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Stefan Ampenberger (1908 - 1983), detail from “The Red Sun”, oil on board, Sanlam Art Collection. FIA Meeting 16 October 2012.

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Presentation on theme: "Stefan Ampenberger (1908 - 1983), detail from “The Red Sun”, oil on board, Sanlam Art Collection. FIA Meeting 16 October 2012."— Presentation transcript:

1 Stefan Ampenberger (1908 - 1983), detail from “The Red Sun”, oil on board, Sanlam Art Collection. FIA Meeting 16 October 2012

2 Economic reality

3 IFO world economic climate survey

4 Recent trends/themes

5 Cheap shares became cheaper and relatively expensive shares remained expensive

6 Global laggards cheap and underperforming

7

8 Global equities sideways but volatile Asset performance driven by risk-off or risk-on

9 Globally: risk-on and risk-off dictating

10 Correlation can remain high for sustained periods

11 All about expectations Policy measures and earnings expectations

12 Earnings expectations – 2012 Source: JP Morgan

13 Where do we invest OPM?

14 Common answer... In assets where the value appreciate

15 US bonds – multi-year bull market Source: I-Net

16 US bonds – multi-year bull market Source: I-Net Global Sovereigns do not provide the right answer

17 Global Equities

18 Pattern

19 Sideways with short cycles Source: I-Net

20 Price

21 Valuation – methodologies differ Source: Case Shiller

22 US equities – valuation from all angles Valuation MetricCurrent Value Long term Ave Avg. Since 1991 Trailing PE16.315.525.3 Normalised PE24.318.029.7 Forward PE15.414.923.7 Forward DY2.34.52.1 ERP4.114.230.99

23 US equities multi-year lows versus bonds Source: Case Shiller

24 US equities multi-year lows versus bonds Source: Case Shiller Preferred Asset class

25 ... and property?

26 Expectations look reasonable

27 A local update

28 Macro context

29 SA GDP – trend heading in the wrong direction Source: I-Net

30 Rand weakness – SA unique problems Source: I-Net

31 Pattern

32 JSE All Share – cyclical bull market Source: I-Net

33 Price

34 ALSI valuation, fair but... Source: I-Net, SPI

35 The value dilemma in SA Sector/ShareFY1 Consensus Earnings growth FY1 spot earnings growth Gold sector32%42% Platinum sector23%-51% Sasol-3%37% Anglo American3%-15% Billiton-1%-12% Resource Sector6%-5%

36 Commodity prices – visible response to tough environment Source: I-Net

37 Copper – very muted response Source: I-Net

38 FINDI earnings – lower PMI suggest pressure Source: I-Net

39 Case for positive but subdued returns

40 A few share thoughts

41 Share A – R2 to R155 Source: I-Net

42 MTN – investment case summary 9-Oct-2012 Diversified portfolio of businesses in growing economies Penetration levels are low Attractive dividend yield with an outlook for increased dividend pay-outs Strong balance sheet with R7.7bn as at 30 June 2012 Current price of R151 is a discount to our fair value of R175

43 MTN – diversified portfolio in growing economies

44 MTN – capex and cash profile

45 Share B – a clear winner R5 R162 Source: I-Net

46 Shoprite – a winner but priced accordingly Source: Bloomberg Price to sales ratio

47 Shoprite’s success story Source: Bloomberg

48 Share C – should we forget about this one? Source: I-Net

49 Astral – quality in tough industry Delivering through the cycle returns of circa 30%. Through the cycle intrinsic value R200. Trading around R100 Delivered high quality earnings Good dividend payer historic dividend yield of 7.9%. 10 year average dividend yield is above 6%. Expected 2012FY dividend yield of 6.3% in extremely tough operating environment

50 Astral – look through the cycle The short term results expected to be poor regional oversupply increasing imports from Brazil high input cost inflation FMCG retail sector playing the producers off against each other. Medium term balance likely to return weaker producers out demand catches up with supply possible increase in tariffs on imports input costs pressures moderate

51 Astral – play on “normal” margins

52 Conclusion Tough macro environment No long term alternative – embrace risk Equities likely to move modestly higher – volatile Property remain important building block Volatility a friend rather than enemy of long term investors


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