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Cobas AM
Lisbon • November 26th 2019
1. The Investment Team
2. Investment Philosophy
3. Past Performance Overview
4. Portfolio
5. Annex
Contents
2
(As of 11/15/2019)Cobas AM’s Key Figures
2,100Million € under management.
22,500Investors.
10 + 2Funds and
Pension Plans.
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1. The Investment Team
CHAIRMAN AND CEOFrancisco García Paramés
SPANISH EQUITIESHe began investing in 1993. Over the next 21 years achieved an average annual return of 15.5% vs 7.8% IGBM.
INTERNATIONAL EQUITIESHe began investing in 1998. Over the next 16 years achieved an average annual return of 10.6% vs 4.5% MSCI
AWARDS AND RECOGNITIONS1994 Best Spanish Equities Fund Award.2006, 2007, 2011 and 2012 AAA Citywire Fund Manager Rating. During 1993-2014, Mr García Paramés investment team was awarded with75 prizes by some of the most prestigious mutual fund rating agencies.
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• 16 Average years experience
Investment Team
• Spending 95% of their time searching for companies and assessing their objective value
• A combination of generalists with diverse backgrounds
• Strong discipline in valuing and identifying high quality stocks
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JUAN MIGUELCantus Pastor
(Madrid)
JUANHuerta de Soto Huarte
(Madrid)
ANDRES Allende Rodríguez-Losada, CFA
(Madrid)
IVÁNChvedine Santa María
(Madrid)
VICENTEMartín Brogeras
(Madrid)
CARMENPérez Baguena, CFA
(Madrid)
MINGKUNChan, CFA(Shanghai)
HWISoon Chan(Shanghai)
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2. Investment Philosophy
INVESTMENT PROCESS
ANALYZEINVESTMENT
SELECTION VALUATION
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IDEA
Idea generation comes from various sources…press, sell side and external analyst reports, conversations with company managers
and employees, contact with peer companies, visits to companies, conversations with other value managers…
IDEA ANALYZE INVESTMENT
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A SOLID PROCESS
IDEA INVESTMENTANALYZE
We spend 95% of the time searching for companiesassessing their objective value, industry trends, competitiveness, economic
environment. Estimate their true earnings power, FCF generation, sustainable earnings, business models and competitive advantages, low debt levels, the potential
to benefit from consolidation and ability to gain market share…and the triggers that unlock their underlying value.
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A SOLID PROCESS
IDEA INVESTMENT
We only invest in stocks once they can be bought with a safety margin.Our high-conviction stock picks create fairly concentrated portfolios
that are not tied to any benchmark.We continuously monitor our portfolios
ANALYZE
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A SOLID PROCESS
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IDEAANALYZE& VALUATION
INVESTMENT
MARGIN SAFETY
Phase 1: Monitoring and Pre analysisWaiting for signal/alertsSetting a target price and margin of safety
Phase 2: Holding PeriodOngoing Analysis Trading + /- according to our valuation
Phase 3: Sell DisciplineTarget price is achievedBetter opportunities
Jan 2017
“Someone’s sitting in the shade today because someone planted a tree a long time ago” Warren Buffett
…and a strict DISCIPLINE
• Businesses, which have an advantage over their competitors / over time
• Low debt levels trading below their economic value
• With a honest and highly capable managers
• Market inefficiency
• Overvalued• Better investment alternative• When mistakes are discovered• Investment fundamental deteriorated• Events and circumstances that
negatively affect the fair value of that business
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KEEP ITSIMPLE
No activism
No trend following
No prediction on the future
No market timing
No complex valuation
No addiction of the daily markets
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3. Past PerformanceOverview
Past performance overviewFrom 1998 to 2013 we delivered an annual return in international equities of 10,85%
versus 2,28 % of the MSCI index
Notes: 1. Francisco García Paramés stepped down as CIO of Bestinver Gestión, SGIIC, S.A. (fund manager) on 23 September 2014, having been involved in the management of the fund since its inception.2. Past performance is not a guarantee of future returns. Source: Bloomberg. Figures from Bestinver Internacional.fund ES0114638036
+78.4%-17.5%1998 30 Marchto 8 October
+64.9%-38.4%2002 19 Aprilto 9 October
+153.6%-61.8%2007-2009 16 July 2007to 9 March 2009
+66.0%-22.9%2011 11 Mayto 23 November
Year PeriodPercentage
fallReturn
2 years later
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Notes: 1. Francisco García Paramés stepped down as CIO of Bestinver Gestión, SGIIC, S.A. (fund manager) on 23 September 2014, having been involved in the management of the fund since its inception. 2. Past performance is not a guarantee of future returns. Source: Bloomberg. Fondo Bestinver Internacional. ES0114638036
+74.7%
-14.1%
Loss Recovery
MSCI World IndexNet asset value
Past performance overview. 1998 Fall
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Notes: 1. Francisco García Paramés stepped down as CIO of Bestinver Gestión, SGIIC, S.A. (fund manager) on 23 September 2014, having been involved in the management of the fund since its inception. 2. Past performance is not a guarantee of future returns. 3. In 2011, CIR & COFIDE weighted ~7% of the fund and later saw a permanent loss in value of close to 50% Source: Bloomberg. Fondo Bestinver Internacional. ES0114638036
-22,9%
+66,0%
Loss
MSCI Europe Net ReturnNet asset value
Recovery
19
Past performance overview. 2011 Fall
20
International Portfolio*(Number of periods)
BESTINVERINTERNACIONAL
1 year(5,787)
BESTINVERINTERNACIONAL
3 years(5,056)
BESTINVERINTERNACIONAL
5 years(4,326)
BESTINVERINTERNACIONAL
10 years(2,499)
Average periods 14.6% 40.7% 65.7% 150.1%
Average negative periods -20.0% -15.8% -7.7% -
Best period 103.4% 192.5% 259.0% 321.8%
Worst period -50.9% -49.4% -22.4% 54.0%
Negative periods(Number of negative periods)
26.9%(1,554)
21.4%(1,080)
5.4%(234)
-
*Profitability of Bestinver Internacional 1. Francisco García Paramés stepped down as Head of Investments at Bestinver Gestión, SGIIC, S.A. (fund manager) on 23 September 2014, having been involved in the management of the fund since its inception. 2. Past performance is not a guarantee of future returns.Source: Bloomberg. Fondo Bestinver Internacional. ES0114638036
Rolling return 1997–2014*Historical performance
Value vs GrowthExtremely cheap Value Stocks
MSCI Europe Value vs Growth Relative Price
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Cobas PER 6.4x
2019
Source: MSCI, Morgan Stanley Research.
4. Portfolio
UCITS Funds
INTERNATIONALGlobal Equities (excluding Spain and Portugal), no market cap, sector, country or currency constrains. (Limited Capacity)
IBERIASpanish and Portuguese Equities, no market cap, sector, country or currency constrains. (Limited Capacity)
LARGE CAPGlobal Equities, >4bn€ market cap (>70% of portfolio), no sector, country or currency constrains.
SELECTIONGlobal Equities, no market cap, sector, country or currency constrains. (Limited Capacity)
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10.000
15.000
20.000
25.000
30.000
35.000
40.000
Net asset value vs target value
Target value
Net asset value
April 2017 October 2019
15,315
37,491
145% Upside
Selection Porfolio(as of 31/10/2019)
• Net asset value : 15,315 €
• Target value: 37,491€
• Potential upside: 145%
• ROCE: 25%
• PER 2019e: 6.4x
• FCF yield: 23.4%
• ISIN: LU1372006947
Ratios
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as of 30/09/2019
Company Sector %
Aryzta Food & Distribution 5,96%
Golar LNG Transport 5,59%
Babcock Aerospace & Defence 5,20%
Teekay LNG Transport 5,14%
International Seaways Transport 4,98%
CIR Holding 4,07%
Dixons Carphone Consumer 3,94%
Teekay Corp Transport 3,73%
Porsche Automotive 3,01%
Renault Automotive 2,92%
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Selection PorfolioOur top 10
4. Portfolio Overview
The Cobas Selection fund has an upside potential of
more than 140 %.
Our experience shows that our target prices tend to be
met in most cases
1The degree of knowledge of
our portfolio is greater, which increases our confidence in
our valuations
3Our portfolio already
reflects to some extent the market’s cyclicity concerns
(Example: Autos ~ -35% from 2015 vs EuroStoxx 600
-15% (1))
(1) From April, the 1st, 2015
2
Reasons why we believe that our portfolio will recover
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Wolters Kluwer293% 68% 82%227%200%
Exor Thales BMW Schindler
Source: Conferencia Anual Bestinver 2011
Figures in euros
110
4028
1618
Price 2011
143
104
56
3441
Target Price 2011
200
67
110
5454
Today
Target value, ¿reachable?
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01020304050607080
0
10
20
30
40
50
2012 2013 2014 2015 2016 2017 2018 2019 2020
Dividend scaleback
Share price
TGP is starting to reap the rewards
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Market capitalisation $3.6BnNet profit of $200Mn expected in 2020
?
New Investment Plan~$3Bn
Investment Plan Ends
Source: Bloomberg and own forecasts.
Market capitalisation $1.15Bn $200MnNet profit expected in 2020
Return
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TGP
Source: To simplify, in the example a static business value is assumed, and the free cash flow is devoted to repaying debt.
4,851
1,155
Net Debt
Market Capitalisation
Total ($Mn) 6,006 6,006 6,006
4,431
1,575
4,011
1,995
Price per share 14.5 20 26
Target Price 32 34 36
2019 2020 2021
The passage of time crystallises the value: TGP will generate $420Mn/year Free cash flow
Teekay LNG LP Teekay LNG GP+IDRTeekay Tanker
FPSO*3SG&A capitalizedCorporate net debt
Total ValuationMarket Capitalisation
Upside potential 100%
$ 907 Mn$ 178 Mn$ 169 Mn
$ 187 Mn$-168 Mn$-195 Mn
$ 1,077 Bn$ 540 Mn
Sum of Components Valuation
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Teekay CorpTime to reap the rewards
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• Share buyback.
• Sale of IDRs by TK to TGP.
• Simplification of the corporate structure.
• Debt Reduction/Dividend Increase.
Teekay/TGPHow the valuation gap is closed
33
Sogefi
CIR
KOSGedi
59.5% 56.8%45.8%
Italian media group.Mainly in newspapers and
radio.
Geriatric clinicsin Italy and Germany.
Global auto parts(filters, suspensions and
cooling)
• Company controlled by the De Benedetti family.
Description of the companyCIR & COFIDE
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CashKOSOther Assets
Total ValuationMarket capitalisation
Upside 120%
€ 272 Mn€ 701 Mn€ 360 Mn
€ 1.332 Bn€ 595 Mn
ValuationKOSOrpea is trading at 18x EBITDAOur assessment implies 12x EBITDA
120100
80
60
4020
€mn
KOS: evolution of EBITDA
0
ValuationCIR & COFIDE
2006 2009 2012 2015 2018
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• Net cash. They have bought back their own shares (CIR 19.3%).
• CIR-COFIDE merger, simplification of the structure.
• Sale of assets.
How the valuation gap is closedCIR & COFIDE
UK Defence Emergencies Civil nuclear
Strong competitive advantages
High Market Share
Unique Assets
Accumulated knowledge
High Reliability (High switching costs for governments)
Company´s Description
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Babcock International
Profit vs Stock Price (Last 15 years)
37
Source: Factset and Cobas AM.
Babcock International
Babcock owns the shipyards needed for the maintenance of the United Kingdom Navy. The switching costs are so high that it is inconceivable that the English Government will change providers.
Babcock maintains 75% of frigates and 100% of nuclear submarines. These assets have a useful life of 40-60 years.
(Example of Switching Costs)
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Devonport: longevity across programmes.
Vanguard Class
Dreadnought Class
Trafalgar Class
Astute Class
Astute Replacement
Albion Class (LPD)
T23 Class
T26 Class
In service DecommissionSource: Company reports
Babcock International
Babcock International
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Rolls-RoyceBAE SystemsGeneral DynamicsLockheed Martin
> 20x11x16x19x
P/E industry peersNet Profit 2020eMultipleValuationAdjustments
Total ValuationMarket Cap
Upside
£ 362 MM17x
£ 6,154 MM£ -540 MM
£ 5,610 MM£ 2,430 MM
130%
Valuation
Valuation
40
Cheap for many reasons at the same timeBabcock International
• Brexit.• Inappropriate comparisons.• Perception of excessively high margins.
• Perceived as a subcontractor, but more comparable to Defence companies.
• Save costs to the Government and are good negotiators.
• Open books with the Ministry of Defense.• Internal accounting by contract.• Margins rise as the contract progresses.
COMMITTED
Pic: Matt Duncan, Unsplash
Sharing and promotingfinancial knowlege
SocialImpact
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With Society
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Olive tree growth,patient and long-term
5. Annex
Note: Past performance is not a guarantee of future returns.
We have experienced significant falls in the past, in some casescoinciding with investment errors
Experience shows that we havelater recovered
The portfolio is trading at around 7.2x normalised earnings
Return2 years later
+78.4%
+64.9%
+153.6%
+66.0%
-38.4%
-61.8%
-22.9%
PeriodPercentage
fall
-17.5%1998
2002
2007-2009
2011
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Conclusions
Francisco García Paramés, Spain 1963. Degree in economics from the Complutense University (Madrid) and master’s degree from IESE. He joined Bestinver AM in 1989 as an analyst. Two years later he began managing equity funds. Self-taught, his management style is based on applying the principles of value investing (Graham, Buffett, Peter Lynch, etc.), underpinned by a deep understanding of the Austrian Theory of Economic Cycles. He left Bestinver AM in 2014 and founded Cobas AM after a two year non-compete agreement.
Andrés Allende Rodríguez-Losada, CFA. Spain 1977. Bachelor’s degree in Business Administration from the Complutense University (Madrid). In 2001, he joined Credit Suisse where he worked as a portfolio manager first in Madrid and then in Zurich. In 2007, he joined RAB Capital in London as a Long/Short equities portfolio manager for Latin America, and subsequently for Global Emerging Markets. In 2011, he joined Allianz Global Investors in London, before moving to Edinburgh to work for Standard Life Investments in 2014 where he ran Global Emerging Markets funds. His investment style is contrarian and fundamental, based on a bottom up understanding of companies and industry cycles. Andres was appointed in Cobas AM in January 2017.
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Investment Team’s CV
Vicente Martín Brogeras, Spain 1973. Degree in Business Administration from Complutense University (Madrid). Executive Master of Finance at IE Business School, and Management Development Program (PDD) at IESE business school. In 1998, he joined Retevisión as a junior analyst. In 2000, he joined Endesa as an analyst. In 2007, he moved to Santander Investment Bolsa as a sell-side equity analyst covering Small & Mid-Caps. Vicente joined Cobas AM in December 2016.
Iván Chvedine Santamaría, Peru 1976. Degree in Business Administration from the Pontificia University Católicadel Perú and a master’s degree in Financial Markets from the IEB. He joined Bestinver AM in 2003 as a buy-side analyst where he focused on the analysis of small & mid-caps, utilities, insurance companies, among others. In 2015, he joined azValor AM and moved to Cobas AM in December 2016.
Mingkun Chan (aka Herman), CFA, Taiwan, 1979. Bachelor’s degree in International Business from National Taiwan University and master’s degree from IESE. Fluent in Mandarin Chinese, English and Spanish.He headed the Rep office in Asia, as a buy-side analyst for Bestinver AM from 2008-2015 and for azValor AM from 2015-2016. Previously, he worked as an associate for Deutsche Bank Investment Banking Division in London and as a buy-side equity analyst for Sinopac Securities in Taiwan. Mingkun integrated Cobas AM in December 2016. He is based in our Shanghai office.
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Investment Team’s CV
Carmen Pérez Báguena, CFA. Spain 1984. Degree in Business Administration from the University of Zaragoza and a master’s degree in Financial Markets from the IEB. She is a CFA charterholder. She joined Bestinver AM in 2009 and azValor AM in 2015. Carmen moved to Cobas AM in December 2016.
Juan Miguel Cantus Pastor, Spain 1989. Degree in Business Administration from the University of Alcalá (Spain), where he specialised in financial auditing. He joined Bestinver AM in 2013 and azValor AM in 2015 as a buy-side analyst. Juan was hired from Cobas AM in December 2016.
Juan Huerta de Soto Huarte, Spain 1989. Degree in Business Administration and degree in Law from the Complutense University (Madrid). Master’s degree in Austrian Economics from University Rey Juan Carlos, Madrid. Former analyst at Bestinver AM and azValor AM where he focused on the analysis of oil & gas, auto manufacturing, real estate and financial companies, among others. Juan joined Cobas AM in December 2016.
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Investment Team’s CV
Hwisoo Cha, South Korea, 1992. Bachelor’s degree in Economics & Spanish from Hankuk University of Foreign Studies (Seoul, South Korea) and master’s degree from IE Business School (Madrid). Fluent in Korean, English and Spanish. He started his career in the several research departments in Korea. Cha is a member of the Asian team and integrates Cobas AM in October 2018. He is based in our Shanghai office.
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This document is of a commercial nature and is supplied solely forinformation purposes and may not at any time be considered acontractual element, recommendation, personalised advice oroffer. Nor may it be considered as a replacement of theFundamental Investor Data (FID) or any other mandatory legalinformation which must be consulted prior to taking aninvestment decision. In the case of any discrepancy, the legalinformation shall prevail.
All legal information will be available at the head office of theManagement Company and through the website:www.cobasam.com. The references made to COBAS ASSETMANAGEMENT, S.G.I.I.C., S.A. are not to be understood asgenerators of any kind of legal obligation for said entity.
This document includes or may include estimates or forecastsregarding the progress of the business in the future and financial
results, which come from expectations of COBAS ASSETMANAGEMENT, S.G.I.I.C., S.A. and are exposed to factors, risksand circumstances that could affect financial results so that theymay not coincide with estimates and projections.
COBAS ASSET MANAGEMENT, S.G.I.I.C., S.A. has no obligation topublicly update or communicate the updating of content in thisdocument if the facts are not exactly as detailed in the present orif changes are made to the information contained herein.
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(Spain)+34 900 15 15 30
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