YAK:CN - Leveraged to Mongolias Growth April 2013 Presentation ! - - PowerPoint PPT Presentation
YAK:CN - Leveraged to Mongolias Growth April 2013 Presentation ! - - PowerPoint PPT Presentation
YAK:CN - Leveraged to Mongolias Growth April 2013 Presentation ! Legal Disclaimers ! This is not an offer to sell or a solicitation of an offer to purchase securities looking statements are typically identified by terminology such as may,
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Legal Disclaimers!
This is not an offer to sell or a solicitation of an offer to purchase securities by Mongolia Growth Group (the “Company”). Any such offer or solicitation will only be made by means of the Company’s Offering Documents (e.g., prospectus, offering memorandum, subscription agreement and or similar documents) and only in jurisdictions where permitted by law. Investors should refer to the Offering Documents for more complete information, including investment risks, fees and expenses. !
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The securities are a highly speculative investment and are not intended as a complete investment program. They are designed only for sophisticated persons who can bear the economic risk of the loss of their investment in the Company and who have limited need for liquidity in their investment. There can be no assurance that the Company will achieve its objectives. Target investment goals are not a guarantee of future returns. ! ! The attached material is provided for informational purposes only as of the date hereof, is not complete, and may not contain certain material information about the Company, including important disclosures and risk factors associated with an investment in the Company. This information does not take into account the particular investment objectives or financial circumstances of any specific person who may receive it. More complete disclosures and the terms and conditions relating to a particular investment is, or will be, contained in the Offering Documents. Before making any investment, prospective investors should thoroughly and carefully review the Offering Documents with their financial, legal and tax advisors to determine whether an investment is suitable for them.! ! The attached material includes forward-looking statements relating to, among other things, the future financial performance of and objectives of the Company; plans and expectations for the operation of the Company; and estimates or expectations for fees, costs and expenses. These forward- looking statements are typically identified by terminology such as “may,” “will,” “should,” “expect,” “anticipates,” “plans,” “intends,” “believes,” “estimates,” “projects,” “predicts,” “seeks,” “potential,” “continue” or other similar terminology. Forward-looking statements are inherently unreliable, and prospective investors should not rely on them. The forward-looking statements are based on the Company’s current expectations, assumptions, estimates and projections about future events. Actual results are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in a forward-looking statement as a result
- f various factors which may be further described in the Company’s
Offering Documents. The Company does not have any obligation to update
- r otherwise revise any forward-looking statements in the attached material
- r to reflect the occurrence of unanticipated events.!
! Certain information contained herein have been prepared by third-party sources, and such information has not been independently audited or verified by the Company. The Company has used its best efforts to ensure the accuracy and completeness of the information presented.!
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Legal Disclaimers!
Forward Looking Statements! ! This document, together with any documents incorporated by reference herein, contains statements about expected future events and financial and
- perating results that are forward-looking. From time to time, we may also
provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements give our current expectations or forecasts of future-events. You can identify these statements by forward-looking words such as "expects", "does not expect", "plans", "anticipates", "does not anticipate", "believes", "intends", "estimates", "projects", "potential", "scheduled", "forecast", "budget" and similar expressions, or that events or conditions "will", "would", "may", "could", "should" or "might" occur and similar words. In addition, statements that we make in this document including any documents incorporated by reference herein that are not statements of historical fact may also be forward-looking statements.! ! Forward-looking statements are not guarantees of our future performance and involve risks, uncertainties and assumptions that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. For example, some risks, uncertainties and assumptions include: capital requirements; fluctuations in the international currency markets and in the rates of exchange of the currencies of Canada and the United States; price volatility in the spot and forward markets for commodities; impact of any hedging activities, including margin limits and margin calls; discrepancies between actual and estimated production and between actual and estimated reserves and resources; changes in national and local government legislation in Canada, the United States and Mongolia or any other country in which the Company currently or may in the future carry on business; taxation; controls, regulations and political or economic developments in the countries in which the Company does or may carry on business; the speculative nature of oil and natural gas exploration, production and development, including the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; competition; loss of key employees, additional funding requirements; stock market volatility and ability to access sufficient capital from internal and external sources; actual results of current exploration or reclamation activities; changes in project parameters as plans continue to be refined; accidents; labour disputes; and defective title to claims or property
- r contests over claims to oil and gas properties. In addition, there are risks
and hazards associated with the business of oil and natural gas exploration, production and development, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins and flooding (and the risk of inadequate insurance or inability to obtain insurance, to cover these risks). You should not place undue reliance on forward-looking statements.! ! We do not promise to notify you if we learn that our assumptions or projections are wrong for any reason except as required under applicable securities laws. We do not undertake any obligation to update forward- looking statements, whether as a result of new information, future events or
- therwise except as required under applicable securities laws. You should
be aware that all the risk factors discussed in this document could cause our actual results to differ from any forward-looking statements. !
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!! Leverage the tremendous growth in Mongolia ! !! Focused on acquiring, constructing and managing investment real estate in Mongolia while helping to build the country’s insurance industry!
Mission Statement!
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!! Rich in mineral wealth! !! Construction of world class mines! !! Proximity to China ! !! Experiencing a high teen annual GDP growth rate ! !! Hard working and ambitious, pro-Western culture!
Why Mongolia?!
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!! Land area: 1.56m sq.km! !! Population: 2.7 million! !! Political System: Democracy! !! Capital: Ulaanbaatar! !! Located between Russia and China! !! 19th largest country in the world! !! GDP (2012): $9,92 Billion*! !! GDP per capita: $3.500*! !! GDP is likely to accelerate significantly in the future!
The Country !
*NSO (National Statistical Office of Mongolia)!
Ulaanbaatar!
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Two Massive Projects !
OyuTolgoiMine (OT)*! TavanTolgoiMine (TT)*!
!! JV between Ivanhoe Mines and Rio Tinto! !! Contains 81 billion pounds of copper and 46 million ounces of gold! !! Scheduled to produce 1.2 billion pounds of copper (4% of global production) and 650,000 ounces of gold each year 59 year mine life! !! To begin production in 2013. Total capital expenditure is estimated at $6.5 billion! !! Anticipated to account for 30% of Mongolia’s GDP. Expected to create thousands of direct, high paying, full time jobs! !! May be the largest undeveloped coking coal mining district in the world, holding in excess of 6 billion tones of coal! !! Close to Chinese border! !! Multi-billion dollar project began development in 2011! !! Huge upside potential for resources and annual production! !! TT is the largest of the many planned mid-to-high BTU coal projects in various stages of development in Mongolia! !! Planned IPO will accelerate current production rates!
*Ivanhoe Mines Ltd.!
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A Simple Question!
Question: There are tens of billions to be spent on capital ! ! projects that are in the planning and development ! stages, so how do you put this much capital into ! such a small economy?!
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Answer: Get ready for the boom!!
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Mongolia Growth Group’s Thesis!
!! Mongolia has a small population with huge resource potential! !! We anticipate large GDP and per capita income growth ! !! Historical comparables where an open economy has allowed for wealth creation are Kuwait, Qatar, and Kazakhstan ! !! We want to invest at the inflection point when the first major new mine is being built!
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Using Kazakhstan as an Investment Roadmap for Mongolia!
!! There Are Many Similarities Between Kazakhstan And Mongolia! !! Both Resource Economies! !! Both Former Soviet Satellites! !! Culturally Similar! !! Similar Soviet Architecture! !
The Difference is That Kazakhstan is 10 years Ahead of Mongolia in its Boom!
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The Kazakhstan Boom from 2002 to 2008!
2002! 2008! % Change!
Kazakhstan Oil Production (Barrels/Day) *1!
885,000! 1,363,000! 54%!
Kazakhstan GDP ($ USD Billions) *2!
$24,637! $104,853! 326%!
Kazakh Tenge (Currency) 3 ! 150.67! 120.64! 20%! Kazakh Stock Exchange Index3! 104.55! 2640.15! 2425%!
*1: US Department of Energy! *2: World Bank! *3 Bloomberg!
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*1: Currently Observed Prices! *2:Cushman & Wakefield, Almaty Office!
Current Price in Almaty, Kazakhstan! Current Price in Ulaanbaatar!
Downtown Apartments ($USD Per Meter)!
$3,000-$5,2002! $900-$2,0001!
Prime Ground Floor Retail Space in Downtown ($USD Per Meter)!
$10,000-$30,0002! $1,500-$3,0001!
Current Prices in Ulaanbaatar on the Eve of the Boom! !
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Strategy!
Focus on:! Industries likely to benefit from the growth in consumer income:! ! !! Real Estate! !! Insurance! ! ! Ignore:! Mining itself:! !! Tough Industry ! !! Capital Intensive! !! Political! !! Boom & Bust Cycles! ! !!!!!!!! !
Real Estate!
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Mongolian Property Rights!
!! Property rights are strongly protected by law! !! Foreigners can own finished structures ! !! Foreigners can enter into land leases (max 100 years)! !! Foreign and local corporations cannot own land!
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!! Only one main street (Peace Avenue) and very few secondary streets! ! !! Most activities are concentrated along a three kilometer stretch of Peace Avenue ! ! !! Very small footprint that everyone wants to be located within!
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Why Ulaanbaatar Is Unique For Property Investors! !
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Ulaanbaatar City Map!
Mountains Mountains
Ulaanbaatar is constricted by mountains to the north and the south! A single 2-lane east-west road constricts movement and focuses all development into the downtown !
- f approximately 2km North-South by 3 km East-West!
Downtown !
Airport
Peace Avenue Is Only Main East-West Road City Is Constricted To The North And South By Mountains
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View of Downtown UB! D
- w
n t
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n C
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Gandan Ger District
Parliament
New UN Building
Central Business District
Peace Avenue Seoul Street
Ring Road North
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Our Portfolio!
!! 19 Residential Properties ! !! 6,502 meters of Retail space ! !! 5,231 meters of Office space! !! 14,062 meters of Redevelopment Opportunities!
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MGG Property Strategy ! !
!! Buy top-quality properties along Peace Avenue and a handful of secondary streets.! ! !! Focus on leasable retail and office property! ! !! Focus on redevelopment opportunities with sizable value uplift through redevelopment.!
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Current Portfolio!
Key Asset - MGG Headquarters!
Approximately 1720 Meters" of Office Space!
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MGG Portfolio Breakdown!
Type! # of Meters! # of Properties! At Cost! % At Cost! Residential! 2,200! 19! 2.9B MNT! 5.8%! Retail! 6,502! 48! 19.4B MNT! 39.7%! Office! 5,231! 6! 10.1B MNT! 20.7%! Redevelopment! 14,062! 6! 16.5B MNT! 33.8%! Total! 27,995! 78! 48.9B MNT! 100%!
As of March 31, 2013!
All data as of March 31, 2013. Percentages are calculated based on property purchase costs in MNT.! !
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MGG Acquisition Growth Chart!
MNT!
As of March 31, 2013!
All data as of March 31 , 2013. Total property purchased is calculated based on property purchase costs in MNT.! 0! 5,000,000,000! 10,000,000,000! 15,000,000,000! 20,000,000,000! 25,000,000,000! 30,000,000,000! 35,000,000,000! 40,000,000,000! 45,000,000,000! 50,000,000,000! Redevelopment! Office Space! Retail Space! Residential !
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MGG Property Usage Breakdown!
All data as of March 31, 2013. Percentages are calculated based on property values.! For the purpose of this chart, MGG’s insurance subsidiary, Mandal Daatgal, is considered as a tenant as it pays rent to
- MGG. The Property value of the space rented by Mandal is not included under “corporate use”. !
As of March 31, 2013!
45.3%! 36.8%! 4.7%! 2.2%! 6.9%! 4.2%!
Rented! Redevelopment! Renovation! For Sale! Vacant! Corporate Use!
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Monthly Rental Revenue!
As of March 31, 2013!
MNT! All data as of March 31, 2013 is presented in MNT and includes VAT received. MGG’s insurance subsidiary, Mandal Daatgal, has paid 11,653,760 MNT monthly since March 2013; and paid 8,410,210 MNT in rent to MGG in February 2013 and 8,410,210 in January 2013.!
0! 50,000,000! 100,000,000! 150,000,000! 200,000,000! 250,000,000!
Redevelopment! Office! Retail! Residential!
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MGG Lease Breakdown!
Retail! Office! Residential! Total!
5 Years! 22.0%! 0.0%! 0.0%! 13.8%! 3 Years 23.3%! 39.3%! 0.0%! 26.3%! 2 Years! 25.8%! 28.3%! 3.0%! 24.9%! 1 Year! 28.9% 32.4% 97.0% 35.0%
As of March 31, 2013!
All data is presented in MNT. Percentages are calculated based on the amount of rent collected.!
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Rent Breakdown!
Type! Average Yield1! % of Rent Total!
Residential! 9.8%! 7.7%! Retail! 9.0%! 54.7%! Office! 13.2%! 29.1%! Redevelopment! 1.3%! 8.5%! Total! 10.1%*! 100%!
1 Average yield is calculated as annual rent received as a percentage of total property acquisition cost (including capital expenditures). All data is presented in MNT.! * Total yield is based on all rentable properties that excludes land, redevelopments and properties under renovation. !
As of March 31, 2013!
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Value Creation Through Redevelopment! !
!! High rents in downtown lead to property values that are many times the replacement costs of completed structures.! ! !! The economic returns from development are abnormally high due to a scarcity of high- quality land on main streets.! ! !! MGG recognized this early and has a very attractive redevelopment pipeline.!
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Key Redevelopment Assets ! And Assumptions!
Approx. Meters! Development Type! Approx. Finished Size! Approx. Build Cost Per Usable Meter! Current Monthly Rent Per Meter! Expected Payback on Development! Asset 1! 2,200! ! Class A Office! 30,000 Meters! $1,200- $1,500 Per Meter! $40-$60 Per Meter! 2.5 To 4 Years! Asset 2! 2,600! Class A Office! 40,000 Meters! $1,200- $1,500 Per Meter! $40-$60 Per meter! 2.5 To 4 Years! Asset 3! 1,300! Residential! 300 Units! $900-$1,200 Per Meter! $2,500-$3,500 Per Meter Sale Price! Pre-Sales Should Fund It.! Asset 4! 8,000! Mixed Use! 30,000 Meters! $1,000- $1,300 Per Meter! $20-$40 Per Meter! 3 To 6 Years! Asset 5! 900! Mixed Use! 10,000 Meters! $1,000- $1,300 Per Meter! $40-$60 Per Meter! 2.5 To 4 Years! Asset 6! 1,700! 3 Floor Retail! 5,000 Meters! $700-$800 Per Meter! $15-$25 Per Meter! 2.5 To 4.5 Years!
*Disclaimer: Assumptions for illustrative purposes only and that the Company has not generated any plans, nor does it currently have the permits in place, to develop these assets. !
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Redevelopment Strategy! !
! ! ! !! Partner with experienced developers! ! !! Contribute land and local experience to a prospective JV! ! !! Manage the property afterwards which leads to high margin revenues! ! !! Avoid outsized financial commitments! !! Avoid completion risk! !! Avoid budgeting risk ! ! !! Retain high returns on capital with reduced risk!
Insurance!
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Mandal General Daatgal LLC! !
!! Received insurance license on June 2, 2011! !! Operates in various property and casualty lines of business! !! Initial capital of US$5m, making one
- f the best-capitalized insurer in
Mongolia!
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Mandal Reinsurance Partners! Mandal Corporate Clients!
Insurance!
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Management Philosophy!
Our structure is corporate, but we operate on the principles of a long-term partnership !
!!! No founding management salaries or options ! !! The Board has been chosen based on relevant experience, intellect, and a deep understanding and coherence to our guiding principles ! !! Our only upside is by creating shareholder value; increasing the intrinsic value of the company on a per share basis ! !! We own a lot of shares and are working for ourselves and our investors !
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Mongolia Growth Group Ltd.!
!! Founded in February 2011! !! Listed on the CNSX, TSXV - Ticker: YAK! !! 34,173,352 shares outstanding! !! 33.5% Sr. Management and Board
- wnership!
!! Approximately $51.5M raised!
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Conclusion!
According to the International Monetary Fund, Mongolia is expected to be one of the fastest growing economies in the world
- ver the next decade. !
! We want to leverage that growth.!
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