Fall 2014 Advisory Board Presentation - University of …...Portfolio Performance Net of Cash •...

All figures shown in $CAD millions except share price or otherwise noted

Fall 2014 Advisory Board Presentation

SAF Student-Run Investment Fund Team December 1st, 2014

Agenda

▲ December 2014 SAF Student-run Investment Fund Team

▲ New Initiatives

▲ Overview

▲ Macro and Sector Outlook

▲ Fund Performance

▲ Recommendations

3

Fall 2014 SAF Student-run Investment Fund Team

Team Picture

L-R (Front): Jonathan Chan, Mohtasim Hakim, Jeffrey Wong, Henry Yu, Camille Tan, Adnan Khan, Christopher Chan, Andy Lu, Salman Ahmed, Daniel Zhang, Summer Zhang, Yidi Xiong, Sophia Chen L-R (Back): Daniel Wu, Michael Blake, Kevin Fung, Mobeen Malik, Thanoozan Thangaraja, Hasanain Habib-Nayany, Jason Chen, Karan Balachandar , Taha Shayeq, Andrew Xue, Louis Hong, Krishna Murali Missing: Yushu Yang

Spring 2012

Inception

Spring 2013 New Team Structure

Fall 2013 Course Credit Enter into U.S.

Spring 2014 New Analyst

Program

Fall 2014 Faculty Discussions &

Assigned Marks

4

Overview – Current Team Structure

Jeffrey Wong Michael Blake Louis Hong Henry Yu

Hasanain Habib-

Nayany Jonathan Chan

Christopher Chan

Sophia Chen Daniel Zhang

Yidi Xiong

Adnan Khan Daniel Wu Jason Chen

Karan Balachandar Summer Zhang

Kevin Fung Mohtasim Hakim

Consumer Industrials Healthcare Energy

Industrials & TMT

Andrew Ecclestone: Financials, Healthcare, & Materials Craig Geoffrey: TMT, Energy, & Utilities

Ranjini Jha: Consumer & Industrials

Faculty

Andrew Xue

Mobeen Malik Camille Tan

Taha Shayeq Salman Ahmed

Thanoozan Thangaraja

N/A

TMT Utilities

Krishna Murali, Louis Hong, Andrew Xue Executive Team

Materials Andy Lu

Yushu Yang

Financials

Energy & Utilities Materials & Healthcare Consumer Financials

5

Overview – 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 and Faculty

Speakers

Weekly Meetings with

Faculty

Bloomberg / Capital IQ Training Sessions

SAF Student-run Investment

Fund Panel

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

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

8

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…

9

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”)

10

Overview – Lessons Learned ▲ The Fund has grown tremendously over the last 2 years ▲ Selected quotes from the Fall 2014 team members

Adnan Khan, Junior Analyst, Energy Sophia Chen, Senior Analyst, Healthcare

Henry Yu, Junior PM, Consumer Andrew Xue, Senior PM, Financials

“It is important to delve deeper than just the numbers when telling the story of a company. For instance, it is important to understand why a company is trading at a discount to its peers”

“You truly understand a complex business when you are able to distinguish the key fundamentals from the details, but are ready to answer questions about the details”

“Though I was there to pass on my knowledge and experiences, my analysts taught me the importance of time management, work review and delegation”

“Finding the right stock is only the first step. As a portfolio manager, determining how the stock fits with the overall portfolio is just as important”

11

Overview – Sample Co-op Placements

Analyst, Investment

Banking Division

Analyst, Investment

Banking Division

Analyst, Investment

Banking Division

Analyst, Private Equity


Analyst, Public Markets

Analyst, Investment

Banking Division

Analyst, Structured Products

Analyst, Investment

Banking Division

Associate, Equity

Research

Analyst, Alternative

Assets


12

Overview – Sample Full-Time Placements 2014 and 2015

Andrew George-Parkin

• TDAM, Bond Analyst Analyst (2014)

Michael Liu

• CIBC, IB Analyst (2014)

Sunny Guo

• UBS, Trading (2014)

Michael Wang


Anqi Wang


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)

• KPMG Global Infrastructure, Advisory Practice (2014)

William Li

• Jarislowsky Fraser Limited (2014)

Jiatong Ma Krishna Murali Louis Hong

• Goldman Sachs, IB

Analyst (2015)

• Susquehanna International Group (2015)

Macro and Sector Outlook

14

Macro Outlook Key Themes

Sectors

Global economic outlook continues to improve Growing household debt levels are a worry

Global Macro

Expect low interest rate environment Given continued low inflation and asset buybacks in Europe

Interest Rates

Slowing developing economies keeping commodity prices flat Oil prices

Commodities

Consumer TMT

Overweight

Healthcare Industrials Materials

Neutral

Energy Financials

Underweight

15

Global Macro Outlook ▲ Consumer spending is on the uptick, driven

by pent-up demand and rising real wages; the concern however is the continuing increase in household debt levels

North America Employment Rate Pent-Up Consumer Demand

Household Debt to Disposable Income Industrial Production (yoy % change)

▲ Global economic outlook continues to improve; some emerging market concerns; growth continues in North America and other developed markets

95 100 105 110 115 120

2004 2006 2009 2012

Canada US

(20.0%)

(10.0%)

-

10.0%

20.0%

1992 1997 2003 2008 2013

Global US-

30%60%90%

120%150%180%

1990 1993 1996 1999 2002 2005 2008 2011

16

Interest Rates ▲ We do not see the Fed unilaterally raising

rates amidst continued low inflation and easing from Europe; little desire to increase spreads between US and German yields

Inflation vs. Central Bank Rates But 10Y Rate Trends Down

Germany-US Rate spreads Short Term Rise From Tapering

▲ While Fed taper led to a short-term rise in rates, overall rate trend continues to move downward, and we expect a continued low interest rate environment

-1.0%2.0%3.0%4.0%5.0%

2010 2010 2011 2012 2013 2014

Can US

17

Commodity Prices

▲ Oil has continued its tumble over the last month, with WTI now below $70/bbl

▲ While short-term prices continue to fall amidst no shortage of global supply

▲ Long-term oil prices not sustainable at this level, as costly projects begin to price out

Sluggish Metal Prices Continue

Crude Oil Prices Metals Prices

▲ While global recovery remains stable, concerns over emerging markets continue to weigh on prices of base metals

▲ Precious metals prices remain tepid, as the US continues to post strong economic growth and the Fed continues to taper

-

20

40

60

80

100

120

140

160

2009 2010 2011 2013 2014

WTI Brent

Buying Opportunity in Energy?

-

50

100

150

200

250

300

2009 2009 2010 2011 2012 2013 2014

Base Metals Precious Metals

Fund Performance

Portfolio Returns Since Inception

• Includes 2.2% dividend yield All figures are C$ basis

Net Asset Value

Fund NAV NAV Return TRI Benchmark Relative Return Avg. Cash % of Portfolio Fiscal Year ’12 10.49 4.93% 11.22% -6.29% 42.9% Fiscal Year ’13 12.26 18.61% 20.82% -2.21% 21.7%

Spring ’14 12.58 2.60% 7.32% -4.72% 41.7% Fall ’14 12.08 -3.97% -1.98% -2.00% 33.7%

Since Inception 12.08 20.76%* 38.90% -18.14% 33.4%

Total Returns

19

12.08

13.89

9.00

10.00

11.00

12.00

13.00

14.00

15.00

Jul-12 Nov-12 Feb-13 May-13 Sep-13 Dec-13 Mar-14 Jul-14 Oct-14

Fund NAV Benchmark

Portfolio Characteristics

All figures are C$ basis

Average Portfolio Return 0.69%

Portfolio Standard Deviation 1.73%

Average Benchmark Return 1.20%

Benchmark Standard Deviation 2.07%

Portfolio Beta 0.62

Portfolio Alpha -0.12%

Sharpe Ratio 0.30

Value at Risk (5%) -$3,674

All returns are listed on a monthly basis Historical

Looking Forward

Weighted Average Beta 0.89

20

Portfolio Performance Net of Cash

• Includes 2.2% dividend yield All figures are C$ basis

Net Asset Value Excluding Cash

Characteristics

21

12.81

13.89

9.00

10.00

11.00

12.00

13.00

14.00

15.00

Jul-12 Nov-12 Feb-13 May-13 Sep-13 Dec-13 Mar-14 Jul-14 Oct-14

Fund NAV Ex-Cash Benchmark

Average Portfolio Return 0.91%

Portfolio Standard Deviation 2.29%

Portfolio Beta 0.82

22

Security and Sector Returns (Fall 2014)


Security Returns Sector Returns

-60% -40% -20% 0% 20% 40%

VSI

SU

SAFM

RRX

PRA

OLED

NA

MYGN

GIL

G

FTS

D.UN

CPX

CCA

BNS

BDI

AX.UN

AGU

-60% -40% -20% 0% 20%

Utilities

Telecommunication

Materials

Information Technology

Industrials

Healthcare

Financials

Energy

Consumer Staples

Consumer Discretionary

TSX Sector Fund Return

Portfolio Breakdown November 28, 2014


Note: According to the Fund SIPP, portfolio weighting in any one security should be no greater than 10%.

Ticker Name Value (in $CAD) NASDAQ:MYGN Myriad Genetics 10,067.57 TSX:SU Suncor Energy 9,531.60 TSX:BNS Scotiabank 8,749.44 TSX:GIL Gildan Activewear 8,658.00 TSX:CCA Cogeco Cable 6,825.00 NYSE:VSI Vitamin Shoppe 6,174.40 TSX:FTS Fortis 5,920.20 TSX:NA National Bank 5,704.20 TSX:G Goldcorp 5,565.60 TSX:AX.UN Artis REIT 5,502.00 TSX:AGU Agrium 5,485.00 NYSE:PRA Proassurance 5,445.15 TSX:CPX Capital Power 5,424.00 NASDAQ:OLED Universal Display 5,218.00 NASDAQ:SAFM Sanderson Farms 4,967.55 TSX:D.UN Dream Office REIT 4,813.20 TSX:BDI Black Diamond Grp 4,302.00 TSX:RRX Raging River 3,028.20 Market Value 111,417.46 Cash & Fixed Income Securities 58,985.89 Portfolio Value 170,403.35

23

MYGN 9%

SU 9%

BNS 8%

GIL 8%

CCA 6%

VSI 6% FTS

5% NA 5%

G 5%

AX.UN 5%

AGU 5%

PRA 5%

CPX 5%

OLED 5%

SAFM 4%

D.UN 4%

BDI 4%

RRX 3%

Portfolio Breakdown Post-Trade November 28, 2014


Note: According to the Fund SIPP, portfolio weighting in any one security should be no greater than 10%.

Ticker Name Value (in $CAD) TSX:BNS Scotiabank 13,406.40 NASDAQ:MYGN Myriad Genetics 10,067.57 NASDAQ:FOSL Fossil Group 10,046.59 NASDAQ:SAFM Sanderson Farms 9,935.10 TSX:CCA Cogeco Cable 9,750.00 NASDAQ:OLED Universal Display 9,545.22 TSX:SU Suncor Energy 9,531.60 TSX:CPX Capital Power 9,492.00 NYSE:VSI Vitamin Shoppe 9,207.44 TSX:PSI Pason Systems 9,012.50 TSX:GIL Gildan Activewear 8,658.00 TSX:BDI Black Diamond Grp 8,280.00 TSX:AX.UN Artis REIT 7,860.00 TSX:RRX Raging River 6,180.00 TSX:NA National Bank 5,740.20 TSX:G Goldcorp 5,565.60 TSX:AGU Agrium 5,485.00 TSX:D.UN Dream Office REIT 4,813.20 Market Value 152,576.42 Cash & Fixed Income Securities 17,696.94 Portfolio Value 170,273.35

24

AGU 4% AX.UN

5%

BNS 9%

BDI 5%

CPX 6%

CCA 6%

D.UN 3%

GIL 6%

G 4%

MYGN 7%

NA 4%

RRX 4%

SAFM 7%

SU 6%

OLED 6%

VSI 6%

FOSL 7%

PSI 6%

Large Cap 32%

Mid Cap 46%

Small Cap 22%

CDN 68%

US 32%

Portfolio Breakdown November 28, 2014

All figures are C$ basis 25

Consumer Discretionary

18%

Staples [PERCENTAGE]

Energy 10%

Financials 21%

Healthcare 7%

Tech PERCENTAGE]

Industrials 11%

Materials 7%

Telecom [PERCENTAGE]

Utilities 6%

0%5%

10%15%20%25%30%35%40%

Consumer Energy Financials Healthcare Industrials Materials TMT Utilities

Portfolio S&P/TSX S&P 500

26

5 Year Correlation Analysis

AGU AX.UN BDI BNS CCA CPX D.UN FOSL GIL G MYGN NA OLED PSI RRX SAFM SU VSIAGU 100%

AX.UN 28% 100%BDI 26% 29% 100%BNS 36% 35% 29% 100%CCA 3% 5% 6% 15% 100%CPX 18% 32% 12% 29% 7% 100%

D.UN 20% 53% 17% 23% 19% 24% 100%FOSL 44% 24% 29% 30% 10% 16% 17% 100%

GIL 26% 27% 13% 35% 6% 11% 16% 26% 100%G 20% -1% 15% 17% -2% 7% 1% 11% 0% 100%

MYGN 29% 21% 22% 23% 6% 9% 12% 20% 10% 9% 100%NA 33% 34% 29% 61% 16% 23% 22% 21% 25% 10% 16% 100%

OLED 41% 29% 20% 30% 1% 22% 27% 47% 23% 10% 8% 17% 100%PSI 13% 9% 22% 12% 7% 3% 13% 16% 1% 10% 15% 8% 10% 100%

RRX 20% 1% 26% 15% -8% 6% 1% 25% 20% 14% 7% 13% 14% 19% 100%SAFM -2% 7% 16% 19% 17% 6% 16% 14% 18% 2% 10% 12% 5% 3% -1% 100%

SU 50% 27% 40% 41% 5% 17% 22% 39% 20% 30% 28% 32% 36% 30% 48% 8% 100%VSI 21% 13% 21% 23% 5% 11% 14% 15% 16% -3% 17% 23% 24% 5% 0% 10% 29% 100%

Recommendations

Valuation

Company Overview

Buy Recommendation – First Quantum Minerals (TSX:FM)

▲ Strong Fundamentals for Copper ▲ Sector Leading Growth in Copper Production ▲ Track Record of Cost Leadership

Share Performance

Drivers & Risks Drivers

Risks ▲ Copper Price Risk ▲ Exposure to Uncertain Fiscal Regimes ▲ Strong Reliance on Projects in the Pipeline

Canada’s Leading Pure Play Copper Company Market Data Metals Exposure

Share Price EV (mm) P/E P/B EV/EBIT Div. Yield D/E Debt Rating Beta

$19.46 $18,336

18.6x 1.08x 15.8x

0.88% 0.45

B+ 1.67

NAV Discount Rate NAVPS Multiple Cash Cost Growth

7.0% 0.9x 2%

Limit Price Weighting Target Price Current Price Upside

$19.10 100%

$22.35 $19.46 17.0%

28

12%

15%

73%

Other Nickel Copper

(20.0%)

-

20.0%

40.0%

60.0%

Nov-13 Mar-14 Jun-14 Sep-14

First Quantum S&P/TSX Capped Materials

Valuation

Company Overview

Buy Recommendation – Fossil Group Inc. (NASDAQ:FOSL)

▲ Current upcoming products & partnerships ▲ International & domestic growth strategy ▲ Undervaluation

Share Performance


Risks ▲ Undetermined impact of smart watches ▲ License agreement renegotiations ▲ Requirement for skilled labour

Fossil designs and distributes fashion accessories Market Data Revenue by Segment

Share Price EV (mm) P/E EV/EBITDA ROE Div Yield D/E Debt Rating Beta

$110.16 $6,044

16.0x 9.0x

38.2% 0.0%

65.1% NR

1.74

29

(40.0%)

(20.0%)

-

20.0%

40.0%

Nov-13 Feb-14 May-14 Aug-14 Nov-14FOSL Consumer Disc. Index

Watches 77%

Leather 13%

Jewelry 7%

Other 3%

DCF Comps Historical

WACC Rev. CAGR

8.8% 6.2%

Share Price Weighting Target Price Current Price Upside

$156.33 77.5%

$130.00 $110.16

18.2%

$71.71 10%

$107.51 12.5%

$71.71 $162.36

Valuation

Company Overview

Limit Buy Recommendation – Masimo Corporation (NASDAQ: MASI)

▲ Recurring revenue from robust business model ▲ Near-Term OEM partnerships (GE and Philips) ▲ Continuous innovation

Share Performance


Risks ▲ Patent expiration ▲ Weak margins from direct sales force ▲ Pricing pressures on contract renewals

Market leader in pulse oximetry Market Data Revenue by Segment

Share Price EV (mm) P/E EV/EBITDA ROE Div Yield D/E Debt Rating Beta

$26.47 1,394 16.9x 14.2x

20.7% 0.0% 0.0%

NR 1.03

DCF WACC Revenue CAGR (2014 – 2023) Historical CAGR (2009 – 2013) EV/EBITDA Multiple

8.53% 6.1%

11.6% 12.4x

Target Share Price Current Price Limit Buy Price Upside

$28.00 $26.47 $23.50 19.1%

$20 $42

30

(40.0%)

(20.0%)

-

20.0%

40.0%

Dec-2013 Mar-2014 Jun-2014 Sep-2014

Masimo Corporation S&P 500 Health Care Index

Royalty/License 6%

Product Sales 94%

Valuation

Company Overview

Limit Buy Recommendation – Pason Systems Inc. (TSX:PSI)

▲ Industry leader in EDR market which allows for cross-selling of complimentary products

▲ Growth opportunities through robust pipeline ▲ Poised for international expansion with joint

ventures in the Middle East

Share Performance


Risks ▲ Correlation with oil ▲ Competitive landscape in US and technology

Industry leader in oilfield instrumentation equipment Market Data Revenue by Segment

Share Price EV (mm) P/E EV/EBITDA ROE Div. Yield D/E Debt Rating Beta

$25.80 $2,092.0

24.3x 10.7x

23.0% 2.5% 0.0%

NR 0.83

DCF WACC Forecasted 5 Year Revenue CAGR EV/EBITDA Multiple

8.02% 8.1% 10.4x

Share Price Weighting Target Price Current Price Upside

$30.52 100%

$30.52 $25.80

18% $23.20 $35.70

31

(20.0%)

-

20.0%

40.0%

60.0%

Nov-13 Feb-14 May-14 Aug-14 Nov-14

PSI Industrial Index

Gas 8% Other

9%

ADR 11%

C&S 14% PVT

15%

EDR 43%

Buy

Existing Holdings

32

Hold

(10.0%)

-

10.0%

20.0%

30.0%

Nov/2013 Feb/2014 May/2014 Aug/2014 Nov/2014

FTS TSX Composite Utilities Index

Stock Performance

Sell Recommendation – Fortis (TSX:FTS)

Portfolio Data

Sell Rationale Events

Original Value Market Value Purchased Capital Gains Div. Yield

$5,007.0 $5,920.5

July 2012 18.2% 8.4%

Market Data Price Market Cap EV/EBITDA 5Y Beta Dividend

$37.94 10,386.8

12.5x 0.29

3.4%

A

B Short-term performance to be heavily reliant on successful integration process of UNS acquisition

Dividend yield and other valuation metrics no longer favourable given recent run-up

December 2013 – Fortis announces $4.3B acquisition of UNS Energy

November 2014 – Fortis announces strategic review of real estate portfolio

33

A

B

Believe that market has over-optimistic view of real estate holding monetisation options

(20.0%)

20.0%

60.0%

100.0%

140.0%

Nov/2011 May/2012 Nov/2012 May/2013 Oct/2013 Apr/2014 Oct/2014

PRA Financial Index

Stock Performance

Sell Recommendation – ProAssurance Corporation (NYSE:PRA)

Portfolio Data

Sell Rationale Events

Original Value Market Value Purchased Capital Loss Div. Yield

$5,200.7 $4,734.5

Dec 2013 -9.0% 2.4%

Market Data Price Market Cap P/TBV 5Y Beta Dividend

$45.09 2,578.4

1.3x 0.65

2.7%

A

B

C

Lack of organic growth in the competitive healthcare professional liability market

Macro environment forces PRA to reinvest at low interest rates, depressing investment returns

January 2013 – ProAssurance closes $154 million Medmarc Insurance Group acquisition

December 2013 – Fund purchases 105 shares

January 2014 – ProAssurance closes $205 million Eastern Insurance Holdings acquisition

34

Persistent rise in underwriting expenses leading to combined ratio deterioration

B

C A

35

Other Stock Pitches

▲ Designs and manufactures connectors, cables and senor products

▲ Overvaluation on EV/EBITDA, and P/E metrics compared to peers

▲ Highly fragmented industry with increasing market share only possible through acquisitions

▲ Develops and provides end-to-end green computing solutions and servers for enterprises, data centres and cloud computing

▲ Overvaluation on EV/EBITDA, and P/E metrics compared to peers

▲ Industry primarily dominated by HP, Dell and IBM

36

Industry Mentors

Mike Williams Jin Li

Nader Ahmed 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

37

Industry Mentors

Michael Liu Nick Gill Jonathan Sue David Lee

38

Partners

Craig Geoffrey Ranjini Jha Andrew Ecclestone

John Gort, Chair

Jeffrey Stacey Thomas Scott Dennis Huber Aazar Zafar

Faculty

Advisory Board

Dan Lavric Alan Douglas

Lynn Graham

Student Relations

Appendices

1 Year Performance

Current Holding – Suncor Energy 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 ROE 2013 Dividend Yield D/E Beta

$36.11 $52,409 17.0x 11.6x

5.3x 5.1x

1.3x 1.4x

9.7% 3.1%

28.4% 1.64

Recent News

Valuation Fund Portfolio Data Investment Outlook Recommendation Previous Target Price Updated Target Price

Hold $45.00 $42.50

Investment Thesis •Downstream integration continues to allow capture of price differentials Investment Risks •Upside reliant on continued reserve development; projects risk being priced out

▲ 22% dividend increase in 2014

▲ Oil production slight miss through Q3 14

▲ Cash operating costs continue to improve

▲ 2014 capex spend 13% below original estimate

▲ Impairment charges for Joslyn oil sands project and Libya assets

40

Current Price Shares Owned Market Value Purchase Date Purchase Price Return – Inception Return – TTM Return – YTD

$36.11 260

$9,389

3/22/13 $32.00

12.8%

-3.0% -0.8%

80 85 90 95

100 105 110 115 120 125 130

Nov-13 Jan-14 Feb-14 Apr-14 Jun-14 Jul-14 Sep-14 Oct-14

SU TSX Energy Index

30.00 35.00 40.00 45.00 50.00

EV/BoE per D

EV/2P Reserve

EV/EBITDA

DCF NAV Model

1 Year Performance

Current Holding – Raging River Exploration (TSX:RRX)


$6.21 $1,119

15.7x 11.3x

7.1x 4.6x

3.1x 3.1x

13.6% - 6.5% 2.17

Recent News


Buy $11.75 $8.50

Investment Thesis •Very low cash operating costs •High positive leverage to WTI Investment Risks •Very price sensitive to oil •Valuation dependent on continued resource base development

▲ 30% fall in oil prices over last three months

▲ Q3 production well ahead of estimates

▲ 2015 guidance of average daily production of 12.5mBoE

▲ Average IP90 for 2014 at 47bbl/d

41


$6.21 490

$3,041

7/25/14 $10.09

-38.4%

-1.4% -7.9%

4.00 5.00 6.00 7.00 8.00 9.00 10.00

EV/BoE per D

EV/2P Reserve

EV/EBITDA

DCF NAV Model

70

90

110

130

150

170

190

Nov-13 Jan-14 Mar-14 Apr-14 Jun-14 Aug-14 Sep-14 Nov-14

RRX TSX Energy Index

1 Year Performance

Current Holding – Capital Power Corp. (TSX:CPX)


$27.13 $2.263 27.1x 17.8x

10.0x 8.4x

0.9x 1.1x

7.9% 5.0%

52.3% 0.38

Recent News


Hold $29.00 $29.50

Investment Thesis •Continued organic growth potential •Positive leverage to Alberta economy Investment Risks •Potential cost and construction delays

▲ 8% dividend increase in 2014

▲ Construction timeline continues to track on schedule

▲ Sheperd Energy Natural Gas [400MW] Q1 2015

▲ K2 Wind Project [90MW] Q3 2015

42


$27.13 200

$9,389

3/22/13 $21.64

25.4%

29.8% 27.3%

20.00 24.00 28.00 32.00 36.00

EV/EBITDA

Dividend Yield

DCF EBITDA Multiple

DCF FCF Multiple

80

90

100

110

120

130

140

Nov-13 Jan-14 Feb-14 Apr-14 Jun-14 Jul-14 Sep-14 Oct-14

CPX TSX Utilities Index

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 P/TBV ROE 2013 Dividend Yield D/E Debt Rating

$64.98 $3,173

12.7x 15.3x

6.7x 6.5x 2.1x NM

14.7% 2.2%

83.7% 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

$64.98 105

$6,823

12/4/2013 $47.88

36.9% 38.2% 38.9%

Recommendation Original Target Price Updated Target Price

Hold $66.75 $68.00

Investment Thesis •Strong organic growth •Strategic acquisitions •Strong cost management Investment Risks • Industry saturation •Wireless substitution •Regulatory risks

▲ FY2014 results (11/1/2014)

▲ Canadian operations to become first to include Netflix on cable set top boxes

▲ Introduction of TiVo services in Canada (10/31/2014)

43

-20%

0%

20%

40%


Cogeco Cable S&P/TSX Telecommunications Index

$50 $60 $70 $80 $90

DCF

EV/EBITDA

P/E


Current Holding – Black Diamond Group Limited (TSX:BDI)


$18.04 $775 25.6x 14.8x 11.1x 6.1x 1.9x 2.1x

13.8% 5.3%

16.1% NR

Recent News


$18.04 239

$4,312

3/28/2013 $20.96

-9.4%

-36.9% -34.7%


Hold $35.50 $27.00

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 Q3 2014 (11/6/2014)

▲ FY2015 CapEx budget of $85mm does not include LNG projects

44

-40%

-20%

0%

20%

40%


Black Diamond S&P/TSX Industrials Index

$10 $20 $30 $40 $50

DCF - Growth

DCF - Multiple

NTM P / E:

LTM P / E:

LTM EV / EBITDA:

NTM EV / EBITDA:


Current Holding – Universal Display Corp (NASDAQ:OLED)


$27.74 $1,267

73.2x 15.0x 33.4x 13.5x

2.9x 3.6x

21.5% 0

0.0% NR

Recent News


$27.74 164

$4,549

7/30/2014 $30.05

-23.2% -23.2% -23.2%


Hold $38.30 $34.20

Investment Thesis •Patented technology (PHOLED) •Key customer relationships Patent pipeline Investment Risks •Revenue dependency on critical customers •Technology obsolescence •Patent expiration

▲ Announced Q3 2014 results (11/6/2014)

▲ Increased proliferation and application and advancement of OLED technology (mobile phone resolutions, virtual reality simulators), smart watches

45

-40%

-20%

0%

20%

40%


OLED iShares US Tech

Major DCF Assumptions (100% DCF Value)5-year revenue CAGR 28.5%5-year EBITDA CAGR 27.8%WACC 10.6%Terminal Multiple 16.2xTarget Price $34.30Current Price $27.74Upside 23.6%

1 Year Performance vs. Sector Index

Current Holding – Agrium Inc. (TSX:AGU)


$109.50 $16,192

17.5x 14.3x

11.3x 9.0x 2.0x 3.4x 15.7% 3.0%

29% BBB

Recent News


$99.61 50

$5,634

11/30/12 $101.41

15.1%

20.0% 6.9%


Hold $120.76 $126.00

Investment Thesis • Integrated value chain •Diversified business mix •Undervalued retail business Investment Risks •Volatile commodity prices •Production difficulties • Integration risk

▲ Offers $500M debentures (11/13/2014)

▲ Increase in dividend (11/3/2014)

▲ ValueAct Capital ownership announcement (10/24/2014)

$110 $126

46

$80.00 $120.00 $160.00

52W Range

Sum of Parts

DCF - EM

DCF - PG

-20%

0%

20%

40%


Agrium Inc. S&P/TSX Capped Materials


Current Holding – Goldcorp Inc. (TSX:G)


$23.48 $19,113

NM 20.4x

5.4x 8.9x

0.9x 0.9x

(3.7%) 2.9%

14% BBB+

Recent News


$23.48 240

$5,635

11/30/12 $35.30

(31.7%)

(5.0%) (23.0%)


Hold $51.06 $25.50

Investment Thesis •Unhedged exposure to gold •Robust product pipeline •Focus on low risk operations Investment Risks •Movement of gold prices •Currency risk •Development risk

▲ Missed production estimates in Q3 results (10/30/2014)

▲ First commercial production at Éléonore and Cerro Negro (10/2/2014)

▲ Delayed production at El Sauzal (9/2/2014)

47

$21.84

$25.50 $5.87 $2.51

Producing Assets DevelopingAssets

Other Assets NAV

-20%

0%

20%

40%


Goldcorp Inc. S&P/TSX Capped Materials

Inception Performance vs. Sector Index

Current Holding – Myriad Genetics Inc. (NASDAQ:MYGN)


$33.20 $2,423

18.4x 15.6x

9.0x 9.1x

3.4x 7.1x (19.5%) 0.0%

0% --

Recent News


$33.20 266

$8,831

07/25/14 $37.32

(11.0%)

(11.0%) (11.0%)


Hold $45.15 $44.00

Investment Thesis •Growth in MDx industry •Economic moat in MDx •Robust product pipeline Investment Risks • Increasing competition •Management execution •Legal risk

▲ myRisk reports 96% growth in Q1 earnings with increase in operating expenses (11/4/2014)

48

$34.89 $44.00

$20 $30 $40 $50 $60

52W RangeHist. P/E

Hist. EV/EBITDAComp. EV/EBITDA

DCF - PGDCF - EM

-40%

-20%

0%

20%

40%

60%


Myriad Genetics Inc. S&P 500 Healthcare Sector Index


Current Holding – Gildan Activewear Inc. (TSX:GIL)


$65.45 $8,107 19.1x 22.4x

13.5x 16.6x

3.9x 4.8x

20.4% 0.7%

7.0% NR

Recent News

Valuation Fund Portfolio Data Investment Outlook Recommendation Original Target Price Updated Target Price

Hold $70.60 $75.00

Investment Thesis •Dominance in printwear •Growth in branded apparel • Increased production Investment Risks •Valuation •Cotton price volatility •Key customer dependence

▲ Q3 2014 results ▲ Completion of Doris

acquisition

49

(5.0%)

10.0%

25.0%

40.0%

GIL Consumer Disc. Index

Current Price $65.45

Target Price $75.00

- $50 $100 $150 $200

DCF - Perpetuity

DCF - Exit Multiple

Historical(EV/EBITDA)

Historical (P/E)

Comps(EV/EBITDA)


$65.45 130

$8,509

3/25/14 $54.63

19.8%

19.8% 19.8%


Current Holding – Sanderson Farms (NASDAQ:SAFM)

Valuation Metrics Recent News

Valuation Fund Portfolio Data Investment Outlook

Investment Thesis •Added capacity •Consumer preference •Big bird deboning Investment Risks •Prices of competing meats •High crop prices • Increasing short interest

50

(10.0%)

-

10.0%

20.0%

30.0%

40.0%

50.0%

SAFM Consumer Staples Index

Current Price, $86.02

Target Price, $95.00

- $40 $80 $120 $160 $200

DCF - Exit Multiple

Historical (EV/EBITDA)

Historical (P/E)

Comps (P/E)

Comps (EV/EBITDA)

▲ Construction of Palestine, Texas big bird deboning facility

▲ Q3 2014 results


$86.02 50 $4,301

7/30/14

$100.30

(14.2%) (14.2%) (14.2%)


Hold $113.00 $95.00

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

$86.02 $1,985

15.4x 9.8x

7.1x 4.9x

2.4x 2.4x

27.7% 1.0%

2.4% NR


Current Holding – Vitamin Shoppe (NYSE:VSI)


$48.03 $1,483

23.3x 22.0x 10.6x

9.5x 2.4x 5.6x

11.1% 0.0%

0.0% BB

Recent News


$48,93 114

$5,475

7/30/14 $43.33

10.8%

10.8% 10.8%


Hold $55.42 $55.00

Investment Thesis •Price, selection and service • Increased retail presence •Merger/acquisition potential Investment Risks •Fragmented industry •Negative media exposure •Acquisition integration

▲ Q3 2014 results ▲ Acquisition potential

announcement

51

(40.0%)

(25.0%)

(10.0%)

5.0%

20.0%

35.0%

50.0%

VSI Consumer Staples Index

Current Price $48.03

Target Price $55.00

- $20 $40 $60 $80 $100 $120

DCF - Perpetuity

DCF - Exit Multiple

Historical EV / EBITDA

Historical P / E

Comps NTM EV / EBITDA


Current Holding – National Bank (TSX:NA)

Valuation Metrics Share Price Market Cap (mm) P/E CT1 Capital Ratio P/TBV ROE ROCE Dividend Yield

$53.13 $17,462 12.1x 9.1%

2.9x 16.5%

18.6% 3.6%

Recent News


Hold $47 $65

Investment Thesis •Strong Wealth Management •Strong Financial Markets Investment Risks •Lack of Geographical Diversity •Complicated Regulatory Environment

▲ Q3 2014 results

52


$53.13 108

$5,740

7/31/12 $37.38

30.4%

19.8% 20.3%

35 45 55 65 75

52 Week Range

DDM

Forward PEG

LTM P/Book

NTM P/E

LTM P/E

(10%)

-

10%

20%

30%

Nov-13 Nov-14National Bank of Canada S&P/TSX Capped Financials Index

19.8%

13.8%


Current Holding – Bank of Nova Scotia (TSX:BNS)

Valuation Metrics Share Price Market Cap (mm) P/E CT1 Capital Ratio P/TBV ROE ROCE Dividend Yield

$70.50 $85,769 12.0x

13.0% 2.6x

15.2% 16.4%

3.7%

Recent News


Increase $78 $80

Investment Thesis •Strong capital position •Solid risk management • International exposure Investment Risks •Geopolitical instability •Complicated regulatory environment

▲ Q3 2014 results ▲ Announced series of

charges totaling $451M, including restructuring of Canadian and International operations

53


$70.50 190

$13,406

3/22/13 $59.18

23.1%

11.8% 10.1%

$40 $50 $60 $70 $80 $90 $100

52 - Week Range

DDM

LTM P/E

NTM P/E

LTM P/BV

LTM P/TangBV

NTM PEG

(10%)

-

10%

20%

Nov-13 Nov-14The Bank of Nova Scotia S&P/TSX Capped Financials Index

12.1%13.8%


Current Holding – Artis REIT (TSX:AX.UN)

Valuation Metrics Share Price Market Cap (mm) P/AFFO P/FFO P/TBV ROE Distribution Yield FFO Payout Ratio

$15.88 $2,159 13.7x

11.5x 0.9x

5.2% 6.8%

74.7%

Recent News


Increase $18 $17

Investment Thesis •Well positioned in Canada and US •Rent increase on renewals Investment Risks •Declining occupancy rate •High rate exposure


acquisition

54


$15.88 495

$7,860

7/31/13 $14.50

18.4%

18.2% 15.7% $9 $14 $19 $24 $29 $34

52 Week Range

NAV (Cap: 5.43 -7.43%)

LTM P/FFO

LTM P/AFFO

(10%)

-

10%

20%

Nov-13 Nov-14Artis Real Estate Investment Trust S&P/TSX Capped Financials Index

18.2%

13.8%


Current Holding – Dream Office REIT (TSX:D.UN)

Valuation Metrics Share Price Market Cap (mm) P/AFFO P/FFO P/TBV ROE Distribution Yield FFO Payout Ratio

$26.96 $3,014 11.2x

9.6x 0.8x

12.7% 8.3%

56.7%

Recent News


Hold $35 $30

Investment Thesis •High quality portfolio •High occupancy rates •Geographic Diversity Investment Risks •Limited growth opportunities •Refinancing rate risk •Exposure to office market


acquisition

55


$26.96 180

$4,813

11/29/13 $28.00

4.6%

4.6% 1.5%

$20 $30 $40 $50 $60

52 - Week Range

NAV (Cap: 5.78 - 7.78%)

LTM P/FFO

LTM P/AFFO

(10%)

-

10%

20%

Nov-13 Nov-14Dream Office Real Estate Investment Trust S&P/TSX Capped Financials Index

4.6%

13.8%

Fall 2014 Advisory Board Presentation - University of …...Portfolio Performance Net of Cash •...

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Transcript of Fall 2014 Advisory Board Presentation - University of …...Portfolio Performance Net of Cash •...