Grindrod Asset Management Presentation November 2013
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Grindrod Asset Management Presentation November 2013 Grindrod Asset Management Presentation November 2013 Presentation Transcript

  • THE BENEFITS & POTENTIAL OF PAYERS & GROWERS™ November 2013
  • INTRODUCING PAYERS & GROWERS™
  • What are Payers & Growers™? Simple definition: “Companies that pay a dividend and grow that dividend continuously over time.” Dividend aristocrats (US) definition: “These are large, blue chip companies that have historically provided better performance and lower volatility than the S&P 500 as a whole.” SOURCE: Grindrod Asset Management & Forbes View slide
  • Why invest in Payers & Growers™? "According to Ned Davis Research, stocks with growing dividends outpaced the U.S. market from January 1973 through September 2011, registering annualized total returns of 9.21%. Yet they had a lower annual standard deviation, at 16.45%, than those that paid little or no dividend." Annualised Return Standard Deviation S&P500 Dividend Cutters -1.02% 25.9% S&P500 Dividend Non-Payers 1.74% 25.9% S&P500 No Change in Dividends 7.00% 18.6% S&P500 Dividend Growers 9.21% 16.5% SOURCE: Barron’s & Ned Davis Research View slide
  • Share prices rise as earnings/dividends rise “Capital growth is a function of earnings/dividend growth. Businesses become more valuable as their profits rise.” Standard Bank (SBK) 700 16000 600 14000 12000 500 10000 400 8000 300 6000 200 4000 100 2000 0 0 '01 '02 '03 '04 '05 '06 '07 Dividends per share (RHS) SOURCE: I-Net Bridge & Grindrod Asset Management '08 '09 '10 '11 '12 Share price (LHS) '13f '14f '15f
  • Payers & Growers™ equity portfolio “A portfolio of businesses that reward shareholders with consistent growth in earnings & dividends.” VODACOM AVI TRUWORTHS BIDVEST BRITISH AMERICAN TOBACCO TIGER BRANDS SPAR CORONATION FIRSTRAND SASOL INVESTEC PLC STANDARD BANK LIBHOLD SAB MILLER LIFE HEALTHCARE REUNERT MMI HLDGS OLD MUTUAL MTN MR PRICE
  • Equal weighting – a disciplined approach to investing Each security enjoys an equal weight in the equity portfolio  Equal weights = disciplined approach  sell expensive income streams  Investing proceeds into more appropriately priced income streams  Equal weighting (vs market cap weighting) added approximately 2% per annum to portfolio total return over the past 10 years SOURCE: Grindrod Asset Management
  • Listed property – the ultimate Payers & Grower™?  Valued relative to bonds (i.e. on a yield-relative basis) • listed property yields are high • companies pay out 100% of earnings  Distribution growth exceeds inflation • • • • contractual rental escalations gearing internalised management companies active asset management  Total returns are expected to exceed 15% per annum  Volatility of returns should be lower than the equity market SOURCE: Grindrod Asset Management & Forbes
  • Diversification benefits of listed property COMPARATIVE TOTAL RETURN INVESTMENT CORRELATION Date period for upper right: October 2003 – October 2013 (10 years Listed property All Share All Bond Small Cap Listed property 1.00 0.26 0.65 0.63 All Share 0.13 1.00 0.07 0.68 All Bond 0.73 0.21 1.00 0.34 Small cap 0.40 0.70 0.35 1.00 Date period for lower left: October 2008 – October 2013 (5 years) SOURCE: I-Net Bridge & Grindrod Asset Management
  • Diversification benefits of listed property “Listed property provides significant diversification benefits due to its lower volatility and high absolute returns.” Monthly Returns - 2008 15 10 5 0 -5 -10 -15 Jan Feb Mar Apr May 100% Equities SOURCE: I-Net Bridge & Grindrod Asset Management Jun Jul Aug Sep 50% Equities / 50% Listed Property Oct Nov Dec
  • Payers & Growers™ listed property portfolios  Securities are selected to suit portfolio mandate • A & B unit structures afford opportunities • able to construct a high yield or high growth portfolio or a combination of both  Opportunities exist to enhance returns • private placements (issued shares at a discount to market or receive a pre-commitment fee) • smaller listed property companies deliver superior returns due to higher yields and income growth rates
  • APPLYING PAYERS & GROWERS™
  • Grindrod Stable Growth Fund South African – Multi-Asset – Low Equity Payers & Growers™ Equities Payers & Growers™ Listed Property Fixed Income 40% of portfolio 25% of portfolio 35% of portfolio INCOME YIELD 4.29% INCOME YIELD 8.86% INCOME YIELD 7.52% INCOME GROWTH 12.40% INCOME GROWTH 8.76% INCOME GROWTH 0% INCOME YIELD = 6.58% (before expenses) 3 YEAR INCOME GROWTH = 7.21% SOURCE: Grindrod Asset Management
  • Grindrod Managed Growth Fund South African – Multi-Asset – High Equity Payers & Growers™ Equities Payers & Growers™ Listed Property Fixed Income 65% of portfolio 25% of portfolio 10% of portfolio INCOME YIELD 4.29% INCOME YIELD 8.65% INCOME YIELD 4.82% INCOME GROWTH 12.48% INCOME GROWTH 9.85% INCOME GROWTH 0% INCOME YIELD = 5.43% (before expenses) 3 YEAR INCOME GROWTH = 11.10% SOURCE: Grindrod Asset Management
  • Grindrod High Income Fund South African – Multi-Asset – Income Payers & Growers™ Equities Payers & Growers™ Listed Property Fixed Income 20% of portfolio 80% of portfolio INCOME YIELD 0% INCOME YIELD 9.50% INCOME YIELD 8.05% INCOME GROWTH 0% INCOME GROWTH 9.58% INCOME GROWTH 0% INCOME YIELD = 8.39% (before expenses) 3 YEAR INCOME GROWTH = 2.04% SOURCE: Grindrod Asset Management
  • Grindrod Equity Income Growth Fund South African – Equity – General Payers & Growers™ Equities Payers & Growers™ Listed Property 90% of portfolio 10% of portfolio INCOME YIELD 4.30% INCOME YIELD 8.39% INCOME YIELD 0% INCOME GROWTH 12.47% INCOME GROWTH 13.51% INCOME GROWTH 0% Fixed Income INCOME YIELD = 4.65% (before expenses) 3 YEAR INCOME GROWTH = 12.19% SOURCE: Grindrod Asset Management
  • Optimising portfolio objectives with listed property “Maximising the income produced in those portfolios where income is a key objective.” Listed Property Portfolio Yields 10.00 Conservative Aggressive 9.50 7.00 6.50 10% allocation 7.50 25% allocation 8.00 25% allocation 8.50 20% allocation 9.00 6.00 High Income SOURCE: I-Net Bridge & Grindrod Asset Management Stable Growth Managed Growth Equity Income Growth
  • Optimising portfolio objectives with listed property “Maximising the potential for capital growth in those portfolios where long-term growth is required.” Listed Property Portfolio Growth Rates 16.00 Conservative Aggressive 14.00 4.00 2.00 25% allocation 6.00 25% allocation 8.00 20% allocation 10.00 10% allocation 12.00 0.00 High Income SOURCE: I-Net Bridge & Grindrod Asset Management Stable Growth Managed Growth Equity Income Growth
  • BENEFITS OF PAYERS & GROWERS™
  • Predictable, growing distributions “Clients are able to prepare better budgets because their cash flows are more predictable (don’t rely on capital gains).” Stable Growth Fund Managed Growth Fund High Income Fund Equity Income Growth Fund SOURCE: Grindrod Asset Management
  • Grindrod Stable Growth Fund Monthly returns from 31/05/2012 to 31/10/2013 CUMULATIVE RETURN = 27.13% WORST MONTH = -1.44% 6 5 4 3 2 1 0 -1 -2 06/12 07/12 08/12 09/12 10/12 11/12 SOURCE: I-Net Bridge & Grindrod Asset Management 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13
  • Grindrod Managed Growth Fund Monthly returns from 31/05/2012 to 31/10/2013 CUMULATIVE RETURN = 36.30% WORST MONTH = -1.99% 8 7 6 5 4 3 2 1 0 -1 -2 -3 06/12 07/12 08/12 09/12 10/12 11/12 SOURCE: I-Net Bridge & Grindrod Asset Management 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13
  • Grindrod High Income Fund Monthly returns from 31/05/2012 to 31/10/2013 CUMULATIVE RETURN = 11.37% WORST MONTH = -0.25% 2.0 1.5 1.0 0.5 0.0 -0.5 06/12 07/12 08/12 09/12 10/12 11/12 SOURCE: I-Net Bridge & Grindrod Asset Management 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13
  • Domestic portfolio range “Maximising the clients chance of beating inflation for a given level of risk.” 9 8 Grindrod Stable Growth Fund Grindrod High Income Fund Initial income yield 7 Grindrod Managed Growth Fund 6 5 INCOME YIELD AND INCOME GROWTH BELOW LONG-TERM INFLATION 4 3 2 Grindrod Equity Income Growth Fund 1 0 0 1 2 3 4 5 6 7 8 Medium-term income growth SOURCE: Grindrod Asset Management 9 10 11 12 13 14
  • Questions
  • Disclaimer This presentation has been compiled by Grindrod Asset Management ((Pty) Ltd (‘GrAM’), a wholly owned subsidiary of Grindrod Financial Holdings Limited. It is confidential and presented as a general information service to the addressee only and therefore should not be considered to be investment advice. Accordingly, it contains no recommendation (whether express or implied), guidance, or proposal that any particular security is appropriate to the investment objectives, financial situation or particular needs of the addressee. Conflicts of interest may exist with any one or more of the securities recommended in this presentation, which include situations where the author/s of the presentation or a member of his/her family owns a direct interest in securities issued by a company mentioned, an employee of GrAM acts as a director of a company mentioned in the presentation, GrAM owns securities in a company mentioned in the presentation, or GrAM receives compensation for providing financial services to a company mentioned in the presentation. This presentation shall not be reproduced in whole or in part, without GrAM’s permission. The information contained herein has been obtained from sources which, and persons whom, we believe to be reliable but is not guaranteed for accuracy, completeness or otherwise. Any opinions expressed are subject to change without notice. While care has been taken in the preparation of the information contained in the presentation, GrAM will not be liable for any loss or damage of any nature arising from this presentation, or incurred as a result of acting on the contents thereof. Grindrod Asset Management (Pty) Ltd is an Authorised Financial Services Provider (License 29834).