tuesday 24 – thursday 26 august 2010 | sydney

Tuesday 24 – Thursday 26 August 2010 | Sydney

[ Markets][ ]I’ve been thinking about…

the seeds of potential… the seeds of potential future failure

Chris SelthCIO & L d P tf li MCIO & Lead Portfolio Manager5 Oceans Asset Management Australia

Valuation; Bull ReadingValuation; Bull Reading

3

Bear Reading Shiller PEBear Reading – Shiller PE

4

S&P500 sector EPS moves

5Source: Factset, Five Oceans Asset Management

Emerging market valuations not e g g a et a uat o s otexpensive if earnings growth is sustainablesustainable

6

Source: MSCI, IBES, Morgan Stanley Research

Equity risk premiumEquity risk premium

7

Source: Goldman Sachs

Stocks have become highly correlated

8

Source: Bernstein Research (Sourcing: Factset, Bernstein analysis)

Growth versus value… massive convergence

9


Stock selection within sectors significant

10


The rise of the two speed economy; something changed a decade ago

11

Source: BEA, Morgan Stanley Research

The globalisation of equitiesThe globalisation of equities

12

Winners versus losersPrice Outperformance of Apple over Micrsoft

500%

600%

200%

300%

400%

0%

100%

ay-0

5

ec-0

5

ul-0

6

an-0

7

g-07

eb-0

8

p-08

ar-0

9

ct-0

9

ay-1

0

ov-1

0

-100% May

De Ju Ja Aug

Fe Sep

Ma

Oc

May

Nov

PE NTM

40.00

45.00MSFT AAPL

20.00

25.00

30.00

35.00

0.00

5.00

10.00

15.00

05 05 06 07 07 08 08 09 09 10 10

13

May

-0

Dec

-0

Jul-0

Jan-

0

Aug-

0

Feb-

0

Sep-

0

Mar

-0

Oct

-0

May

-1

Nov

-1

Source: Factset, Five Oceans Asset Management

Technology growth drivers in both the developed and developing world

Global PC Penetration Age of Corporate Desk Tops - Global

Source: Gartner, Credit Suisse Source: CLSA

14

Commodities vs industrial productionCommodities vs industrial production

Global Iron Ore - Market Balance

10

15

20

100

150

200

250

-5

0

5

2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 2013F 2014F 2015F

100

-50

0

50

-20

-15

-10

-250

-200

-150

-100

China Iron Ore Usage (YoY Mt) ROW Iron Ore Usage (YoY Mt)Seaborne Market Balance (LHS)Seaborne Market Balance (LHS)

15

Source: IMF

Mining sector discounted on LT hflcashflows

Rio Tinto – P/NPV – LT History

1.4

1.6

1 0

1.2

x)

LT avg 0.96x

0 6

0.8

1.0

P/N

PV (x Current 0.78x

0.4

0.6

Post Alcan Trough 0.24x0.2May-98 May-00 May-02 May-04 May-06 May-08 May-10

16

Source: Deutsche Bank

Penetration of financial productsPenetration of financial products

17

Financial product penetration of India

18

Comparing bank valuationsComparing bank valuations

Based on 2012 estimates

CBA ($AUD) Wells Fargo ($USD) ICICI Bank (Rp)

Current Share Price 50.3 25.38 1000P/TE 2.60x 1.45x 1.80x

Return on Assets 1.03% 1.50% 1.50%L 18 2 10 7 7 3Leverage 18.2x 10.7x 7.3x

Loan to Deposits 127% 104% 99%

2012 Earnings 4.62 3.82 68.432012 PE 10.89x 6.64x 14.61x

19

Source: Company Reports, Factset

Comparing amounts of debtComparing amounts of debt

20

Australia’s two speed economyAustralia s two speed economy

Australia's Monthly Exports$18 000 y p

$14,000

$16,000

$18,000

$8 000

$10,000

$12,000

$4,000

$6,000

$8,000

$0

$2,000

l-77

l-79

l-81

l-83

l-85

l-87

l-89

l-91

l-93

l-95

l-97

l-99

l-01

l-03

l-05

l-07

l-09

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Jul

Rural Goods Mining Related Other

21

Source: ABS

Australia buried in mortgage debt Supply side squeeze

70%

80%

90%

100%

40%

50%

60%

0%

30%

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Aussie Mortgage Debt to GDP US Mortgage Debt to GDPSource: Morgan Stanley

Over-valued by ~35%Source: Morgan Stanley

Value of housing stock to GDP

300%

350%

150%

200%

250%

0%

50%

100%

Jun-

88

Jun-

90

Jun-

92

Jun-

94

Jun-

96

Jun-

98

Jun-

00

Jun-

02

Jun-

04

Jun-

06

Jun-

08

22Source: Morgan Stanley

Australian Residential Real Estate Value to GDPUS Residential Real Estate Value to GDP

AUD versus equitiesqA changed relationship

1 00 1800

AUD SPX

0.90

0.95

1.00

1400

1600

1800

0.80

0.85

0.90

1000

1200

1400

0.70

0.75

600

800

1000

0.60

0.65

200

400

600

0.50

0.55

1985 1989 1993 1997 2001 2005 20090

200

23

Source: Bloomberg

Why International?ySnail Trail - ASX 200 vs MSCI World (ex Aust)

Snail Trail - ASX 200 Vs MSCI World (ex AUS)

40

50

10

20

30

ing

1 ye

ar r

etur

n

-10

0

10

-10 -8 -6 -4 -2 0 2 4 6 8 10

- diff

eren

ce in

rolli

-40

-30

-20

Ret

urn

(%) -

-50

40

Risk (%) - difference in standard deviation

24

As at 31 July 2010

Source: Bloomberg

Why International?S il T il ASX 200 I t ti l b tSnail Trail – ASX 200 vs International beta hedged strategies

Snail Trail - ASX 200 versus International beta hedged strategisSnail Trail ASX 200 versus International beta hedged strategis

40

50

10

20

30

ollin

g 1

year

retu

rn

20

-10

0-10 -8 -6 -4 -2 0 2 4 6 8 10

%) -

diff

eren

ce in

ro

-40

-30

-20

Ret

urn

(%

As at 31 July 2010

-50


25

Rolling 1 year returns, since inception of Five Oceans W/S World Fund

Source: Bloomberg

Risk adjusted performancej pSnail Trail – Combined returns

Snail Trail - combined returns

20

30

urn

10

n ro

liing

1 y

ear r

etu

-10

0-8 -6 -4 -2 0 2 4 6 8

n (%

) - d

iffer

ence

in

30

-20

Ret

urn

As at 31 July 2010Rolling 1 year returns, since inception of Five Oceans W/S World Fund

-30


26

Portfolio represents equal weighting of Five Oceans World Fund and S&P/ASX 200 AI

Source: Bloomberg

DisclaimerDisclaimer

I f ti t i d h i i t t 25th A t 2010 l th i ifi d d iInformation contained herein is current as at 25th August 2010 unless otherwise specified and is provided by Five Oceans Asset Management Pty Limited ABN 90 113 453 160 AFSL 290540 (Five Oceans). Portfolio and performance information contained in this presentation relates to the Five Oceans World Fund, an onshore Australian based unit trust denominated in Australian dollars and is

id d b Ch ll M d I t t Li it d (Ch ll ) ABN 94 002 835 592 AFSL 234provided by Challenger Managed Investments Limited (Challenger) ABN 94 002 835 592 AFSL 234 668, the issuer of the Five Oceans World Fund (Fund). Five Oceans Asset Management is the Investment Manager for the Fund. It is intended solely for the recipient who is a wholesale investor within the meaning of the Corporations Act 2001 (Cth). It must not be passed on without the prior

itt t f Fi O It h ld b d d l i f ti l th th d iwritten consent of Five Oceans. It should be regarded as general information only rather than advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of any particular investor. Because of that, each person should, before acting on any such information, consider its appropriateness, ha ing regard to their objecti es financial sit ation and needs Each person sho ld obtain a cop of ahaving regard to their objectives, financial situation and needs. Each person should obtain a copy of a current relevant offer document and consider that before making any decision to invest. Past performance is not an indication of future performance. For further information please call +612 99947490 or email [email protected] or see our website: www.5oam.com.

2727

Tuesday 24 – Thursday 26 August 2010 | Sydney

tuesday 24 – thursday 26 august 2010 | sydney

Documents