Presented by: Anthony Muh
For:
Shanghai Stock Exchange
Asian Corporate Governance Association
Local Insight Global View
services provided by:Salomon Brothers Asset ManagementSmith Barney Asset ManagementCitibank Global Asset Managementand affiliated advisory entities
Enhancing Competitiveness and Market Value through Corporate Governance”
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Global PresenceGlobal Perspective with Local Insights
• 15 investment centres and 9 global research centres located in key strategic markets
As at 30-Sep-2004.
Singapore
Stamford
New York
LondonTokyo
Melbourne
São Paulo
San Francisco
Warsaw
Hong Kong
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Citigroup Asset Management
Global presence
• 15 investment centers and 9 global research centers located in key strategic markets
• Approximately 2,600 employees in 20 countries worldwide
Competitive position
• US$5012 billion in client assets under management
• The 9th largest asset manager based on worldwide assets1
Investment capabilities
• Full spectrum of equity, fixed income, balanced and alternative investment strategies
• 400 investment professionals
• Sophisticated, proprietary technology combined with market experience help us manage risk
A Snapshot
As at 30-Sep-2004.1 This ranking is based on the 2004 Pensions & Investments Money Manager Survey The investment advisory services of Citigroup Asset Management are provided by Salomon Brothers Asset Management Inc, Smith Barney Asset Management (a division of Citigroup Global Markets Inc.), Citibank Global Asset Management (a unit of Citibank, N.A. and Citibank International plc), Citigroup Asset Management Limited and affiliated advisory entities. 2 The Asset Management businesses include Citigroup Asset Management (CAM), Citigroup Alternative Investments’ (CAI) Institutional business, Banamex Asset Management and Retirement Services businesses, Koram Asset Management, Travelers Property and Casualty/Travelers Asset Management International Corporation Fixed Income business and Citigroup’s other retirement services businesses (includes Citistreet’s Retirement Services and Latin America Retirement Services businesses) in North America and Latin America.
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The Investment Platform
• Proprietary fundamental research combined with disciplined valuation framework identifies attractive investment opportunities
• Portfolio Management, Fundamental Research and Quantitative Research work as a team to aim to maximise the impact of proprietary information and insights
• Apply repeatable, successful processes with world-class research resources
PortfolioManagement
28 teams worldwide
QuantitativeResearch
Over 30 quantitative analysts
Fundamental Research
Over 130 global equity research analysts
and associates
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Philosophy and Style
“we believe by using proprietary research to define intrinsic value and combining that with shorter term earnings momentum will deliver consistent outperformance”.
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Research is based on identification of sustainable long term cash generation
Time
5
10
15
20
RO
E
0
10
20
30
40
50
60
70
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Normalised EarningsHistoric
Ope
ratio
n ea
rnin
gs p
er s
hare
2009 2010
Sustainable Growth Rate
Average = 12% ROE
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Top-down
Sector
Bottom-up
CountryRisk
Country Liquidity
Country Momentum
CountryValuation
BalanceSheet
EarningsVariability
EarningsForecastability
Deriving for an appropriate discount rate
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Corporate governance a useful tool for measuring management commitment to
creating shareholder value.
Various studies, including those by McKinsey (2000) and the City University of
Hong Kong (2003), suggest that good governance tend to lead to lower capital
costs, higher valuations and stronger stock price performance as investors
appear willing to pay some premium for investments in companies that display
superior corporate governance standards.
Corporate Governance – how it really impacts valuation?
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Defining intrinsic value
Source: Internal. This is for illustration purposes only and does not represent our forecasts or any recommendation to purchase/ sell any security.
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Utilities
Company Name Cty DDM FV Price Ret to FV ESR DDM Alpha
KOREA ELECTRIC POWER CORP KR 36357.61 22250.00 63.4% 0.30 1.95 2.27CHEUNG KONG INFRASTRUCTURE HK 26.14 20.95 24.8% -0.10 0.75 0.83PLUS EXPRESSWAYS BHD MY 2.99 2.59 15.3% 0.10 0.29 0.37DATANG INTL POWER GEN CO-H CN 7.19 6.70 7.3% 0.48 0.01 0.28HUANENG POWER INTL INC-H CN 7.31 6.35 15.1% -0.37 0.28 0.10MALAKOFF BHD MY 6.67 6.50 2.6% 0.30 -0.15 0.00AUSTRALIAN GAS LIGHT COMPANY AU 14.75 13.33 10.6% -0.20 0.08 -0.04HONGKONG ELECTRIC HOLDINGS HK 39.24 34.70 13.1% -0.66 0.20 -0.18HONG KONG & CHINA GAS HK 13.46 14.95 -9.9% 1.10 -0.88 -0.42TRANSURBAN GROUP AU 5.51 5.62 -1.9% 0.01 -0.51 -0.62GAIL INDIA LTD IN 167.89 200.50 -16.3% -0.34 -0.80 -1.05CLP HOLDINGS LTD HK 41.93 44.90 -6.6% -0.30 -0.73 -1.08TENAGA NASIONAL BHD MY 9.73 11.40 -14.7% -0.52 -0.75 -1.09
Ranking intrinsic value
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Global High Grade Credit Research
• Fundamental equity research output is the starting point for credit analysis
– Financial forecasts including credit ratios
– Company-specific risk analysis
– Industry outlook
Financial Analysis– Equity research
template– Financial flexibility– Operating performance– Capital structure– Financial policies
Financial Analysis– Equity research
template– Financial flexibility– Operating performance– Capital structure– Financial policies
Citigroup Ratings– Long-term rating– Rating outlook– Event risk– Probability rating
Citigroup Ratings– Long-term rating– Rating outlook– Event risk– Probability rating
Company Analysis– Industry/markets– Country of domicile– Management– Corporate
structure/governance– Ownership– Event risk
Company Analysis– Industry/markets– Country of domicile– Management– Corporate
structure/governance– Ownership– Event risk
StandardisedResearch Template
Disciplined and Structured Approach to Fundamental Credit Assessment
StandardisedCredit Report
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Ratings Comparison
• For companies under coverage, CAM has been ahead of the Rating Agencies
Case Study – Telecoms
For illustrative purposes only. This example should not be construed as investment advice or a recommendation to buy or sell a security.Please see endnotes for additional information.
Telecom Ratings
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5 CAM
S&P
Moody'sA
A-
BBB+
BBB
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Important Note
The information in this presentation is of a general nature only and is not intended to be, and is not, a complete or definitive statement of the matters described in it. The information does not constitute specific investment advice and does not include recommendations on any particular securities or markets. Although statements of fact in this presentation have been obtained from and are based upon sources we believe to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions and estimates included in this communication constitute our judgment as of the date of this communication and are subject to change without notice. This presentation has not been prepared to take into account the investment objectives, financial objectives or particular needs of any particular person. Before making an investment decision you should consider, with or without the assistance of a financial adviser, whether such an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. We do not accept any liability for any direct or indirect loss arising from any reliance on the information contained in this presentation.
The contents of this document may not be reproduced or distributed in any manner without prior permission by Citigroup Asset Management.