Transcript Presentation to - Renaissance Investments

Presentation to
CIBC
Global Listed Infrastructure
March 18 2008
RARE Infrastructure Limited
AFSL: 307727
ABN: 84 119 339 052
Presentation Team
Richard Elmslie,
Investment Director
18 years global infrastructure
experience
Gas, electricity, water, telecoms,
airports and communications
Australia, UK, New Zealand, USA
Canada, Asia, Japan
Previously Head of Power and Joint
Head of Infrastructure at UBS
Investment Bank.
Nick Langley,
Investment Director
10 years global infrastructure
experience
Gas, electricity, telecoms networks,
rail, airports, toll roads and social
infrastructure
4 years with AMP Capital’s infrastructure
funds management team
CFO of DUET, a AUD 5.5 bn enterprise
value, ASX-listed trust owning gas and
electric networks
Worked with Richard Elmslie 1998 - 2000
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Contents
What is Infrastructure?
RARE Team
Investment Process
Portfolio Review
Performance
Market Outlook
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What is Infrastructure?
RARE investment universe
Less Regulated
More Competitive
• Defensive assets
• Revenues relatively stable across
economic cycles
User Pays
Assets
Regulated
Assets
Community
and Social
•
•
•
•
Housing
Public Health
Education
Prisons & Stadia
• Gas/electric
transmission &
distribution
• Water & wastewater
•
•
•
•
Airports
Toll roads
Railways
Ports
Competitive
Assets
• Energy retail &
generation
• Logistics
• Telecom services
Increasing Risk
What RARE is trying to achieve for investors:
We are absolute return focused
We aim to deliver low double digit returns over a 3-5 year period
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RARE Team
Richard Elmslie,
Investment Director
18 years global infrastructure
experience
Gas, electricity, water, telecoms,
airports and communications
Australia, UK, New Zealand, USA
Canada, Asia, Japan
Previously Head of Power and Joint
Head of Infrastructure at UBS
Investment Bank.
Tim Humphreys,
Senior Investment Analyst
12 years funds
management
experience, including
Insight Investment
(FUM in excess of
£100bn) and Rothschild
Asset Management
Researched European
transport (airports, road
and rail) and logistics
Member, performance
analyst team (attribution
analysis, risk analysis,
other techniques)
George Raftopulos,
Senior Portfolio Manager
Nick Langley,
Investment Director
10 years global infrastructure
experience
Gas, electricity, telecoms networks,
rail, airports, toll roads and social
infrastructure
4 years with AMP Capital’s infrastructure
funds management team
CFO of DUET, a AUD 5.5 bn enterprise
value, ASX-listed trust owning gas and
electric networks
Worked with Richard Elmslie 1998 - 2000
Sarah Shaw,
Senior Investment Analyst
8 years investment
experience, including 7
years with Dresdner
Kleinwort Wasserstein,
based in London covering
telecom utilities.
Head analyst for Asia Pacific
(ex Japan) region, US RBOCs,
Latin America and cross regional
theme analysis in global sector
No.1 Team in Extel 2005 Survey
27 years equities research and funds
management experience
10 years funds management experience
with UBS Brinson, Lazard Freres and
Constellation Capital
Senior Research Analyst with BZW, Macquari
Barings and research sales with CFSB
Career research – all sectors in Australia,
including infrastructure and utilities and
global responsibility with Lazards
David Maywald,
Senior Investment Analyst
8 years funds management
experience, including
Bankers Trust Fund
Management and
Constellation Capital
Researched domestic and
international stocks
Undertaken currency strategy
and dealing
Covered a variety of
infrastructure sectors
including gas, electricity ports,
road, airports and communications
Rod Chisholm,
Senior Investment Analyst
7 years investment
experience, including 6
years with HSBC, based in
London covering research
on telecom utilities and
previously in investment
banking covering telecom,
utilities and communications
Head analyst for top ranked
Pan European fixed line
telecoms team
77 years global infrastructure experience
46 years funds management experience
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Investment Process
Objectives & process
RARE Universe
RARE 200
(Infrastructure Characteristics)
(Investment Universe)
Focus List
Portfolio
Long dated
assets
Resilient &
predictable
cash flows
Ownership of
monopoly
assets
Attractive yield
Inflation hedge
Low volatility of
earnings
Reasonable
liquidity
Robust financial
profile:
- Gearing
- Coverage
ratios
Relatively
undervalued
Attractive
RAREs
Strong mgmt &
corp gov
Supportive reg
environment
Visible cash
flows
80% bottom up
20% top down
1,200 stocks
USD3.3 trillion
200-250 stocks
USD2.3 trillion
80-120 stocks
USD1.3 trillion
30-60 stocks
USD0.6 trillion
Screening
First Research
Detailed Research
Portfolio
Construction
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Portfolio Review
Top stocks & portfolio statistics as at 29 February 2008
Top Stocks
Name
Cintra Concesiones
Babcock & Brown Wind
Snam Rete
Spark Infrastructure
Vinci SA
Red Electrica
E.ON
SES
Singapore Post
CCR
Region - Asset
Weight
5.5%
3.8%
3.7%
3.6%
3.5%
3.3%
3.1%
2.8%
2.7%
2.6%
Cash
13%
Sector
North
Am erica
28%
Dev'ing
23%
Cash
Com m 's 13%
& Other
3%
Rail&
Logistics
5%
Tollroads
22%
Asia Pacific
12%
UK/Europe
23%
Other
Essentials
5%
Essential Services
Region - Listing
Portfolio Statistics
Key statistics of the current RARE
model portfolio are as follows1:
Dividend Yield
5.4%
EV/ EBITDA
9.4x
Interest cover
4.6x
Gearing (Debt/ EV)
35.1%
Asset Beta
0.45
1
Based on weighted averages
Electric
33%
Cash
13%
Dev'ing
9%
North
Am erica
18%
Communications & Other
Maturity
Cash
13%
Greenfield
5%
Dev'ing
10%
Asia Pacific
28%
Transport
Gas
18%
M ature
72%
UK/Europe
31%
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Performance
Renaissance Global Infrastructure Fund (RGIF)
Recent Performance
Perform ance Since Inception,CAD (19 Novem ber2007)
110
February
%
3 months
%
RGIF (net, after fees)
1.0
-4.1
S&P Global 100 (CAD,
gross)
0.0
-8.7
MSCI (CAD, gross)
-1.9
-10.7
Index,Renaissance Perform ance vsCom parables
108
106
104
102
100
12 month Composite Performance
98
96
94
1
Gross
Performance
12 months ended
29 February 2008
%
RARE (CAD)
+5.1
S&P Global 100
(CAD)
-5.5
MSCI (CAD)
-13.9
92
90
Nov-07
Renaissance GIF (CAD)
Dec-07
Jan-08
S&P GlobalInfra (CAD)
Feb-08
M SCIW orld Equities(CAD)
1 Represents the performance of the RGIF for the period from December 2007 and the “RARE Strategy” for the March – November
period.
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Market Outlook
General – Earnings recession?
Causes
Slowing economy
Dysfunctional debt market
Industrial companies
Earnings downgrades
Negative revisions likely
Reduced/negative EPS growth
outlook
Infrastructure earnings intact
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Market Outlook (cont)
Infrastructure
Many companies oversold
Underlying fundamentals for infrastructure very sound
December results have been as expected or better
Not expecting any ‘surprises’ from companies yet to report
Debt issues not viewed as a concern for RARE’s portfolio
companies
Many companies have little or no refinancing in 08 and 09
73% of companies in the portfolio have hedged their interest rate
exposure
Despite the above points the market is currently being indiscriminate
Infrastructure stocks have fallen but not as much as global equities
Capital flows have and will continue to influence volatility
Emerging markets
Macro economic expectations
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Contact Details
Richard Elmslie
Nick Langley
Investment Director
RARE Infrastructure
+61 2 9397 7301
[email protected]
m
Investment Director
RARE Infrastructure
+61 2 9397 7302
[email protected]
www.RAREinfrastructure.com
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Appendices
Why Listed Infrastructure
At the beginning of a period of tremendous growth
Emerging asset class with attractive characteristics
Low risk of loss
Who is Treasury Group?
Portfolio Construction Guidelines
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Why Listed Infrastructure?
At the beginning of a period of tremendous growth
The closest parallel to growth in listed infrastructure is the significant growth
that has occurred in listed property trusts over last 17 years.
Aggregate Market Capitalisation
“RARE 200”
New Entrants:
US$0.4t market cap
114 companies
US$ 2.5t
220 companies
Primary Drivers of Growth:
Governments looking to divest assets
Rising global GDP means consumers
demand better infrastructure
Significant maintenance required for
existing global infrastructure
US$ 0.4t
106 companies
1996
2007
Future
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Why Listed Infrastructure?
Emerging asset class with attractive characteristics
Emerging as its own asset class
Initial, private equity style,
investment characteristics have
matured
Expected, over time, to rank
alongside property
US$
Infra
Bonds
Equities
Infra
1.00
Bonds
0.27
1.00
Equities
0.51
0.50
1.00
Property
0.60
0.42
0.60
Property
Attractive Investment
Characteristics
Long dated assets
Resilient & predictable cash flows
Low maintenance capital
expediture
Largely fixed operating cost base
Ownership of monopoly assets
Greater leverage
Attractive yield
Inflation hedge
Low volatility of earnings
1.00
Source: Mercer Investment Consulting
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Why Listed Infrastructure?
Low risk of loss
M onthly Volatility vsAverage Return
(rolling two yearobservationsDec-96 to Dec-06,localcurrency totalreturn)
3%
RARE 200 Index
GPR W orld 250 REIT
Index
M SCIW orld Equity
GPR W orld 250 REIT
2%
Average M onthly Return (%)
Citigroup W orld Corp Bond
RARE 200
Index
1%
0%
-1%
Citigroup W orld
Corporate Bond
M SCIW orld
Equity
-2%
-3%
0%
1%
2%
3%
4%
5%
6%
M onthly Volatility (Standard Deviation)(%)
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Who is Treasury Group?
Funds under Management ($15.2bn)
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12
10
$ bn
Treasury Group at a Glance
Australian Securities
Exchange listed since 2000
A$15.2 billion under
management at 31 December
2007
Partnering approach towards
“best of breed” boutique fund
managers – currently six in the
group
Provides non-investment
services to its managers
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6
4
2
0
Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07
Compliance & risk
management
Operations
Accounting & administration
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Portfolio Construction Guidelines
Sector
Stock Limits
Sector Exposure
Expected Equity IRR
(based on a 3yr and 5yr
hold)
Maximum Stock
Weighting
(% of total portfolio)
Rank 1
13%+
6%
Rank 2
11%
5%
Essential Services
45-70%
Transport
25-45%
Communications
5-15%
Community & Social
0-10%
Rank 3
10%
4%
Target fully invested 1
Rank 4
9%
3%
Cash
Regional
Asset Maturity
Regional Exposure
Asset Lifecycle Maturity
UK/Europe (Developed)
30-40%
Nth America (Developed)
30-40%
Asia/Pacific (Developed)
10-25%
Developing
10-25%
Cash
Target fully invested 1
Weighting
(% of total portfolio)
Green field
0-20%
Developing
0-20%
Mature
70-90%
Note: 1. RARE’s investment approach is to reserve the right to hold up to 20% of a portfolio in cash if no value can be found. Excess cash will be held in high quality fixed rate
notes or 11am
deposits (term deposits). It is expected that, under normal conditions, cash will represent less than 5% of the portfolio.
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Important Information
While the information contained in this presentation has been prepared with all reasonable care,
RARE Infrastructure Limited (“RARE”) does not accept any responsibility or liability for any errors,
omissions or misstatements however caused. This information is not personal advice. This advice
has been prepared without taking account of your objectives, financial situation or needs.
Investors should be aware that past performance is not indicative of future performance. Returns
can be volatile, reflecting rises and falls in the value of underlying investments. Potential investors
should seek independent advice as to the suitability of the investment to their investment needs.
The fact that shares in a particular company or asset class may have been mentioned should not
be interpreted as a recommendation to either buy, sell or hold that stock.
RARE has been granted Australian financial services licence 307 727.
The RARE Infrastructure Value Fund is open to investors as at the date of this presentation.
Treasury Group Investment Services Limited (“TIS”) is the responsible entity for the RARE
Infrastructure Value Fund. Applications can only be made on the application form in the product
disclosure statement for that fund. The product disclosure statement is available on
www.RAREinfrastructure.com or by contacting RARE. Potential investors should consider the
product disclosure statement before deciding whether to invest, or continue to invest, in the fund.
Any prospective financial measures referred to in this presentation constitute estimates which
have been calculated by the RARE investment team based on RARE’s investment processes and
research.
Richard Elmslie and Nick Langley are representatives of RARE.
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