Laurium Capital

Shifting Your PerspectiveThe Trump Scorecard, and the implications for global growth.

How to take advantage of unobvious investment opportunities to unlock value for investors in 2017

Shifting Your PerspectiveSo Donald Trump has chosen Mickey Pence as his vice-president….

Not even Walt Disney could’ve imagined that one day Mickey and Donald would be running America

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Global Outlook

• Macro risks abound – Trump, USA/China trade relations, Brexit, European elections, China debt

levels etc.

• World GDP expected to increase from 2016’s 2.9% to 3.2% in 2017 and 3.5% in 2018

• Upgrades to GDP growth likely to underpin equity markets

• Rising inflation, driven by tighter labour markets (US & Germany), higher energy prices and

improving industrial production, negative for bonds

• USD/Euro at parity at YE

• S&P rating on a forward PE of 17x is demanding

• Expect total return from global equities of 5% in USD

• Substantial outflows from EM over the past year, valuations are slightly more compelling than DM,

despite worries of a strong USD

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Global Outlook US and China PMI data

After contraction, PMI’s now improving

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Market risks continue to rise

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• We are in the 8th year of the 3rd longest bull market in 80 years

• Deep nature of last recession and sluggish recovery have allowed central banks

to keep rates much lower for longer, keeping asset prices inflated

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Domestic Outlook

• SA GDP growth has bottomed, should rise to 2% in 2018

• Our base case is that SA will not be downgraded – less than 50%

probability

• Forecast average inflation of 5.5% in 2017, with a 50bps cut in Q4

• Forecast earnings growth for domestic SA 12-15%, might be too

optimistic

• Expect continued earnings upgrades for resources using spot

commodity prices

• YE R/$ estimated at 14.5, marginally supportive of ZAR hedges

• 2017 total return expectations for ALSI of 14%

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Unlocking value

Forecast TR of 17%

• At spot commodity prices, diversified miners are trading on a one year fwd PE of c.7x

• This implies a c.50% upgrade to earnings

• While we remain concerned about bulk commodity prices, even if these retrace to our

forecast levels, the stocks still present value

• We view Gold as fair value and are not constructive on Platinum given implied EPS

downgrades using spot

Part 1 - Resources

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Unlocking valuePart 2 - Financials

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Forecast TR of 12%

• The financial sector is trading on a fwd 11.3x PE, which is a 5% premium to its 5 year

average

• With forecast earnings growth of 13%, a dividend yield of 4% and c.16% ROE, this is not

expensive. However we assume earnings growth will fall short of forecasts

• Domestic banks will generate high single digit total returns – earnings growth of mid-single

digits, dividend yields of c.5%, and stable PE ratings (fwd PE currently c.10x)

• Insurers are likely to beat banks, after meaningful underperformance in 2016

Unlocking value

Forecast TR of 8% (Excluding Naspers)

• Industrial stocks are trading at a small discount to the 5-year average PE & PB multiples

• With EPS growth one year forward of c.14%, a DY of 3.8% and ROE of over 20%, the fwd

PE of 14.8x seems fair

• We see good value in the global consumers, particularly following a global de-rating of

defensive and tech stocks in Q4 2016

• However we are concerned that low GDP growth has not been fully reflected in earnings

forecasts

• Our total return of 8% assumes earnings growth closer to 10% together with some de-rating

Part 3 - Industrials

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Fund Overview

• Collective Investment Scheme, governed by CISCA

• Minimum 70% in SA, max 25% in Global assets and 5% in African assets

• Net annualized return per annum of 17.1% vs. ALSI (TR) of 10.1% since inception to end January 2017

• Ranked no. 1/50 since inception to end January 2017

• 4 year track record

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Laurium Flexible Prescient Fund

© 2017 Laurium Capital

25%28%

46%

88%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CPI STeFi JSE All Share TR Laurium FlexiblePrescient

Asset

Allocation

Foreign SA Total

Equity 16.2% 58.3% 74.5%

Property 0.0% 3.9% 3.9%

Bonds 3.7% 6.2% 9.9%

Cash 0.1% 11.6% 11.7%

Total 20.0% 80.0% 100.0%

Benefits in a Voluntary / Discretionary portfolio

Recommended Allocation = 20%

• Fewer Constraints

• Dynamic Asset Allocation

• Increased Diversification

• Low downside capture relative to ALSI

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Laurium Flexible Prescient Fund

© 2017 Laurium Capital

0.5

0.6

0.7

0.8

0.9

1

1.1

Laurium Flexible

ALSI

The Graph above illustrates the cumulative return of every month where the JSE All Share

(ALSI) had a negative return for the month

Benefits in a Compulsory / Retirement portfolio

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Laurium Flexible Prescient Fund

© 2017 Laurium Capital

Recommended Allocation = 10%

• Strong alternative for investors who value tactical asset allocation

• The ability to participate in bull markets

• Superior risk management, leading to outperformance in the longer term, especially during times of high volatility

• More Optionality, flexibility

Thank YouQuestions?

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