ioof adviserbriefing “australia – are we digging a hole for ourselves?” 2012
TRANSCRIPT
IOOFadviserbriefing
“Australia – are we digging a hole for ourselves?”
2012
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Disclaimer
This presentation is for financial adviser use only – it is not to be distributed to clients.
Issued by IOOF Investment Management Limited (IIML), ABN 53 006 695 021, AFSL 230524. IIML is a company within the IOOF group of companies, consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate.
Examples are for illustrative purposes only.
Past performance is not a reliable indicator of future performance.
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
The rise of resources
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Resources dominate EPS growth
-5%
0%
5%
10%
15%
20%
25%
EPS g
row
th (
pa)
Source: Bloomberg
Consumer(Discretionary)
Industrials Financials Consumer(Staples)
ResourcesTelecoms Energy Utilities Healthcare
Earnings growth 2002-2012
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
25%
4%
72%
Today
25%
4%
Change can be rapid
14%
20%
66%
March 2000 (dot.com bubble)
Source: Legg Mason/ASX/IOOF
Everything else
Resources
Telecoms
Australian share market composition
Resources
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Resources have dominated… but for how much longer?
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
90
100
110
120
130
140
150
160
170
180
190
Resource market outlook
PROJECTED
Strong analyst forecast for resource earnings
EPS (
base
d t
o 1
00)
Source: Bloomberg
Resources
Financials
2013 2014 2015May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
20122011
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Resource market outlook
0
5
10
15
20
25
30
35
40
Pri
ce
ea
rnin
gs r
ati
o
Historical P/E near long-term average
Source: Bloomberg
Actual P/E ResourcesAverage P/E Resources
2001 2003 2007 20092005 2011
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
7
8
9
10
11
12
13
14
15
China GDP forecast to slow
Source: Bloomberg
Median
High
Low
PROJECTED
GD
P g
row
th (
%)
1998 2000 2002 2004 2006 2008 2010 2012 13 14
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Massive increase in iron ore supply
0
50
100
150
200
250
300
350
400
450
500
Seaborne iron ore exports
Source: Bloomberg
Mill
ion m
etr
ic t
onn
es
2001 2003 2005 2007 2009 2011
Brazil
Rest of world
Australia
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
New iron ore projects
Perth
Geraldton
Kalgoorlie
Port Hedland
Significant increases in supply ahead
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
40
60
80
100
120
140
160
180
Iron ore price forecast
Iro
n o
re U
SD
/t
No growth in iron ore price
Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Q2 Q3 Q4 2013 2014
2009 2010 2011 2012
Source: Bloomberg
PROJECTEDIron ore price
Analyst forecast
Futures prices
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Slower resource growth
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
??Phenomenal resource growth coming to an end
Last 10 years
Next 3 years
Beyond 2015
Annual earnings growth (pa)
Source: Bloomberg
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Positioning portfolios post-boom
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Watch for long-term trends
-40
-20
0
20
40
60
80
Tota
l ret
urn
(%pa
)
1998
Source: Bloomberg
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
TelstraBHP
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Watch for long-term trends
-40
-20
0
20
40
60
80
Tota
l ret
urn
(%pa
)
Source: Bloomberg
TelstraBHP
1998
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Under 15 (US)
Over 65 (US)
0
5
10
15
20
25
30
Ageing US population
% P
op
ula
tio
n
The world is getting older
1980 1985 1990 2000 20051995 2010 2015
Source: Bloomberg
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
0
5
10
15
20
25
30
% P
op
ula
tio
n
Chinese population also ageing
The world is getting older
Under 15 (US)
Over 65 (US)
1980 1985 1990 2000 20051995 2010 2015
Under 15 (China)
Over 65 (China)
Source: Bloomberg
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
0
5
10
15
20
25
30
Japan is worst-case scenario
The world is getting older
Source: Bloomberg
Under 15 (Japan)
Over 65 (Japan)
1980 1985 1990 2000 20051995 2010 2015
% P
op
ula
tio
n
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
11%
Other89%
US
8%
Other92%
UK
4%
Other96%
Australia
Healthcare under-represented
Room for growth in Australian healthcare
Source: Bloomberg
Healthcare
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
Opportunities in healthcare
Australian health stocks can be winners
IPO 5 years on Today
CSL
Resmed
Mesoblast
9,400%
339%
3,675%
Source: Bloomberg
20 billion
18 billion
16 billion
14 billion
12 billion
10 billion
8 billion
6 billion
4 billion
2 billion
The next ten years won’t look likethe last ten years
What are the implications for public policy?
How do we manage this transition as investors?• Look for emerging sources of EPS growth• Employ active management to capture value
from emerging trends
IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”
IOOFadviserbriefing2012