MUNRO GLOBAL GROWTH FUND SEPTEMBER QUARTER 2017 Disclaimer Neither - - PowerPoint PPT Presentation

MUNRO GLOBAL GROWTH FUND SEPTEMBER QUARTER 2017

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Disclaimer

Neither Munro Asset Management Limited, Munro Investment Holdings Pty Ltd, Munro Partners (together “Munro”) nor Grant Samuel Funds Management Pty Ltd (GSFM) AFSL 317587 are providing any general advice or personal advice regarding any potential investment in any financial products within the meaning of section 766B of the Corporations Act. Munro Asset Management Limited is the holder of an Australian Financial Services Licence (AFSL) number 480509. Our Financial Services Guide can be located on our website: www.munropartners.com.au. This presentation is not an advertisement and is not intended for public use or distribution. As such, it is not to be released or made available to any other party, excepting Grant Samuel Funds Management Pty Ltd (GSFM) AFSL 317587 or used for any other purpose. Grant Samuel Funds Management Pty Limited ABN 14 125 715 004 AFSL 317587 (‘GSFM’) has a distribution arrangement with Munro to represent their products in the Australia and New Zealand markets. Munro has issued a product disclosure statement (PDS) on 1 March 2017 offering investors an opportunity to subscribe for units in the Munro Global Growth Fund (Fund). If you would like to receive a copy of the PDS, then please contact Munro on (03) 9290 0900 or contact@munropartners.com.au and Munro will arrange for a copy of the PDS to be forwarded to you. Alternatively, a copy of the PDS for the Fund is available

• n our website www.munropartners.com.au/access. All prospective investors should consider the contents of the PDS in full prior to making a decision regarding an investment in the Fund.

No consideration has been made of any specific person’s investment objectives, financial situation or needs. The provision of this presentation is not and should not be considered as a recommendation in relation to an investment in any entity or that an investment in any entity is a suitable investment for any specific person. Recipients should make their own enquiries and evaluations they consider appropriate to determine the suitability of any investment (including regarding their investment objectives, financial situation, and particular needs) and should seek all necessary financial, legal, tax and investment advice. Munro, GSFM, its directors, related parties, representatives and employees do not accept any liability for results of any actions taken or not taken on the basis of information in this presentation, or for any negligent misstatements, errors or omissions of any of its contents and no legal or other commitments or obligations shall arise by reason of the provision of this Presentation or its contents, except as required by law. It contains selected information and does not purport to be all-inclusive or to contain all of the information that may be relevant. The information contained in the Presentation has not been independently verified, nor have they conducted any due diligence in respect of the information provided. It should be noted that any projections or past performance are provided for general reference purposes and are based on assumptions relating to the general economy and other factors beyond the control of Munro. Returns of the Munro Global Growth Fund are net of applicable fees, costs and taxes. Past performance is not a reliable indicator of future performance. The MSCI AC World TR Index (AUD) refers to the MSCI All Country World Net Index in Australian dollars. The Top 5 Holdings depict end of month figures and may have changed materially from holdings during the month or not disclosed due to confidentiality reasons. Numbers may not sum due to rounding, compounding returns or GST and RITC. Please also see our Financial Services Guide, Privacy Policy and Terms of Use via www.munropartners.com.au/legals/. The recipient represents to Munro that it is capable of making its own independent assessment as to the validity and accuracy of the financial assumptions, data, results, calculations and forecasts contained, presented or referred to in the Presentation, and the economic, financial, regulatory, legal, taxation and accounting implications of such. The recipient further represents to the Munro that it is not relying on any recommendation or statement by Munro. The recipient acknowledges that no independent third-party audit or review has been obtained by Munro or has been undertaken by such an independent third party of the financial assumptions, data, results, calculations and forecasts contained, presented or referred to in the Presentation. This Presentation may contain forward-looking statements, forecasts, historical performance, estimates, projections and opinions ("Forward Statements"). No representation is made or will be made that any Forward Statements will be achieved or is correct. Actual future results and operations could vary materially from the Forward Statements. Similarly no representation is given that the assumptions disclosed in this Presentation upon which Forward Statements may be based are reasonable. The recipient acknowledges that circumstances may change and the contents of this Presentation may become outdated as a result.

CONTENTS

MUNRO PARTNERS BUSINESS UPDATE 4 MGGF PERFORMANCE ANALYSIS 5 MGGF EXPOSURE & MARKET OUTLOOK 10 KEY INVESTMENT THEME: INTELLIGENT INDUSTRY (LONG) 14

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MUNRO PARTNERS BUSINESS UPDATE

Munro 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.

Nick Griffin (CIO) James Tsinidis (PM) Kieran Moore (PM / Dealer) Jeremy Gibson, CFA (PM) Ronald Calvert (CEO) Jon Spensley (COO) Business & Sales: Grant Samuel Funds Management Financial markets experience 21 12 3 14

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Previous experience K2 Asset Management, Deutsche Bank, CFS K2 Asset Management, Bell Potter, Zenith Partners K2 Asset Management Pictet Asset Management

Iluka Resources, Eye Management Pty Ltd, Ernst & Young Eclipse Funds, SAITeysMcMahon, ANZ, AXA, Merrill Lynch

Prime Broker Custodian Administrator Registry Auditor

Leading service providers

THE MUNRO PARTNERS TEAM

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MGGF PERFORMANCE ANALYSIS

• 2%

0% 2% 4% 6% 8% 10% HANG SENG INDEX HANG SENG CHINA ENT INDX DOW JONES INDUS. AVG SHANGHAI SE COMPOSITE S&P 500 INDEX STXE 600 € Pr NIKKEI 225 FTSE 100 INDEX MSCI Local MGGF Local

July 1 to September 30 2017

(%) 6

MGGF VS. MAJOR MARKET INDICES - QUARTERLY

Local currency returns of various global markets and the return of the MSCI World AC Index in AUD next to the return of the MGGF in AUD.

= FX Contribution Index Return 2.8% Fund Return 7.0%

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MGGF LONG/SHORT ATTRIBUTION - QUARTERLY

July 1 to September 30 basis point attribution of the MGGF by investment category.

Past performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

• 200

200 400 600 800 1000 Long Equities Short Equities Option Hedging FX

Munro Global Growth Fund Attribution

(bps)

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MGGF STOCK AND REGION ATTRIBUTION - QUARTERLY

July 1 to September 30 basis point attribution of the MGGF by stock and by region.

Top 5 Performers Bps Blue Prism 117 ASML 81 Micron Technology 70 Applied Materials 65 Kidman Resources 59 Bottom 5 Performers Bps Next

• 26

Netease

• 24

Middleby

• 18

Datalex

• 16

Swatch

• 16

Past performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

• 100

100 200 300 400 500

Regional Performance

(bps)

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Snapshot of Munro Global Growth Fund since inception – 30 September 2017

MGGF PERFORMANCE SINCE INCEPTION

Performance Summary as at 30 September 2017 1MTH 3MTHS 6MTHS 1YR SINCE INCEPTION SINCE INCEPTION (p.a.) MUNRO GLOBAL GROWTH FUND (AUD) 1.7% 7.0% 13.8% 18.0% 20.8% 17.6% MSCI AC World TR Net Index (AUD) 3.0% 2.8% 6.6% 15.7% 16.0% 13.6% OVER / UNDER PERFORMANCE

• 1.3%

4.2% 7.2% 2.3% 4.8% 4.0%

Past performance information given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

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FUND EXPOSURE & MARKET OUTLOOK

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GLOBAL MARKET OUTLOOK

The Munro Global Growth Fund has increased both net and gross exposure to a high level in anticipation of strong Q3 reporting.

60% 70% 80% 90% 100% 110% 120% 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 Net Exposure (trailing 10day average) Gross Exposure (trailing 10day average)

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GLOBAL MARKET OUTLOOK

Earnings growth has continued to inflect positively and looks likely to continue into 2018, while valuations remain reasonable versus current interest rates.

Source: Bloomberg Consensus Data

5 10 15 20 25 30 20 40 60 80 100 120 140 160 Mar-90 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16 Mar-18

S&P 500 Index Forward Valuation (RHS) and EPS (LHS)

S&P 500 Fwd EPS (LHS) S&P 500 Fwd P/E (RHS)

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MGGF CURRENT EXPOSURE

Snapshot of Munro Global Growth Fund – as at 30 September 2017

Gross Sector Exposure and Cash as at 30 September 2017

Information Technology, 53.2% Industrials, 14.4% Consumer Discretionary, 25.3% Financials, 2.8% Consumer Staples, 1.8% Real Estate, 2.1% Cash, 10.8% Materials, 3.3% Options, 0.2%

Currency Region Gross Exposure Net Exposure Currency Exposure Australia 1.4% 1.4% 70.1% North America 66.2% 62.6% 28.3% United Kingdom 4.3% 4.3%

• 0.5%

Euro Area 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% Hong Kong / China 2.5% 2.5% 0.1% Switzerland 2.3%

• 0.3%
• 0.1%

Ex xp po

• s

su ur re e 1 10 02 2. .8 8% % 8 89 9. .0 0% % 1 10 00 0. .0 0% % Delta Adjusted Exposure 110.6% 93.2% Stock Country Sector Weight (%) Amazon US Consumer Disc. 4.4 Blue Prism UK Info Tech. 4.3 Facebook US Info Tech. 4.3 Activision Blizzard US Info Tech. 4.0 ASML Holding NE Info Tech. 4.0

Top 5 Holdings as at 30 September 2017

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CASE STUDY: INTELLIGENT INDUSTRY

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CASE STUDY 1: INTELLIGENT INDUSTRY

Intelligent Industry is focused on the automation and computation of typical industrial functions. This includes robotics, warehouse automation, machine vision technology and process controls.

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As E-commerce grows towards 20% of global retail penetration, there is an increasing need for warehouses and fulfilment centres to be heavily automated to improve processing time and efficiency, and also reduce costs. Warehouses will continue to see this secular increase in robotic automation investment, as 90% of the final ‘picks’ are still done by hand. Traditional warehouse functions as shown below are now being automated with the use of robotics and software.

WAREHOUSE AUTOMATION...WE ARE IN A FULLFILMENT ARMS RACE

Source: Citibank Research

AGV

WAREHOUSE AUTOMATION

STORAGE SYSTEMS PALLETISING SYSTEMS CONVEYOR SYSTEMS PICKING SYSTEMS SUPPLY CHAIN SOFTWARE SORTING SYSTEM

Amazon Distribution Centre Toronto: https://www.youtube.com/watch?v=M5xvCGGDISk

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Driven by robotics, warehouse automation spending has increased significantly in recent years. Global robotics has grown over 15% p.a. since 2010, and is set to continue to grow. To compete with companies such as Amazon in fulfilment, corporates need to automate their background functions in order to improve fulfillment speeds and costs.

WAREHOUSE AUTOMATION...WHO WINS?

There are many global warehouse automation providers which have consolidated over recent years leaving us with only two pure plays. In recent years we are seeing consistent solid growth in warehousing equipment units, demonstrating a shift towards automated warehouse equipment.

Source: Citibank Research

Others 23% Jungheinrich 2% Witron 2% Grenzebach 2% TGW 3% Swisslog 3% Fives Group 3% Honeywell (Intelligrated) 4% Beumer 4% Mecalux 5% Vanderlande 5% Murata 6% Kion (Dematic) 11% Schaefer 13% Daifuku 14%

• 40%
• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 100 200 300 400 500 600 2003 2005 2007 2009 2011 2013 2015

Y/Y Growth (%) Warehouse Equipment ('000's units)

Warehouse Equipment (LHS) Growth in Warehouse Equipment (RHS)

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KEY STOCK IDEA: 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 itself as a leader in warehouse automation.

Key Stock Kion

Key Details Market Cap: EUR 9.6bn Listed: Germany Revenue 2016: EUR 5.6bn Qualitative Tests Growth: The majority of Kion’s business is the manufacture and service of forklifts. Kion’s growth is being driven by its supply chain solutions business, which includes an acquisition of Dematic. Dematic provides factory automation software for logistics businesses and warehouses and represents just under 30% of revenues. The supply chain solutions business will drive the revenue growth rate higher over time. Economic Leverage: Management have indicated an adjusted EBIT margin target of 12% for the overall business in the medium term. This compares with a 9.6% margin in

• 2016. A positive margin improvement in Q2 2017 has given investors confidence the

margin can reach this target. Sustainability: Kion’s recent acquisition places the company in a dominant position in regards to the growing trend towards factory automation. With the integration of Dematic software and ultimately progressing to autonomous driving forklifts, Kion is able to offer the logistics market a complete solution for automation improving efficiency and lowering costs. Control: Chinese company Weichai Power owns 43%. Customer Perception: Customer perception is positive and will increase as Dematic is a bigger focus for the business. Quantitative Tests Earnings upside: Growth in earnings is to be driven by the accretive value of the Dematic acquisition and also continued operating leverage as management is able to achieve their EBIT margin target. Multiple upside: Growth in topline and margin expansion should enable multiple expansion above 20x. Kion has re-rated since the Dematic acquisition, which we believe will continue to occur. Catalysts / Sizing: Earnings results, accretive M&A, further announcements regarding the integration and application of Dematic. Outcome Stock discovered: June 2017 trading below 70EUR. 10 11 12 13 14 15 16 17 18 19 20 20 30 40 50 60 70 80 90 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

BF P/E Ratio Kion Share Price (EUR)

Kion Share Price (EUR) BF P/E Ratio 2 2.5 3 3.5 4 4.5 20 30 40 50 60 70 80 90 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

BF EPS Kion Share Price (EUR)

Kion Share Price (EUR) BF EPS

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MUNRO GLOBAL GROWTH FUND

September quarter conclusion

September quarter performance: September was a good quarter for the Munro Global Growth Fund delivering +7.0% return after all fees and expenses versus the MSCI World AC Index in AUD at 2.8% Capital: We remain positively disposed to markets and hence maintain a reasonably high equity exposure. Earnings growth is improving and this looks likely to continue into 2018 baring any major economic calamity or sharply rising interest rates. FX: We see some upside for the USD versus the AUD, but do not have a strong view on other currencies versus the AUD, consequently the fund remains predominately hedged back to AUD (70%) with a 30% holding in USD. Importantly as an absolute return fund the MGGF is unlikely to fully unhedge its currency exposures due to the potential for large capital losses. Stocks: We remain confident in the earnings growth of our investments and we expect share prices to track earnings growth over the longer term. We continue to find new and exciting areas of structural earnings growth at reasonable valuations amongst our universe and hence remain confident of meeting our return objectives over the medium term.

THANK YOU

Munro Partners Level 19 80 Collins Street Melbourne VIC 3000 + 61 3 9290 0900 www.munropartners.com.au contact@munropartners.com.au