compass asset management sa “high yield: in between bonds and equities” speaker: corrado capacci
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Compass Asset Management SA “High Yield: in between Bonds and Equities” Speaker: Corrado Capacci. Via Calprino 18, 6900 Lugano - Paradiso Tel. +41 091 960 39 70 - Fax +41 091 960 39 89 www.compass-am.com. - PowerPoint PPT PresentationTRANSCRIPT
Compass Asset Management SACompass Asset Management SA
““High Yield: in between Bonds and Equities”High Yield: in between Bonds and Equities”Speaker: Corrado CapacciSpeaker: Corrado Capacci
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
Compass Asset ManagementCompass Asset Management
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1998 2003 2005 2006 2007 2008 2009 2010 2011 2012
1998 - Compass AM begins by managing assets for private clients through discretionary management mandates
2003 - Becomes Investment Advisor to CompAM Fund Sicav, Ucits III domiciled in Luxembourg.
2007 - Authorized by the Swiss Federal Banking Commission (now called FINMA) to manageand distribute foreign funds under the Collective Investment Schemes Act
Evoluzione Forza Lavoro
2012 - Compass AM moved to its new offices at Via Calprino 18 Lugano - Paradiso
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
When more than 20 years ago we were studying finance we were taught a theoretical framework that has its foundation on the
RISK FREE INTEREST RATE
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
Then 2008 came along and we learn that:
THERE IS NO RISK FREE
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
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The policy response to 2008 led to another consequence:
THERE IS NO INTEREST RATE
Welcome to the era of:
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
RiskFreeYield-
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
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250.0
300.0European High Yield
Stoxx 600 dividendi reinvestiti
US High Yield
S&P total return index
High Yield: returns in perspectiveHigh Yield: returns in perspective
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
High Yield: yields in perspectiveHigh Yield: yields in perspective
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
Equity like returns
Lower volatility
Faster recovery of drawdowns because: Bond mature at par Do not have to wait for someone to pay your purchase multiple
Cannot disregard earnings generation
Recent fund flows
High Yield: historical perspectiveHigh Yield: historical perspective
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
Monetary base expansion fighting deflationary deleveraging
No bankrupcies is allowed in Europe (France-Peugeot, banking sector)
Financial repression way out of government debt issue
Low (zero) rates sustaining longest duration assets (commodities – gold, equities) and money flows to EM
Some segments of financial markets are racing ahead of sensible valuations
Current ThemesCurrent Themes
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
SCANIA (A-) 1.625% 2017 issued in September 2012
NUMERICABLE (B) issuing bonds in the middle of merger talks
LANXSESS (BBB) 2.625% 2022 issued early November 2012
BOLIVIA (BB-) 4.875% 2022 issued end October 2012
URUGUAY (BBB-) 4.125% 2045 issued early November 2012
Recent issues we have trouble understandingRecent issues we have trouble understanding
Wind SpA Bond vs Equity Peers Market performance
Wind SpA projections and equity valuation Wind SpA Capital Structure FY2012E
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Assets Liabilities
EV Senior credit facilities Hy Bond PIK Equity
5.4x
3.0x
4.2x
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70
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100
110
120
Inde
x
PIK Equities New Sen Sec New HY
4.7x
Company Rating (S&P, Moody's, Fitch) BB, Ba3, BB+ Source: Company Data, FY12 ELast Update: 10-Apr-12 Currency: EUR mln
4Q10 1Q11 2Q11 3Q11 4Q11 FY11 FY12 E LTMRevenues 1,543 1,351 1,399 1,396 1,424 5,570 5,468 5,570
EBITDA 549 497 526 550 533 2,106 2,081 2,106 EBITDA Margin 35.58% 36.79% 37.60% 39.40% 37.43% 37.81% 38.06% 37.81%
Adj EBITDA 549 497 526 550 533 2,106 2,081 2,106 Adj EBITDA Margin 35.58% 36.79% 37.60% 39.40% 37.43% 37.81% 38.06% 37.81%Comment for EBITDA Adjustment:--
Capex (411) (146) (234) (125) (1,532) (2,037) -- (2,037) Cash Interest (163) (212) (169) (189) (142) (712) -- (712) Cash Taxes (44) (0) - (33) (49) (82) -- (82) FCF (before WC chg) (69) 139 123 203 (1,190) (725) -- (725) FCF (after WC) 154 130 159 202 (929) (438) -- (438)
Cash & Marketable Securities 406 389 607 600 395 395 -- 395 Short Term Debt (STD) 341 316 300 50 750 750 -- 750 Total Debt 8,821 8,565 8,680 8,745 9,741 9,741 -- 9,741 Net Debt 8,415 8,176 8,073 8,145 9,346 9,346 -- 9,346 Adj Net Debt 9,285 9,106 9,091 9,128 10,344 10,344 -- 10,344 Comment for Net Debt Adjustment:
Total Leverage 4.0 3.9 4.1 4.1 4.6 4.6 -- 4.6 Net Leverage 3.9 3.7 3.8 3.8 4.4 4.4 4.2 4.4 Adj Net Leverage 4.2 4.2 4.3 4.3 4.9 4.9 4.7 4.9 Net Debt/(EBITDA - Capex) 7.6 7.6 7.6 7.6 6.0 6.0 -- 6.0 Interest Cover 2.5 2.6 2.5 2.9 3.0 3.0 -- 3.0 (EBITDA-Capex-Cash Interest)/Net STD Neg Net STDNeg Net STDNeg Net STDNeg Net STD 5.4 5.4 -- 5.4
Adj for PIK
Name Country SubgroupRevenues FY
Ebitda FY Mkt Cap Net Debt
EV/Sales FY
EV/EBITDA FY
TELEFONICA S.A. € SPAINTelephone-Integrated 63,625 22,364 51,231 59,551 1.74 4.95
DEUTSCHE TELEKOM AG € GERMANY
Telephone-Integrated 56,836 17,816 37,111 42,196 1.40 4.45
FRANCE TELECOM SA € FRANCE
Telephone-Integrated 42,739 13,590 27,853 30,381 1.36 4.29
TELECOM ITALIA SPA € ITALY
Telephone-Integrated 30,493 12,258 15,862 33,768 1.63 4.05
VODAFONE GROUP PLC GBP
UNITED KINGDOM
Cellular Telecom 45,919 14,217 84,270 31,420 2.52 8.14
ILIAD SA FRANCEWeb Portals/ISP 3,050 868 5,513 969 2.13 7.46
KONINKLIJKE KPN NV €
NETHERLANDS
Telephone-Integrated 12,594 4,749 9,753 12,109 1.74 4.60
BELGACOM SA € BELGIUMTelephone-Integrated 6,288 1,791 7,254 1,616 1.41 4.95
Averages 1.74 5.36
Wind SpA 5,468 2,081 1,378 9,781 1.74 5.36
Equity Cushion =Multiple x Ebitda -Net Debt = 1,378
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Investment Process - ExampleInvestment Process - Example
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
High cash balance
Using govt credit (Italy, Ireland, France)
Opportunistic on primary
Some high conviction ideas with still interesting yields
Selectively seeking shelter in CHF bonds
Current Portfolio PositioningCurrent Portfolio Positioning
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
www.compass-am.com
CompAM Fund Sicav - FundsCompAM Fund Sicav - Funds
CompAM FUND Oct. 12
3 Months
6 Months
Net Return YTD
Inception date
Bond Funds Bond Euro 0.62 % 1.21 % 1.87 % 3.97 % Mar.03 Bond Risk 2.06 % 6.53 % 4.45 % 18.51 % Jan.05 Emerging Market Corporate 1.04 % 3.91 % 5.84 % 13.81 % Apr.03 Bluesky Global Strategy (USD) 1.01 % 4.57 % 5.09 % 11.88 % Dec.07
Equity Funds European Equity -0.46 % 3.59 % 1.40 % 6.51 % Mar.03
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 - Fax +41 091 960 39 89
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AwardsAwards
Compass AM - ContactsCompass AM - Contacts
Via Calprino 18, 6900 Lugano - ParadisoTel. +41 091 960 39 70 Fax +41 091 960 39 79