QUARTERLY REPORT
DECEMBER 2021
onlyuse personalShifting sands of For
value and growth
Market moves reinforce our convictions
.1 Video insight
PM Capital Global Opportunities Fund Limited | PM Capital Asian Opportunities Fund Limited |
ACN 166 064 875 (ASX Code: PGF) | ACN 168 666 171 (ASX Code: PAF) |
CONTENTS
Video Insight | 1 | PM Capital Asian Opportunities Fund | 4 |
PM Capital Global Opportunities Fund | 2 | Important information | 6 |
- PM CAPITAL QUARTERLY REPORT | DECEMBER 2021
Quarterly video update
In this video Paul Moore, Chief Investment Officer | |||||||
only | |||||||
and Portfolio Manager, Global strategies, and John | |||||||
Whelan, Portfolio Manager, Global and Australian | |||||||
Strategies, discuss: | |||||||
• The next major leg up in the growth to value | |||||||
rotation | |||||||
• How increasing rates are impacting expensive | |||||||
sectors of the market. | |||||||
• How the Omicron variant provided an | |||||||
opportunity to invest in Airbus | |||||||
use | |||||||
Access the video here. | |||||||
Access all market updates and insights here. | |||||||
"With respect to markets, I think the most interesting aspect of | |||||||
the last quarter is the fact that despite record increases in daily | |||||||
COVID-19 cases, interest rates actually started to go up and there | |||||||
personal | was another major leg up in the growth to value rotation." | ||||||
Listed Company Overview | |||||||
PM Capital Global Opportunities | PM Capital Asian Opportunities | ||||||
Fund Limited | Fund Limited | ||||||
ASX Code | PGF | PAF | |||||
Asset Class | Global equities | Asian (ex-Japan) equities | |||||
ForListing Date | 11 December 2013 | 21 May 2014 | |||||
Suggested Time Frame | Seven years plus | Seven years plus | |||||
Shares on Issue | 390,784,759 | 57,330,012 | |||||
Share Price | $1.58 | $1.11 | |||||
Market Capitalisation | $617.4 million | $63.6million | |||||
NTA before tax accruals (per share, ex-dividend) | $1.6615 | $1.0522 | |||||
Company Net Assets before tax accruals | $649.3 million | $60.3 million |
See page 6 for Important Information. As at 31 December 2021.
- PM CAPITAL QUARTERLY REPORT | DECEMBER 2021
PM Capital Global | |||
Opportunities Fund | Paul Moore | ||
Global Portfolio Manager | |||
only | PM Capital is delighted to have its global investment strategy named the winner of the | ||
International Equities - Alternative Strategies, 2021 Zenith Fund Award.^ We congratulate | |||
the nominees, and thank Zenith for their recognition of our rigorous discipline of focusing | |||
on genuine long term valuation anomalies. | |||
Simple ideas, simple businesses | |||||||||||||
Building long term wealth by finding and exploiting investment anomalies around the world | |||||||||||||
use | |||||||||||||
Net Tangible Asset (NTA) | Company | 3 | 5 | 7 | Since | ||||||||
backing per ordinary share | December | performance | 3 | 1 | Total | Gross Dividend | |||||||
Years | Years | Years | inception | ||||||||||
(After fees and expenses, all | 2021 | Months | Year | Return | Yield (p.a.)3 | ||||||||
figures are unaudited) | 1 | (net of fees)2 | p.a. | p.a. | p.a. | p.a. | |||||||
NTA before tax accruals | $ 1.6615 | PM Capital Global | |||||||||||
4.1% | 28.2% | 20.5% | 14.6% | 13.1% | 13.2% | 171.3% | 9.0% | ||||||
NTA after tax (excluding | $ 1.5363 | Opportunities Fund | |||||||||||
deferred tax assets) | |||||||||||||
1. Past performance is not a reliable indicator of future performance. 2. Performance adjusted for capital flows including those associated with the payment of dividends and tax, share issuance as a result of option exercise and the dividend reinvestment plan. 3.Based on share price as at 31 December 2021, and the dividend guidance issued to the ASX on 12 August 2021.The intended fully franked dividend is subject to there being no material adverse changes in market conditions and the investment performance of the Company's portfolio.The C mpany's ability to continue paying fully franked dividends is dependent on the payment of tax on investment profits and there can be no guarantee that such profits will be generated in the future.
KEY POINTS | towards simplification with a focus on free cash flow | |
generation. Its net cash, fortress balance sheet should | ||
• Opportunity to acquire a position in European | lead to a more resilient company going forward. | |
aerospace company Airbus presented itself | Providing a little bit of history, the Airbus Group began | |
• Sold out of position in Nordic base metals | life in 1970 as the Airbus Industries consortium, an | |
initiative between France, West Germany and the UK | ||
miner & smelter Boliden | ||
and emerged as a competitor to Boeing in the late | ||
• | Copper companies Freeport and First | 1980's. Today, while the Boeing 737 remains the most |
personal | Quantum continue to outperform | popular aircraft in the sky, the Airbus A320 is the world's |
best-selling aircraft with a backlog of orders close to | ||
50% higher vis-à-vis the 737. While some of this recent | ||
PERFORMANCE | success is the result of the grounding of the Boeing 737 | |
Max, another important factor is Airbus' development | ||
The portfolio returned 4.1% over the quarter. The main | ||
of the A321 XLR (XLR being an acronym for "extra-long | ||
p sitive contributors were our positions in the copper | range"). This new aircraft (part of the A320 family) greatly | |
companies Freeport McMoRan and First Quantum | increases its range to the highest of any narrow body | |
Minerals in addition to our position in alternative asset | aircraft which in turn opens a vast range of new routes for | |
manager Apollo Global Management. | airlines. The benefit of this cannot be understated due to | |
For | ||
PORTFOLIO ACTIVITY | the huge cost saving flying narrow body aircrafts versus | |
the more commonly used wide body for medium to long | ||
We initiated a position in Airbus, the European aerospace | haul routes. | |
company, during the December quarter. The resurgence |
of COVID-19 due to the emergence of the new Omicron | Turning to our commodity positions, we exited our |
position in Boliden in December, a stock we originally | |
variant caused the shares to sell off sharply in late | |
bought in May 2020 when the stock was trading below | |
November, providing us the opportunity to acquire the | |
200 SEK versus today in the mid 300's SEK. Boliden is | |
position at an opportunistic price. Our investment thesis is | |
today as it was over 18 months ago - a well-managed, | |
based around Airbus becoming the market share leader | |
lowly-indebted diversified based metals miner& smelter | |
in the world's largest duopoly in a structurally growing | |
with a good track record. However, several factors | |
market with increasing profit margins. In addition, the | |
clouded the investment thesis and led us to exit the | |
global COVID-19 pandemic has reinforced Airbus' drive | |
position. | |
3 PM CAPITAL QUARTERLY REPORT | DECEMBER 2021 | PM Capital Global Opportunities Fund | |
First, high electricity prices make the European heavy industry uneconomic. Boliden is better hedged than European peers in the short-term, however longer-term Boliden will have to roll contracts at higher cost while remaining competitive in a global market. We do not
know where European electricity prices might settle although the current surge is not just in spot prices but
onlyare sensitive to outages. Lastly, it is clear Boliden stock caught some short-term momentum from the Chile p litical-risk trade as traders sold down Chile-exposed mining names and bought Boliden instead. Such flows can quickly reverse if sentiment changes.
also in one- and two-year forward contracts. Second, Boliden had several recent operational issues including
mine stoppages (due to tighter COVID management) and the odd flooding or fire-related outage. Being naturally
lower grade mines, Boliden depends on world-class operational efficiency to keep costs down, so earnings
useAs of the year end, Boliden remains attractively valued at pot commodity prices, and the stock may move higher. But, given strong commodity prices, this is true of nearly
all resource companies and relative to the sector Boliden stock is no longer compelling. We maintain our large positions across other mineral resource names.
OUTLOOK
Copper positions were a key contributor to returns for the quarter with several catalysts supporting strong
sh re price performances. Supply disruptions have again come into focus with MMG's Peruvian Las Bambas mine forced to cease production given community protests along its primary transportation routes. Las Bambas
c ntributes between 1-2% to annual copper supply when fully operational. Supply disruptions are of heighted importance given the physical copper market remains very tight with inventories at historically low levels. An
Portfolio investments | Weighting^^ | |
Housing - Ireland and Spain | 8.7% | Cairn Homes |
Global Domestic Banking | 34.0.% | |
Gaming - Macau | 7.7% | |
Alternative Investment Managers | 7.5% | |
personal | ||
Industrial - Europe | 9.9% | |
Materials | 17.8% | |
Energy | 9.8% | |
Other | 11.7% | |
Long Equity Position | 107.1% | |
Direct Short Position | -3.9% | |
For |
increased focus on inflation and inflation beneficiaries also buoyed copper/ gold producers over the month.
While we continue to maintain a constructive outlook concerning commodities, with copper our preferred exposure, we actively reduced our position during the quarter through the sale of call options in Freeport McMoRan which effectively halves our position at a share price of $47.5 and as discussed above, we exited our position in Boliden.
Another stronger performer over the quarter, Apollo Global Management hosted its investor day in October. The stock had traded sideways from May to the end of September as the market grappled with the change in management and the proposed merger with Athene. The investor day allowed Apollo to showcase both the strategic and financial benefits from the merger, complemented with attractive 5-year growth targets. At the end of September Apollo was trading on 10x pro- forma 2022 earnings. While it has now moved to 12x earnings post the ~17% jump in the share price over the quarter, we continue to believe Apollo stock represents compelling value for a high margin business, growing 15-20% pa with one of the best investment records in the industry. Upcoming catalysts to close the valuation discount include giving the market time to digest the completion of the Athene merger which completed earlier this month, and the potential inclusion of the shares in the S&P500 index with the shift to a single share class structure.
We continue to hold a large position in the Australian dollar which has meaningfully underperformed the rise in commodity prices over the last couple of years. A period of higher commodity prices and higher interest rates will benefit the Australian dollar over the medium term.
Currency exposure* | 100% |
AUD49.2%
USD29.1%
EUR10.1%
GBP7.5%
Other4.1%
* Stated as effective exposure.
Index Short Position | -17.3% | SPX, NASDAQ | ||
Net Invested Equities | 85.9% | Total holdings | 45 | |
The Company aims to create long term wealth through a concentrated portfolio of generally 25-45 global companies that we believe are trading at prices different to their intrinsic values.
The Company's investment objective is to provide long-term capital growth over seven-year plus investment horizon through investment in a concentrated portfolio of undervalued global (including Australian) equities and other investment securities.
Paul Moore - Chief Investment Officer & Global Portfolio Manager John Whelan - Contributing author
- PM CAPITAL QUARTERLY REPORT | DECEMBER 2021
PM Capital Asian | ||||||||||||||||
Opportunities Fund | Kevin Bertoli | |||||||||||||||
Asian Portfolio Manager | ||||||||||||||||
Profiting from hand-picked business operating in the world's growth engine | ||||||||||||||||
Net Tangible Asset (NTA) | ||||||||||||||||
Since | ||||||||||||||||
backing per ordinary share | December | Company performance | 3 | 3 Years | 5 Years | 7 Years | Total | |||||||||
1 Year | inception | |||||||||||||||
(After fees and expenses, all | 2021 | (net of fees)2 | Months | p.a. | p.a. | p.a. | Return | |||||||||
only | 1 | p.a. | ||||||||||||||
figures are unaudited) | ||||||||||||||||
NTA before tax accruals | $ 1.0522 | |||||||||||||||
PM Capital Asian | -5.5% | 4.0% | 6.2% | 5.3% | 5.6% | 5.2% | 46.8% | |||||||||
NTA after tax (excluding | Opportunities Fund | |||||||||||||||
$ 1.0436 | ||||||||||||||||
deferred tax assets) | ||||||||||||||||
1. Past performance is not a reliable indicator of future performance. 2. Performance adjusted for capital flows including those associated with the payment of dividends and tax, share | ||||||||||||||||
i uance as a result of option exercise and the dividend reinvestment plan. | ||||||||||||||||
use | placed to benefit from the investments being made by the | |||||||||||||||
Chinese government in improving China's airport network, | ||||||||||||||||
KEY POINTS | ||||||||||||||||
• Omicron weighs on positions leveraged | not just with respects to the construction of new airports | |||||||||||||||
to economic reopening, while Freeport | but also an upgrading of the existing network. | |||||||||||||||
McMoRan advances with the copper price | After a period of sustained strong performance from its | |||||||||||||||
• PAF.ASX corporate activity negatively impacts | COVID-19 lows, oil took a breather during the quarter, | |||||||||||||||
NTA | again as investors digested the impact on demand | |||||||||||||||
from the most recent rise in infections. This negatively | ||||||||||||||||
• Cash weighing remains elevated, providing | ||||||||||||||||
impacted our position in CNOOC. We believe the impact | ||||||||||||||||
flexibility to add new positions | will be short lived with the market refocusing its attention | |||||||||||||||
on the potential for material supply shortages driven by | ||||||||||||||||
PERFORMANCE AND POSITIONING | underinvestment, which we view as structural in nature | |||||||||||||||
and likely to drive sustained higher prices in the medium | ||||||||||||||||
The emergence of the Omicron variant, which was | term. | |||||||||||||||
announced as a 'variant of concern' by the World Health | Conversely Freeport McMoRan contributed positively to | |||||||||||||||
Organisation in late November, dictated that COVID-19 | performance with several factors helping drive copper | |||||||||||||||
was again the central issue impacting markets over the | producers over the past three months. Supply disruptions | |||||||||||||||
quarter. Portfolio positions leveraged to the reopening | have again come into focus with MMG's Las Bambas mine | |||||||||||||||
of global borders and a corresponding acceleration | forced to cease production given community protests | |||||||||||||||
personal | ||||||||||||||||
in economic activity were most impacted. Travelsky | along its primary transportation routes. Las Bambas | |||||||||||||||
Technologies was the most consequential detractor | contributes between 1-2% to annual copper supply when | |||||||||||||||
f om performance amongst our reopening plays with | fully operational. Supply disruptions are of heighted | |||||||||||||||
the market contemplating a slower recovery in air travel, | importance given the physical copper market remains very | |||||||||||||||
particularly internationally, than previously anticipated. | tight with inventories at historically low levels. An increased | |||||||||||||||
We continue to hold a constructive mid to long term | focus on inflation and inflation beneficiaries also buoyed | |||||||||||||||
copper producers late in the period. | ||||||||||||||||
view on TravelSky predicated on the growth outlook for | ||||||||||||||||
For | While we continue to maintain a constructive outlook | |||||||||||||||
the Chinese aviation sector where per capita penetration | ||||||||||||||||
remains well below the levels seen in more mature | towards commodities, with copper and oil our preferred | |||||||||||||||
developed markets. As the incumbent GDS infrastructure | exposures, we actively reduced our position during | |||||||||||||||
provider within China with deep-seated relationships with | the quarter selling options over Freeport McMoRan | |||||||||||||||
each of the local airline operators, TravelSky is a direct toll | which effectively halves our position at a share price | |||||||||||||||
on the growth in commercial passenger volumes, not just | of approximately $47.5. We also exited our position in | |||||||||||||||
domestically within China but internationally. In the last | Turquoise Hill Resources. | |||||||||||||||
decade (2010-2019), China's domestic and international | ||||||||||||||||
passenger volumes compounded at over 10% per annum | iCar Asia was also a positive contributor after the | |||||||||||||||
and we expect these growth rates to return as authorities | Carsome's takeover offer became binding. The deal which | |||||||||||||||
learn to better live with COVID-19. As a major provider | is structured as a Scheme of Arrangements is set to be | |||||||||||||||
of airport software infrastructure TravelSky is also well | voted on by shareholders in late January. |
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PM Capital Global Opportunities Fund Ltd. published this content on 21 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 January 2022 03:31:04 UTC.