Myriad Genetics S&P500 Healthcare Index
$38.74 $54.82
26
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155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
26%
36%
28%
10%
Vitamins Sports
Supplements Other
-30%
-5%
20%
45%
70%
Jul-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14
VSI Return Sector Return
Valuation
Company Overview
Vitamin Shoppe (NYSE:VSI)
▲ Positive long-term industry outlook
▲ Advantage in price, selection, and service
▲ Strong growth potential through acquisitions
Share Performance
Drivers & Risks
Drivers
Risks
▲ Fragmented industry with high competition
▲ Lack of government regulation
▲ Acquisition integration and store maturity
Specialty retailer of nutritional products in the U.S.
Market Data Revenue by Segment
Share Price
EV (mm)
P/E
EV/EBITDA
ROE
Div. Yield
D/E
Debt Rating
Beta
$42.69
$1,181.1
19.6x
8.3x
13.6%
2.5%
0.0%
BB
1.06
DCF Comps
WACC
Revenue CAGR
EV/EBITDA Multiple
8.9%
4.4%
8.7x
9.6x
Share Price
Weighting
Target Price
Current Price
Upside
$58.38
70%
$55.42
$46.11
20.2%
$48.50
30%
$39.62 $77.21
27
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0 – 70 – 130
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134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
37%
35%
13%
15%
Vacuum Seal Chill Pack
Ice Pack Other
DCF Comps
WACC
Revenue CAGR
EV/EBITDA Multiple
5.2%
5.1%
7.3x
8.1x
Share Price
Weighting
Target Price
Current Price
Upside
$112.23
70%
$112.22
$101.60
10.5%
$112.19
30%
-20%
20%
60%
100%
140%
Jul-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14
SAFM Return Sector Return
Valuation
Company Overview
Sanderson Farms (NASDAQ:SAFM)
▲ Added capacity from new facility additions
▲ Higher demand for chicken over other meats
▲ Discussion of poultry modernization act
Share Performance
Drivers & Risks
Drivers
Risks
▲ Changes to trade laws hampering exports
▲ High crop prices causing margin compression
▲ Industry cyclicality leading to cash flow volatility
Poultry processor specializing in big bird deboning
Market Data Revenue by Segment
Share Price
EV (mm)
P/E
EV/EBITDA
ROE
Div. Yield
D/E
Debt Rating
Beta
$101.60
$2,295.6
17.9x
8.6x
21.4%
0.8%
4.0%
NR
0.46
$93.48 $139.10
28
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
Sell Recommendations
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
Stock Performance
Cameco Corporation (TSX:CCO)
Portfolio Data
Sell Rationale Events
Original Value
Market Value
Capital Gains
Div. Yield
$4,998.0
$5,371.7
7.5%
1.8%
Market Data
EV (mm)
EV/EBITDA
D/E
Debt Rating
Beta
$9,800.4
6.1x
24.5%
BBB+
1.28
A
B
C
D
Oversupply in market keeping uranium prices
depressed in the short-term.
CRA dispute to limit upside in the short-term with a
10-15% loss in value if the appeal is rejected.
Change in sovereign energy policies of major
uranium consumers weakens long-term prospects.
-30%
-20%
-10%
0%
10%
Mar-14 Apr-14 May-14 May-14 Jun-14 Jul-14
CCO Return Sector Return
A
3/27/2014 – Completed sale of interest in
Bruce Power for $450 mm.
7/16/2014 – Further production delays
announced at Cigar Lake.
D
4/29/2014 – Announced Q1 results marginally
missing analyst expectations
B C
5/17/2014 – Halted permitting process for
Millennium project due to lack of demand
30
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
EV (mm)
P/E
EV/EBITDA
Debt Rating
Beta
$5607.5
10.3x
5.4x
NR
1.22
-5%
0%
5%
10%
15%
20%
March-14 April-14 May-14 July-14
Alaska Air Group, Inc. (NYSE:ALK) - Share Pricing
S&P 500 Sector Indices - Industrials Sector Index (^SP500-20) - Index Value
Seattle-Tacoma Airport a significant risk going
forward with Delta ramping up capacity
Stock Performance
Alaska Air Group (NYSE: ALK)
Portfolio Data
Sell Rationale Events
Original Value
Market Value
Capital Gains
Div. Yield
$4772.5
$6324.5
32.5%
1.1%
Market Data
A
B
C
Risk of future earnings disappointment
Trading at discount to global carriers, but relatively
valued with other regional carriers
A
5/12/2014 – Announces share repurchase
program of $650mm
6/9/2014 – Launches seven destinations to
Salt Lake City
B C
7/24/2014 – Q2 2014 disappointment
31
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
Hold Recommendations
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
33
Hold
Please Refer to the Appendix Section for Details
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
“Working in a team not
only helps the
investment decision
process, it helps to
delve even deeper into
the business.”
“It is important to properly
understand the
fundamentals of the
business, and not be
influenced by short-term
market sentiment”
34
Lessons Learned
▲ The Fund has grown tremendously over the last 2 years
▲ Selected quotes from the Spring 2014 team members
“Understanding that
valuation is as much of an
art as it is a science”
“Many great
investment
decisions are made
from examining
multiple points of
views, rather than
the consensus
view” “Despite having well-
informed assumptions,
the valuation can be
wrong and it is
important to remain
unbiased and not
become emotionally
attached”
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
35
Partners
Craig Geoffrey Ranjini Jha Andrew
Ecclestone
John Gort,
Chair Jeffrey Stacey Thomas Scott Dennis Huber
Anish Chopra,
Past Chair Aazar Zafar
Faculty
Advisory Board
Dan Lavric Alan Douglas
Lynn Graham
Student Relations
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
36
Industry Mentors
Mike Williams Jin Li
Dan Lavric Lu Jiang
Niall Glynn Aly Hadibhai
Pawel Rajszel
Kevin Huynh
Simon Kwan
David
Middleton
Dorena Tu
Meng Wang
Ian Gutwinski Derek Chu
Ray Wan Michael Liu
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
37
Alumni Success Stories – Sample Co-op Placements
Analyst,
Investment
Banking
Division
Analyst,
Investment
Banking
Division
Analyst,
Investment
Banking
Division
Analyst,
Private Equity
Analyst,
Private Equity
Analyst, Public
Markets
Analyst,
Investment
Banking
Division
Analyst,
Structured
Products
Analyst,
Investment
Banking
Division
Associate,
Equity
Research
Analyst,
Alternative
Assets
Analyst,
Private Equity
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
38
Alumni Success Stories – Sample Full-Time Placements
Ian Gutwinski
• CIBC, IB Analyst (2013)
• Onex, Associate (2014)
Huazhao Zhu
• TD, Senior Treasury Analyst (2013)
Mo Du
• Ross Smith Associates, Investment Analyst (2013)
Rosa Han
• Veritas, Research, Associate (2013)
Prasanth Pahirathan
• Manulife Bank, Analyst (2013)
Catherine Zheng
• CAPREIT, Corporate Analyst (2013)
Michael Liu
• CIBC, IB Analyst (2014)
Sunny Guo
• UBS, Trading (2014)
Michael Wang
• CIBC, IB Analyst (2014)
Anqi Wang
• CIBC, IB Analyst (2014)
Linda Teng
• Morgan Stanley, Research (2014)
Nitish Sharma
• Oliver Wyman, Consultant (2014)
Dustin Fader
• RBC Capital Markets, Analyst (2014)
Jing Xu
• CPPIB, Public Markets Analyst (2014)
Joanne Toporowski
• J.P. Morgan, IB Analyst (2014)
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
39
Additional Questions?
The School of Accounting and Finance Student-run Investment Fund
https://uwaterloo.ca/school-of-accounting-and-finance/services/services-resources/professional-
development/school-accounting-and-finance-student-run-investment-fund
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
Appendix
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
41
5 Year Correlation Analysis
VSI MYGN OLED SAFM AGU AX-U BNS BDI CPX CCA D-U FTS GIL G NA PRA SU
VSI 100%
MYGN 19% 100%
OLED 27% 11% 100%
SAFM 17% 15% 5% 100%
AGU 22% 31% 37% 2% 100%
AX-U 20% 20% 26% 5% 29% 100%
BNS 20% 18% 21% 28% 35% 37% 100%
BDI 19% 21% 21% 14% 22% 23% 23% 100%
CPX 17% 12% 21% 3% 22% 32% 31% 15% 100%
CCA 7% 5% -2% 12% 2% 15% 14% 3% 8% 100%
D-U 16% 11% 28% 15% 24% 47% 22% 18% 27% 20% 100%
FTS 23% 23% 25% 9% 32% 46% 45% 23% 33% 16% 29% 100%
GIL 17% 5% 18% 9% 18% 20% 22% -1% 14% -1% 12% 16% 100%
G 6% 8% 19% 1% 23% -3% 18% 9% 10% -1% 3% 8% 3% 100%
NA 25% 23% 21% 19% 40% 36% 64% 29% 31% 15% 23% 46% 23% 8% 100%
PRA 35% 32% 22% 20% 29% 16% 28% 18% 14% 7% 23% 27% 15% 9% 32% 100%
SU 32% 23% 39% 9% 52% 24% 43% 33% 27% 5% 18% 42% 14% 35% 42% 35% 100%
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
42
Worldwide Smartphone Vendor Market Share
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
OLED – Uses of OLED
Display Panel Industry Lighting Industry
Signage Backlighting General
Architectural Design
Mobile Devices Tablets
TVs
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
OLED – Outlook and Customer Relationships
Display Panel Industry Lighting Industry
Outlook
Samsung’s rise
in production
Movement to
mid-tier devices
Flexibles /
Wearables, TVs
Relationship with Samsung
1. Patent license agreement with Samsung for its manufacture and
sale of AMOLED display products until Dec. 31, 2017
2. Also supply the proprietary PHOLED materials to SDC for its use
in manufacturing licensed products
Samsung Galaxy Note
Samsung Galaxy Note II
Samsung Galaxy Note III
Samsung Galaxy Note IV
Samsung Galaxy Tab 7.7
Samsung Galaxy Tab S 8.4
Samsung Galaxy Tab S 10.5
Samsung Galaxy S
Samsung Galaxy S II
Samsung Galaxy S III
Samsung Galaxy S IV
Samsung Galaxy S IV Mini
Samsung Galaxy S V
Samsung Galaxy Nexus
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
45
OLED – Valuation Support
Revenue Forecasts Assumptions
$0
$100
$200
$300
$400
$500
$600
11 12 13 14E 15E 16E 17E 18E
Bull Bear Base
Material Sales Growth 80% 50% 65%
Royalty and License Fees Growth 40% 20% 30%
Research Funding Growth 5% 0% 1%
Cost of Material Sales 30% 30% 30%
Royalty and License Exp 3% 3% 3%
R&D Expenditure 30% 30% 30%
SG&A 17% 17% 17%
Patent Costs 12% 12% 12%
AR Days 39 39 39
AP Days 60 60 60
Inventory Days 150 150 150
CAPEX (% of Sales) 3% 3% 3%
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
16.5x
17.5x
18.5x
19.5x
20.5x
$33.00
$37.00
$41.00
$45.00
11.2%11.7%
12.2%12.7%
13.2%
6.8% - 15.6%
15.6% - 28.1%
28.1% - 32.8%
46
OLED – Sensitivity Analysis
##### 16.5x 17.5x 18.5x 19.5x 20.5x
11.2% 35.94$ 37.59$ 39.25$ 40.91$ 42.57$
11.7% 35.48$ 37.12$ 38.75$ 40.38$ 42.01$
12.2% 35.04$ 36.65$ 38.25$ 39.86$ 41.47$
12.7% 34.60$ 36.19$ 37.77$ 39.35$ 40.93$
13.2% 34.18$ 35.74$ 37.29$ 38.85$ 40.41$
Exit Multiple
WA
CC
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
47
VSI Valuation Assumptions
Assumption Pessimistic Base Optimistic
Store Openings 8.0% 9.0% 9.5%
SSS Growth 2% 3% 4%
Gross Margin 41% 43% 45%
SG&A Margin 36% 47% 55%
Capex % of Rev 4.0% 3.5% 3.0%
AR Days 136.2 141.2 146.2
Inventory Days 3.6 3.7 3.8
AP Days 17.7 15.7 12.7
Price - Multiple $39.00 $58.38 $78.83
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
48
SAFM Valuation Assumptions
Assumption Pessimistic Base Optimistic
Pounds Processed 4.6% 5.1% 5.6%
Chicken Price 0.86 0.91 0.96
Gross Margin 12.7% 13.2% 13.7%
SG&A Margin 8.2% 8.9% 9.6%
Capex % of Rev 2.5% 2.0% 1.5%
AR Days 13.8 15.4 16.9
Inventory Days 30.4 33.8 37.2
AP Days 14.6 11.0 7.3
Price - Multiple $93.48 $112.23 $139.10
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
49
MYGN – Sensitivity
Base
Case
Upside
Case
Downside
Case
WACC WACC
#### 7.0% 7.5% 8.0% 8.5% 9.0%
8.6x $41.44 $41.46 $41.48 $41.49 $41.51
9.1x $43.27 $43.29 $43.31 $43.33 $43.35
9.6x $45.11 $45.13 $45.14 $45.16 $45.18
10.1x $46.94 $46.96 $46.98 $47.00 $47.02
10.6x $48.78 $48.80 $48.81 $48.83 $48.85Exit M
ultip
le
WACC WACC
#### 7.0% 7.5% 8.0% 8.5% 9.0%
8.6x $50.22 $50.25 $50.27 $50.29 $50.32
9.1x $52.50 $52.52 $52.54 $52.57 $52.59
9.6x $54.77 $54.79 $54.82 $54.84 $54.86
10.1x $57.05 $57.07 $57.09 $57.11 $57.14
10.6x $59.32 $59.34 $59.37 $59.39 $59.41Exit M
ultip
le
WACC WACC
#### 7.0% 7.5% 8.0% 8.5% 9.0%
8.6x $35.62 $35.64 $35.65 $35.67 $35.68
9.1x $37.16 $37.18 $37.20 $37.21 $37.23
9.6x $38.71 $38.72 $38.74 $38.75 $38.77
10.1x $40.25 $40.27 $40.28 $40.30 $40.31
10.6x $41.80 $41.81 $41.83 $41.84 $41.86Exit M
ultip
le
Top Line Assumptions Top Line Sensitivity
▲ Revenues growing at lower
end of expected market growth
rate (9%)
▲ Competitive positioning (brand
power, physician and insurer
relationship) sustained
▲ Revenues growing at higher
end of expected market growth
rate (11%)
▲ Better-than-expected traction
of new products
▲ Revenues growing at lower
than expected market growth
due to increased competition
(7%)
▲ Deteriorating competitive
positioning
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
MYGN – Industry / Sub-industry Drivers
Source: Company Filings, AdvaMedDx
Healthcare Drivers
① ② ③
Terminal Illness Affordable / Insurance Aging Population
④ ⑤ ⑥
Predictive / Preventative Prognostic Personalized
Risk
AssessmentDiagnosisScreening
Staging &
Prognosis
Therapy
SelectionMonitoring
Complement
traditionalrisk factors
Identify
disease early
Definitive
diagnosis& cancer typing
Assess severity
and & risk of recurrence
Predict efficacy
& response to specific treatments
Monitoring
recurrence & treatment efficacy
MDx Continuum of Care
Oncology & Diseases Reimbursed Much higher risk group
50
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
51
MYGN – MDx Market Growth
Source: Frost & Sullivan Research Report
Hematology
Tissue Dx
Blood Glucose
Hemostasis
Microbiology
Point-of-Care Dx
Immunochemistry
Immunochemistry Microbiology Point-of-Care Diagnostics Hemostasis
Self-Monitoring Blood Glucose Tissue Diagnostics Hematology
MDx11%
▲ Molecular diagnostic market is projected to be the second-fasted growing sub-segment of in-vitro
diagnostics at 11%-14% through the next 5 years after Immunochemistry
▲ MDx market is more concentrated therefore presenting better capture of the overall market growth
In-Vitro Diagnostics Market Expected Market Growth
7%
4%
7%
11%
6%
3%
12%
2%
Molecular Diagnostics Immunochemistry
1 2
75% of IVD
Key Players (2013)
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
Cameco Corporation Sell Rationale
CRA Tax Dispute Sovereign Energy Policies
~$1.2 billion in fines = ~15% of firm value
($3 on a per share basis)
Largest consumers (including U.S. and
France) looking to cut down reliance on
uranium-related power supplies
Situation Situation
Implications Implications
Under reassessment from CRA for evading
taxes through transfer pricing agreements
with entity in Switzerland
~20% higher tax rates on a prospective
basis; loss of tax-efficient structure
Oversupply will drive down uranium spot
prices in the short-term
Lower underlying demand will negatively
impact long-term prices of uranium
52
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
1 Year Performance vs. Sector Index
Current Holding – Suncor Inc. (TSX:SU)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA 2013
EV/EBITDA 2014
P/B
P/TBV
Dividend Yield
D/E
Debt Rating
$45.29
$66,501
14.5x
11.1x
6.0x
5.2x
1.6x
1.7x
1.8%
18%
BBB+
Recent News
P/3P NAV Production Profile Investment Outlook
Recommendation
Target Price
Potential Upside
Hold
$45
0%
Bull:
•Strong execution capability
•Production initiatives
•Proposed pipelines
Bear:
•Appears fairly valued relative
to peers on a P/3P NAV basis
▲ Line 9 pipeline reversal
(add ~$0.20 EPS due to
cheaper feedstock)
▲ Addition of a new coker in
Montreal refinery
(increase capacity by
75mbbl/d)
▲ No acquisitions in new
areas announced
▲ Operational improvements
(debottlenecking) under
way
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Suncor Inc.
TSX/S&P Energy Index
38.6%
27.2%
49%
43%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100% Other International(Libya)
North Sea (U.K.traditional E&P)
Natural Gas
East Coast (traditionalE&P)
In Situ (oil sands -deep underground)
Mining (oil sands -surface)
1.03
0.83
0.99 1.07
0
0.2
0.4
0.6
0.8
1
1.2
Suncor Cenovous Husky Energy Imperial Oil
53
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
1 Year Performance vs. Sector Index
Current Holding – Fortis Inc. (TSX:FTS)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA 2013
EV/EBITDA 2014
P/B
P/TBV
D/E
Dividend Yield
D/E
Debt Rating
$33.27
$7,140
18.8x
20.2x
12.0x
10.5x
1.5x
2.9x
1.16
3.8%
114%
A-
Recent News
P/Next FY EPS Can. & U.S. Assets Investment Outlook
Recommendation
Target Price
Potential Upside
Hold
$36
8.2%
Investment Thesis
•Rate base expansion
•Slightly undervalued relative
to historical
Investment Risks
•Uncertain interest rate
environment
•UNS acquisition
▲ Acquisition of Arizona-
based UNS announced
to be completed later
this year; we estimate
minimal EPS accretion
▲ Q1 EPS higher than
expected due to
increased volume (lower
temperature) in C.
Hudson
▲ $6.5B base rate
expansion in 2014-2018 -10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
FTS CN Equity
TSX/S&P Utilities Index
Canada Average: 18.4x
0
5
10
15
20
25
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
U.S. Average: 17.5x
56%
34%
5%
5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100% ContractedHydroelectricGeneration
Non-Utility
Regulated Gas
Regulated Electric
54
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
1 Year Performance vs. Sector Index
Current Holding – Capital Power Inc. (TSX:CPX)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA 2013
EV/EBITDA 2014
P/B
P/TBV
D/E
Dividend Yield
D/E
Debt Rating
$26.70
$2,191.9
15.8x
21.6x
8.3x
9.7x
0.9x
1.1x
0.69
4.7%
69%
BBB-
Recent News
EV/FY 2015E EBITDA of Peers & Historical Operations Investment Outlook
Recommendation
Target Price
Potential Upside
Hold
$29
8.6%
Investment Thesis
•Expansion activities
•Slightly undervalued relative
to historical & industry
Investment Risks
•Uncertain interest rate
environment
•Execution risk
▲ Q1 below expectations:
realized Alberta prices
~5% lower than spot,
unplanned outage, CO2
credits
▲ Hedged 41% for FY
2015 in the low-$50
range, 23% for FY 2016
in the mid-$50’s
▲ Sheppard facility to open
by early 2015, K2 to
begin construction
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14
Capital Power Inc.
TSX/S&P Utilities Index
8.2x
12.2x
9.0x
11.4x
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Capital Power CapstoneInfrastructure
Transalta Northland Power
Historical Average: 8.8x
55
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
65 70 75 80 85
DDM
P/E
P/B
-10%
0%
10%
20%
30%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Bank of Nova Scotia iShares S&P/TSX Financials
1 Year Performance v.s. Sector Index
Current Holding – Bank of Nova Scotia (TSX:BNS)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
P/B
P/TBV
ROE
Dividend Yield
D/E
Debt Rating
$73.53
$89,525
14.3x
13.3x
2.2x
3.0x
15.3%
3.5%
134%
A+
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$73.53
124
$9,118
03/27/13
$59.18
29.5%
26.8%
10.7%
Recommendation
Prev Target Price
Updated Target Price
Hold
$67.76
$75.42
Investment Thesis
• International exposure
•Accretive acquisitions
•Risk management
Investment Risks
•Geopolitical instability
• Interest rate outlook
•Complicated regulatory envir
▲ Acquisition of 20% of CT
Financial Services
(05/08/2014)
▲ Sale of stake in CI
Financial (05/14/2014)
▲ COO Marwah to retire
(05/15/2014)
▲ 2014 Q2 Results
(05/27/2014)
56
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
40 45 50 55 60
DDM
P/E
P/B
-10%
0%
10%
20%
30%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
National Bank of Can iShares S&P/TSX Financials
1 Year Performance v.s. Sector Index
Current Holding – National Bank (TSX:NA)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
P/B
P/TBV
ROE
Dividend Yield
D/E
Debt Rating
$48.43
$15,876
11.1x
11.2x
2.1x
2.9x
16.9%
4.0%
234%
A
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$48.43
108
$5,230
08/03/12
$37.38
39.3%
22.6%
9.6%
Recommendation
Prev Target Price
Updated Target Price
Hold
$47.75
$50.06
Investment Thesis
•Strong WM& FM Divisions
•Penetrative acquisitions
•Minimal European Exposure
Investment Risks
•Geographical concentration
•Stalled domestic expansion
•Complicated regulatory envir
▲ First AGM outside of
Quebec (04/01/2014)
▲ Quebec election
(04/07/2014)
▲ 2014 Q2 Results
(05/27/2014)
57
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
20 30 40 50
NAV
P/FFO
P/AFFO
-20%
-10%
0%
10%
20%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Dream Office REIT Vanguard FTSE Canadian REIT
1 Year Performance v.s. Sector Index
Current Holding – Dream Office REIT (TSX:D.UN)
Valuation Metrics
Share Price
Market Cap (mm)
P/FFO 2013
P/FFO 2014
P/AFFO 2013
P/AFFO 2014
P/B
P/TBV
ROE
Dividend Yield
D/E
Debt Rating
$29.34
$3,172
11.3x
10.2x
13.4x
11.9x
0.8x
0.9x
9.7%
7.6%
101%
NR
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$29.34
180
$5,281
12/04/13
$28.00
3.8%
-4.9%
1.8%
Recommendation
Prev Target Price
Updated Target Price
Hold
$32.75
$35.28
Investment Thesis
•High quality portfolio
•High occupancy rates
•Geographic diversification
Investment Risks
•Limited growth opportunities
•Refinancing rate risk
•Market view of management
▲ 2014 Q1 Results
(05/08/2014)
▲ Appointment of new
CEO (05/08/2014)
▲ Name change to Dream
Office REIT
(05/08/2014)
58
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
10 15 20 25
NAV
P/FFO
P/AFFO
-20%
-10%
0%
10%
20%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Artis REIT Vanguard FTSE Canadian REIT
1 Year Performance v.s. Sector Index
Current Holding – Artis REIT (TSX:AX.UN)
Valuation Metrics
Share Price
Market Cap (mm)
P/FFO 2013
P/FFO 2014
P/AFFO 2013
P/AFFO 2014
P/B
P/TBV
ROE
Dividend Yield
D/E
Debt Rating
$15.89
$2,145
11.6x
11.5x
18.7x
13.5x
0.9x
0.9x
6.1%
6.8%
122%
NR
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$15.89
350
$5,562
08/06/13
$14.50
16.4%
9.1%
6.9%
Recommendation
Prev Target Price
Updated Target Price
Hold
$16.01
$17.64
Investment Thesis
•Well positioned in Can & US
•High occupancy rates
•Management alignment
Investment Risks
•Credit & tenant conc risk
•Refinancing rate risk
•Retail portfolio
▲ 2014 Q1 Results
(05/08/2014)
▲ Acquisition of Crosstown
Business Center II and
VI, MN (06/24/2014)
59
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
30 40 50 60
DCF (Growth)
P/TBV
P/E
-20%
-10%
0%
10%
20%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
ProAssurance Corp iShares U.S. Insurance
1 Year Performance v.s. Sector Index
Current Holding – ProAssurance Corp (NYSE:PRA)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA
P/B
P/TBV
ROE
Dividend Yield
D/E
Debt Rating
$44.57
$2,866
9.4x
14.9x
5.9x
1.2x
1.3x
9.8%
2.7%
10%
BBB+
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$44.57
105
$4,680
12/13/14
$49.53
-8.1%
-19.1%
-13.5%
Recommendation
Prev Target Price
Updated Target Price
Hold
$51.27
$47.69
Investment Thesis
•Rising demand due to ACA
•Low combined ratio
•Low debt
Investment Risks
•Uncertainty from HC Reform
•Challenges to Tort Reform
•Substitutable insur solutions
▲ 2014 Q1 Results
(05/28/2014)
▲ Eastern Alliance
(subsidiary) to open
office in Grandville,
Michigan (06/30/2014)
60
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
55 65 75 85
DCF (Exit)
EV/EBITDA
P/E
-10%
0%
10%
20%
30%
40%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Cogeco Cable Inc iShares S&P/TSX Info Tech
1 Year Performance v.s. Sector Index
Current Holding – Cogeco Cable Inc. (TSX:CCA)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA 2013
EV/EBITDA 2014
P/B
ROE
Dividend Yield
D/E
Debt Rating
$60.57
$2,953
16.0x
12.8x
7.4x
6.4x
2.2x
13.7%
1.9%
94%
BB+
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$60.57
105
$6,360
12/04/13
$47.88
27.4%
22.6%
26.2%
Recommendation
Prev Target Price
Updated Target Price
Hold
$56.00
$66.75
Investment Thesis
•Strong organic growth
•Strategic acquisitions
•Outstanding cost mgmt
Investment Risks
• Industry saturation
•Wireless substitution
•Regulatory risks
▲ Resignation of Peer 1
CEO (04/23/2014)
▲ 2014 Q3 Results
(07/10/2014)
▲ Atlantic Broadband
(subsidiary) to partner
with Netflix, Inc
(04/25/2014)
61
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Agrium S&P/TSX Capped Materials Index
$80 $98 $115 $133 $150
52W Range
DCF (Growth)
DCF (Exit)
Comps - SoP
1 Year Performance v.s. Sector Index
Current Holding – Agrium Inc. (TSX:AGU)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA 2013
EV/EBITDA 2014
P/B
P/TBV
ROE 2013
Dividend Yield
D/E
Debt Rating
$99.61
$14,343.8
12.9x
14.6x
8.3x
8.3x
2.0x
3.3x
15.7%
3.3%
27%
BBB
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$99.61
50
$4,980.5
11/30/12
$101.41
(1.8%)
14.3%
2.5%
Recommendation
Original Target Price
Updated Target Price
Hold
$120.76
$107.49
Investment Thesis
• Integrated value chain
•Diversified business mix
•Undervalued retail business
Investment Risks
•Volatile commodity prices
•Production difficulties
• Integration risk
▲ Disposed of Advanced
Technologies unit for
$85 mm (7/2/2014)
▲ Signed agreement for
use of Climate Pro
Technology with
Monsanto (6/25/2014)
▲ Unplanned shutdown of
Carseland nitrogen
facility(3/22/2014)
$100 $108
62
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
-30%
-20%
-10%
0%
10%
20%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Goldcorp S&P/TSX Capped Materials Index
$19.93
$19.93
$32.49
$32.49 $13.90 $1.33
$0.00
$10.00
$20.00
$30.00
$40.00
ProducingAssets
DevelopingAssets
OtherAssets
NAV
1 Year Performance v.s. Sector Index
Current Holding – Goldcorp Inc. (TSX:G)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA 2013
EV/EBITDA 2014
P/B
P/TBV
ROE 2013
Dividend Yield
D/E
Debt Rating
$30.51
$19,991.7
NM
37.7x
22.1x
11.0x
1.2x
1.3x
(12.4%)
2.5%
13%
BBB+
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$30.51
293
$8,939.4
11/30/12
$35.30
(21.2%)
5.3%
32.4%
Recommendation
Original Target Price
Updated Target Price
Hold
$51.06
$32.49
Investment Thesis
•Unhedged exposure to gold
•Robust product pipeline
•Focus on low risk operations
Investment Risks
•Movement of gold prices
•Currency risk
•Development risk
▲ Issuance of US $1.0 bn
notes (6/4/2014)
▲ Resumption of
operations at Los Filos
mine (5/5/2014)
▲ Bid for Osisko expired
(4/232014)
▲ Completed sale of
Marigold mine for $275
mm (4/4/2014)
63
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
-10%
0%
10%
20%
30%
40%
50%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Gildan S&P/TSX Capped Cons. Disc. Index
1 Year Performance v.s. Sector Index
Current Holding – Gildan Activewear Inc. (TSX:GIL)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA 2013
EV/EBITDA 2014
P/B
P/TBV
ROE 2013
Dividend Yield
D/E
Debt Rating
$66.36
$8,113.7
24.7x
20.0x
17.9x
15.1x
4.6x
5.9x
20.4%
0.7%
2%
NR
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$66.36
130
$8,626.8
3/25/14
$54.63
21.5%
21.5%
21.5%
Recommendation
Original Target Price
Updated Target Price
Hold
$60.38
$70.60
Investment Thesis
•Dominance in printwear
•Growth in branded apparel
•Share price undervaluation
Investment Risks
•Cotton prices
•Key customer dependence
• Inexperienced in branding
▲ Acquisition of Doris Inc.
(06/19/2014)
$40 $50 $60 $70 $80 $90 $100
DCF (Growth)
DCF (Exit)
Comps
Historicals
$66 $71
64
255 – 200 – 0
127 – 127 – 127
155 – 43 – 57
0 – 70 – 130
70 – 181 – 211
134 – 170 – 109
148 – 138 – 84
228 – 108 – 10
1 Year Performance v.s. Sector Index
Current Holding – Black Diamond Group Limited (TSX:BDI)
Valuation Metrics
Share Price
Market Cap (mm)
P/E 2013
P/E 2014
EV/EBITDA 2013
EV/EBITDA 2014
P/B
P/TBV
ROE 2013
Dividend Yield
D/E
Debt Rating
$31.64
$1,384.4
22.9x
26.4x
10.2x
10.8x
3.5x
4.0x
14.9%
2.8%
12%
NR
Recent News
Valuation Fund Portfolio Data Investment Outlook
Current Price
Shares Owned
Market Value
Purchase Date
Purchase Price
Return – Inception
Return – TTM
Return – YTD
$31.64
239
$7561.9
03/25/13
$20.96
50.6%
29.0%
5.7%
Recommendation
Original Target Price
Updated Target Price
Hold
$35.50
$35.53
Investment Thesis
•Defensive play on oil and gas
production
•One of a kind business in
niche market
Investment Risks
• Increasing capacity in Alberta
•Price Competition
•Softer market for oil and gas
▲ Announced Q1 2014
Lower than
expected margins
Non-rental revenue
mix outweighing
rental revenue mix
▲ Next earnings: August
13, 2014
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Mar-25-2013 Aug-01-2013 Dec-10-2013 Apr-22-2014
Black Diamond S&P/TSX Composite Industrials Index
$- $20.00 $40.00 $60.00 $80.00
52 - Week Range
0.5-3.0% Growth Rate, 7-…
5.2-6.7x Multiple, 7-12% …
DCF Analysis:
NTM P / E:
LTM P / E:
LTM EV / EBITDA:
NTM EV / EBITDA:
Public Comp.:
65