Thomas Hopper & Partners Client Update Seminar Philip Parker & Tim Riordan 9 June 2010 Parker Asset...

Thomas Hopper & Partners

Client Update Seminar

Philip Parker & Tim Riordan 9 June 2010

Parker Asset Management LtdSuite 1302, Level 13, 55 Clarence Street Sydney NSW 2000

GPO Box 135, Sydney NSW 2001Tel: (61 2) 9299 5499 Fax: (61 2) 9299 5988

Email: [email protected] AFS L No. 238364

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Parker Asset Management

Who are we? Independent Fund Manager established in 1999 2 investment decision makers 4 admin professionals

What do we do? Portfolio Management Public Unit Trust Management – launched 1994 Discretionary Private Portfolios Management - superfunds (diy),

company, family trusts and individual portfolios

What do clients get? Personal Fund Manager with International Experience Individual Portfolio Management, or Public Unlisted Managed Fund – Parker Enhanced Leaders Trust (PELT)

Parker Asset Management Ltd GPO Box 135, Sydney NSW 2001

Tel: (61 2) 9299 5499 Fax: (61 2) 9299 5988 Email: [email protected]

AFS L No. 238364

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Investment Team Experience

Philip Parker, BA 25 yrs Founder, managing director, chief investment officer

Tim Riordan, CFA, FRM 8 yrs Analyst

Experience

Parker Asset Management Ltd GPO Box 135, Sydney NSW 2001

Tel: (61 2) 9299 5499 Fax: (61 2) 9299 5988 Email: [email protected]

AFS L No. 238364

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1. Market Performance (History)

2. Current Economy And Market Update

3. Our Methodology

4. Your Investments (Keeping You Informed)

5. Our Performance

Content

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Which countries are the following?


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A.

SOURCE: ELROY DIMSON, PAUL MARSH AND MIKE STAUNTON, CREDIT SUISSE GLOBAL INVESTMENT RETURNS YEARBOOK 2010


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B.



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C.



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D.



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Let’s uncover the truth…


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Australia



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South Africa



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United States



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Germany

SOURCE: ELROY DIMSON, PAUL MARSH AND MIKE STAUNTON, CREDIT SUISSE GLOBAL INVESTMET RETURNS YEARBOOK 2010


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Australian equities/shares

Higher returns, lower risk

4x USA and 114x Germany!

SO DON’T BELIEVE IT WHEN YOU ARE TOLD:

“THE HIGHER THE RETURN, THE HIGHER THE RISK”


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2. Current Economic And Market Update

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Macro DriversA. Government Deficits and Debt Levels

17SOURCE: BCA


- Debt levels circa 100% of GDP- Deficits unsustainable

18SOURCE: BCA

2. Current Economic And Market Update A Return To The Gold Standard?

19SOURCE: BCA


Euroland Slowdown Spain is a major risk

20SOURCE: GOLDMAN SACHS


Insurance for Euro Government Debt, high and rising



ChinaContinues to tighten financial conditions…



…however electricity production growth is above average

23SOURCE: BLOOMBERG


The Equity Market Rollercoaster!

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SOURCE: RUSSELL INVESTMENT GROUP


GFC & Recovery similar to length of 1970’s bear market → 1,000 days to go?!

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Equities are cheap again…

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2. Current Economic And Market Update …but volatility is a rising concern

27SOURCE: BLOOMBERG


Australian public company balance sheets are healthier than pre-GFC

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Resources – BHP – Consistently delivering

above peer performance, until the

RSPT?

Financials – Commonwealth Bank –

The bank to have owned since the GFC


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Energy – Woodside – Volatile ride but going in the right direction

Consumer staples – Woolworths – Consistent & predictable

outperformance


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Utilities – AGL – Building confidence

around growth potential

Healthcare – CSL – Plasma pays

3. Our Methodology

Company analysis

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3. Our Methodology

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AGL Stock 14.11$ IRR 5.73% Last Update 28/01/2005 Corp Tax Rate 30% Franking 75%

June 10yr Bond 5.40 E Price 14.99 Personal Tax 50% LT Rating A

Year EPSEPS % Change P/E Price ROE DVD DVD Yield Payout Ratio

Retained Earnings

% Retained Earnings S/h Equity ($M)

S/h Equity per Share

Shares O/S (M)

2004 0.809 8.01% 14.99 12.13 12.08 0.60 4.95% 74.17% 0.209 25.83% 3049.8 6.70 455.3

2003 0.749 8.24% 14.62 10.95 11.64 0.55 5.02% 73.43% 0.199 26.57% 2896.8 6.44 450.2

2002 0.692 8.98% 14.23 9.85 12.59 0.52 5.28% 75.14% 0.172 24.86% 2101.0 5.50 382.2

2001 0.635 -13.72% 13.33 8.46 11.99 0.52 6.14% 81.89% 0.115 18.11% 1905.9 5.30 359.8

2000 0.736 12.95% 13.52 9.95 13.94 0.51 5.13% 69.29% 0.226 30.71% 1785.6 5.28 338.2

1999 0.6516 9.33% 14.1 9.19 13.92 0.45 4.90% 69.06% 0.202 30.94% 1524.1 4.68 325.5

1998 0.596 16.86% 16.95 10.10 12.78 0.41 4.06% 68.79% 0.186 31.21% 1392.5 4.66 298.5

1997 0.51 17.51% 15.29 7.80 16.53 0.36 4.62% 70.59% 0.150 29.41% 897.2 3.09 290.8

1996 0.434 17.30% 12.19 5.29 12.63 0.30 5.67% 69.12% 0.134 30.88% 985.4 3.44 286.8

1995 0.37 15.63% 12.08 4.47 11.31 0.26 5.82% 70.27% 0.110 29.73% 906.0 3.27 277.0

1994 0.32 0.00% 12.56 4.02 11.46 0.22 5.47% 68.75% 0.100 31.25% 756.1 2.79 270.8

1993 0.32 -8.05% 11.09 3.55 12.29 0.16 4.51% 50.00% 0.160 50.00% 695.5 2.60 267.0

1992 0.348 8.35 2.91 12.88 0.14 4.82% 40.23% 0.208 59.77% 658.7 2.70 243.7

Average 7.75% 13.33 12.77 5.11% 32.25% 4.15

5yr ACRR 4.42% 14.14 5.71% 12.45 5.30% 14.88% 7.42%

10yr ACRR 9.72% 14.13 11.68% 12.94 5.16% 14.97% 9.15%

Growth Rate 9.72% Div Yield 5.16% P/E 14.13ebg ubs

Year EPS Price DIV Post tax div est ebg/est2005 0.880 12.43 0.64 0.42 0.88 1/10/2004 0.8642006 0.966 13.64 0.70 0.47 0.92 0.92 2007 1.059 14.97 0.77 0.51 2008 1.162 16.42 0.85 0.562009 1.275 18.02 0.93 0.61 ACCR PV

2010 1.399 19.77 1.02 0.67 9% $14.92

2011 1.535 21.69 1.12 0.74 12% $11.37

2012 1.685 23.80 1.23 0.81 15% $8.73

2013 1.848 26.12 1.35 0.89 total return ratio2014 2.028 28.65 1.48 0.98 Current Projected ACRR 9.61% 99.24%

6.67 Buy Price for 15% ACRR 8.73$

Total 35.32$

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3. Our Methodology

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AUSTRALIAN GAS LIGHT COMPANYPAML Raw

ScorePAML Sector

ScoreRAW

WeightingSECTOR

WeightingRAW Weighted

ScoreSECTOR Weighted

Score Table A Table C

EV/EBITDA 8.71 0 10 9 0EV/EBITDA vs Mkt 0.71 12.29 7.0 0.6 4.2 0.1 9.5 9.5 1EV/EBITDA vs Sector 0.66 13.14 7.0 0.6 4.2 0.2 9 10 2

0.3 8.5 10.5 3ROE 11.75 0.4 8 11 4ROE vs Mkt 1.07 10.94 6.0 0.6 3.6 0.5 7.5 11.5 5ROE vs Sector 0.64 18.46 7.0 0.6 4.2 0.6 7 12 6

0.7 7 12.5 6.5ROA 5.39 0.8 6.5 13 7ROA vs Mkt 1.07 5.03 6.0 0.4 2.4 0.9 6 13.5 7.5ROA vs Sector 0.69 7.77 7.0 0.4 2.8 1 6 14 8

1.1 5.5 14.5 9PE 18.37 1.2 5 15 10PE vs Mkt 0.80 23.09 7.0 0.4 2.8 1.3 4.5PE vs Sector 1.30 14.11 4.5 0.4 1.8 1.4 4 Table D

1.5 3.5 0 1ROC 8.9 1.6 3 0.25 2ROC vs Mkt 0.98 9.06 5.0 0.4 2.0 1.7 2.5 0.5 3ROC vs Sector 0.66 13.49 7.0 0.4 2.8 1.8 2 0.75 5

1.9 1 1 6Consistency of Earnings Growth 9 8.0 9.0 2.5 2.5 20.0 22.5 2 0 1.25 7

1.5 8Total Debt to Equity 71.8 Table B 1.75 9Total Debt to Equity vs Mkt 1.21 59.17 5.0 0.5 2.5 0 0 2 10Total Debt to Equity vs Sector 0.58 123.12 7.5 0.5 3.8 0.1 1

0.2 2IRR 5.73% 0.3 2 Table EIRR vs 10yr Bond Yield 1.06 5.40% 6.0 6.0 0.5 0.5 3.0 3.0 0.4 3 Market:

0.5 3 +1 for each year of +ve EPS GrowthIncrease in Shareholders Equity 7.0 7.0 0.5 0.5 3.5 3.5 0.6 4 -1 for each year of -ve EPS Growth

0.7 4 Sector:Div Yield 5.16% 0.8 5 +1 for each year of +ve EPS GrowthDiv Yield vs Mkt 1.20 4.29 6.0 0.6 3.6 0.9 5Div Yield vs Sector 0.94 5.47 5.0 0.6 3.0 1 6

1.1 6 Table FCurrent Projected ACRR (EPS Model) 9.61% 1.0 1.0 3 3 3.0 3.0 1.2 6 PAML Manual scoring inputs

1.3 7PAML Management Score 7.0 7.5 2.5 2.5 17.5 18.8 1.4 7

1.5 7Total Return Ratio 0.99 5.0 5.0 0.5 0.5 2.5 2.5 1.6 8

1.7 8TOTALS 76.0 80.5 1 1 70.6 75.8 1.8 9SCORE 58.46% 61.92% 54.31% 58.31% 1.9 9

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1. Company Data

2. Raw scores calculated relative to the Market and Sector

3. PAML score weightings

Data

1 2 3

A

B

B

A

B

E

A

B

F

B

C

F

D

% Relativity to Market & Sector Weighting Adjusted Scores

Final Scores

Keeping You Informed Emails – proactive communication (see handout)

Quarterly update – portfolio

Complete annual performance reports

3-4 annual face-to-face meetings for investment updates

4. Your Investments

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5. Our Performance

Parker Clients 14 Year Full Discretionary Portfolio

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Thomas Hopper & Partners Client Update Seminar Philip Parker & Tim Riordan 9 June 2010 Parker Asset...

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