Post on 05-Jul-2020
Presentation to Shareholders March 2012
Disclaimer
2
This material has been prepared by BKI Investment Company Limited.
The information within this document is not intended to provide advice to investors or take into account an individual’s financial
circumstances or investment objectives. This is general investment advice only and does not constitute advice to any person. The
opinions within this document are not intended to represent recommendations to investors, they are the view of BKI Investment
Company Limited as of this date and are accordingly subject to change.
Information related to any company or security is for information purposes only and should not be interpreted as a solicitation of
offer to buy or sell any security. The information on which this presentation is based has been obtained from sources we believe
to be reliable, but we do not guarantee its accuracy or completeness.
Investors should consult their financial adviser in relation to any material within this document.
1. BKI Background - Group Profile, Investment Strategy,
History, Directors and Management
2. 1H 2012 Results - Highlights, Dividends, MER,
Performance
3. Macro Snapshot - Investor Confidence, Valuations, Yields
4. Taking Advantage - Investment Opportunity, Diversification,
Value, Income, Portfolio Movements
3
Agenda
BKI Background
4
5
Group Profile and Investment Strategy
BKI’s investment portfolio has been built on a philosophy of long term
investment with a focus on Australian equities. BKI primarily seeks to
invest in well-managed businesses with a profitable history and with
the expectation of sound dividend and distribution growth.
An investment in BKI gives shareholders access to a diversified
portfolio across most sectors of the market.
BKI aims to generate an increasing income stream in the form of fully
franked dividends, to the extent of available imputation tax credits,
through long-term investment in a portfolio of assets that are also able
to deliver long term capital growth to shareholders.
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History
1980’s Brickworks Limited (BKW) Establishes Share Portfolio
2003 Acquires BKW’s Share Portfolio – BKI lists on the ASX
2004 Merges with Pacific Strategic Investments (Mkt Cap ~$26m)
2007 Renounceable Rights Issue raises $57.0m
Placement raises $49.3m
2008 Becomes internally managed
Takes over Huntley Investment Company (Mkt Cap ~$93m)
2009 BKW divests shares – WHSP becomes substantial shareholder
Share Purchase Plan raises $24.1m
2011 Awarded Listed Investment Company of the Year
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In 2009 WHSP increased their shareholding in BKI to become the largest
shareholder (currently holding 13.7% of BKI shares). Listed in 1903, WHSP is the
second oldest listed company on the ASX and holds investments worth in excess of
$4.6bln.
As an investment group WHSP has a window on the business world through the
operating companies it controls and the investment companies where it has board
representation. WHSP’s long term, patient investment philosophy is dispersed
across many sectors including, Building Products, Property, Coal,
Telecommunications, Financial Services, Pharmaceuticals, Retail and Agriculture.
Washington H. Soul Pattinson
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Directors and Management
Name Position Special Responsibilities
Mr Robert Millner Non-Executive Director and
Chairman
Investment Committee
Remuneration Committee
Mr David Hall Independent Non-Executive
Director
Chairman Audit Committee
Remuneration Committee
Mr Alex Payne Non-Executive Director Chairman Remuneration Committee
Investment Committee
Audit Committee
Mr Ian Huntley Independent Non-Executive
Director
Investment Committee
Remuneration Committee
Audit Committee
Mr Tom Millner Chief Executive Officer Investment Committee
Mr Jaime Pinto Company Secretary
BKI awarded “2011 Listed Investment Company of the Year”.
The award is a great endorsement of an LIC whose major
focus is to invest in quality companies, enabling it to
generate a growing dividend stream and capital growth.
Exciting future for the LIC sector.
Fund Manager of the Year Awards
1H 2012 Results
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11
BKI Result Highlights
1H 2012 1H 2011 Growth
Ordinary Dividend Income $14.34m $12.46m 12.4%
Net Operating Result $14.16m $12.81m 10.5%
Net Operating Profit $16.42m $15.60m 5.2%
Earnings Per Share 3.33cps 3.03cps 9.3%
Dividend Per Share 3.20cps 3.00cps 6.7%
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Dividends Paid
2
4.3 5 5.3
6 6 5.25
6
3.2
1 1
1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
cps cps cps cps cps cps cps cps cps
2004 2005 2006 2007 2008 2009 2010 2011 2012
Ordinary Dividends Special Dividends
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Management Expense Ratio
0.69% 0.71%
0.56%
0.46% 0.46%
0.31%
0.19% 0.18% 0.18%
0.10%
0.20%
0.30%
0.40%
0.50%
0.60%
0.70%
0.80%
2004 2005 2006 2007 2008 2009 2010 2011 1H 2012
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Source: BKI Investment Company Limited, IRESS. Portfolio Returns are measured by change in pre tax NTA and are after all
operating expenses, provision and payment of both income and capital gains tax and the reinvestment of dividends. Total Shareholder
Returns include reinvestment of dividends. Past performance is not indicative of future performance.
BKI Performance as at 29 February 2012
BKI Portfolio
Returns are
measured after
all operating
expenses,
provision and
payment of
income and
capital gains
tax.
BKI Performance 6 Mths 1 Year 3 Years 5 Years 7 Yearsas at 29 February 2012
(pa) (pa) (pa)
S&P/ASX 300 ACC INDEX (XKOAI) 2.6% -6.8% 13.8% -1.7% 4.9%
BKI Total Shareholder Returns 8.7% 2.1% 17.6% 1.8% 5.7%
BKI Share Price Outperformance V's XKOAI 6.1% 8.9% 3.8% 3.5% 0.8%
BKI Portfolio Performance 5.4% 0.1% 14.5% 1.6% 5.9%
BKI Portfolio Outperformance V's XKOAI 2.8% 6.9% 0.7% 3.3% 1.0%
Macro Snapshot
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Inappropriate cash rates
Global funding pressures affecting variable mortgage rates
Uncertainty on the future cost of living and household affordability
House price decline
Commodity price decline
Negativity surrounding weak global economies
Unstable federal government
Rising unemployment
Slow GDP growth
Low credit growth
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Low Investor Confidence
Domestic
Changed risk appetite to investing in Australian shares
Record consumer savings
Hybrid issues putting pressure on ordinary shares
International
High Australian Dollar
Unfavorable federal government policies;
Carbon Tax
Mining Resources Rent Tax
…Leading to a reduced exposure to Australian shares
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Investors’ Defensive Reaction
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Historical PE Multiples (X)
- Global Markets
Valuation – PE Ratios
Australian Historical
PE Ratios (X)
5
10
15
20
25
2001 2003 2005 2007 2009 2011 2013
Australia US Euro UK
6
9
12
15
18
2001 2003 2005 2007 2009 2011 2013
Australia Average
Source: Credit Suisse
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Income – Dividend Yields
Historical Dividend Yields (%)
- Global Markets
Source: Credit Suisse
Australian Historical
Dividend Yield (%)
0%
1%
2%
3%
4%
5%
6%
7%
2001 2003 2005 2007 2009 2011 2013
Australia US Euro UK
2%
3%
4%
5%
6%
7%
2001 2003 2005 2007 2009 2011 2013
Australia Average
Taking Advantage
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Balance sheets of quality companies are robust and dividend
distributions have continued to improve.
Cautious of companies exposed to: Retail, Media and Manufacturing
Focused on our Stock Selection Criteria:
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Investment Opportunity
1. Income Dividend Yields, Franking, Pay Out Ratios.
2. Principal Activity Sustainable Business Model, Competitive Advantage.
3. Debt Levels Gearing Ratios, Net Interest Coverage.
4. Management & Board Ownership, Board Meeting Attendance,
History of creating shareholder wealth.
5. Earnings/Valuations Earnings Profiles, PE Multiples, EV/EBITDA Multiples.
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1H 2012 Portfolio Movements
Major Investments
FY 2012
Dividend
Yield
Industry
Group
(Sub-Sector)
FY 2012
Gearing
(%)
FY 2012
Interest
Cover (X)
Board and
Management
Ownership
FY 2012
PE Multiple
(X)
FY 2012
EPS Growth
(%)
1. Westpac Bank 8.1% Banks n/a n/a ~$36.1m 10.0 -3.3
2. National Aust Bank 7.4% Banks n/a n/a ~$71.5m 9.6 -2.1
3. Fleetwood Corp 5.3% Auto -5.0 n/a ~$129.3m 15.0 1.0
4. Wesfarmers Limited 5.3% Food 19.0 10.4 ~$64.2m 15.3 11.0
5. Telstra Corporation 8.7% Teleco 86.0 9.4 ~$5.4m 11.4 5.0
6. Commonwealth Bank 6.8% Banks n/a n/a ~$31.8m 11.3 1.0
7. QUBE Logistics 2.4% Transport 8.0 6.0 ~$107.0m 16.5 -44.4
Source: IRESS, BKI, Credit Suisse, CCZ, Company Data
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1H 2012 Portfolio Movements
Divestments
FY 2012
Dividend
Yield
Industry
Group
(Sub-Sector)
FY 2012
Gearing
(%)
FY 2012
Interest
Cover (X)
Board and
Management
Ownership
FY 2012
PE Multiple
(X)
FY 2012
EPS Growth
(%)
1. BlueScope Steel 0% Materials 15.4 1.6 ~$2.6m -8.0 23.1
2. Echo Entertainment 1.8%
Consumer
Discretionary 44.1 4.9 ~$1.8m 21.3 -28.5
3. Suncorp Prefs (SBKPB) 5.7% Insurance n/a n/a n/a n/a n/a
4. Westpac Prefs (WBCPA) 5.0% Banks n/a n/a n/a n/a n/a
5. Orica Prefs (ORIPB) 0% Materials n/a n/a n/a n/a n/a
Source: IRESS, BKI, Credit Suisse, Company Data
1 New Hope Corporation 14.3% 11 ANZ Banking Group 2.5%
2 BHP Billiton Limited 8.4% 12 Woodside Petroleum 2.5%
3 Commonwealth Bank 7.9% 13 Metcash Limited 1.9%
4 National Australia Bank 7.7% 14 Coca Cola Amatil 1.7%
5 Westpac Banking Corp 5.2% 15 Westpac Pref Shares 1.6%
6 Telstra Corporation 4.1% 16 QBE Insurance Group 1.5%
7 Campbell Brothers 3.9% 17 Invocare Limited 1.3%
8 Wesfarmers Limited 3.8% 18 ARB Corporation 1.3%
9 Woolworths Limited 3.1% 19 TPG Telecom Limited 1.2%
10 AGL Energy Limited 2.7% 20 ASX Limited 1.1%
Cash & cash equivalents 5.9%
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Diversification Top 20 Investments - As at 29 February 2012
Diversification S&P/ASX300 Acc Indices
25 Source: BKI Investment Company, IRESS
12 Month Total Shareholder Returns as at 29 February 2012.
Larger portfolio holdings V’s Index returns; diversification delivering performance.
-20%
-10%
0%
10%
20%
30%
40%
Telco Services
Consumer Staples
Industrials Financials S&P/ASX 300 Acc Index
Energy Materials
CPB
BHP
WPL
NHC
WOW
WES NAB CBA
WBC
TLS
BKI
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Value
After adjusting BKI’s closing share price as at 29 February 2012 for the
Ordinary Interim Dividend of 3.2cps, BKI is currently trading at a 12% discount
to the Pre Tax NTA.
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
$1.60
$1.70
Prem/Disc % Pre Tax NTA BKI Share Price
Rates offered by banks and other financial institutions will negatively impact the
level of income received by some investors. BKI believe that the lower levels of
income received from cash and other fixed interest products could be a catalyst
for retail investors to search for income within the equities market.
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Income
BKI has a strong
dividend payout
ability with
abundant franking
credits.
BKI’s historical
grossed up
dividend yield was
8.7% as at 29
February 2012.
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
BKI Grossed Up Dividend Yield 90 Day Bank Bill
Office Level 2, 160 Pitt Street
Sydney NSW 2000
Telephone +61 2 9210 7000
Fax +61 2 9210 7099
Web www.bkilimited.com.au
ABN 23 106 719 868
Low Cost
Low Risk
High Yield…
…all through BKI.ASX
www.bkilimited.com.au