Gresham House Strategic Plc Investor Presentation | Q1 2018 Gresham House Asset Management
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Gresham House Strategic plc - The Opportunity ▪ Compelling opportunity to buy at a 30% discount to Relative Performance 130 0% NAV 1 125 -5% ▪ 120 Concentrated portfolio with considerable potential -10% 115 upside, attractively valued and tracking in line with -15% 110 investment manager’s thesis 105 -20% 100 -25% ▪ Portfolio valued at a discount to market together with 95 -30% 90 share price discount to NAV creates a ‘double 85 -35% discount’ Aug 15 Dec 15 Apr 16 Aug 16 Dec 16 Apr 17 Aug 17 Dec 17 ▪ Proven team - long term 20-year track record 2 GHS DISCOUNT GHS NAV SMXX ASX ▪ Right timing – Focused on undervalued areas (Small- Source: Bloomberg, as at 29 March 2018 Cap, Value) in a market that is increasingly favouring GHS Portfolio Metrics vs. Indices stock-pickers 3 FTSE FTSE All FTSE GHS GHS Small Share AIM ▪ Current 4 Forecast 4 Intention to continue dividend payments following Cap Current Current Current maiden 15p dividend and share buyback in April EV:Sales 0.8x 0.7x 1.0x 1.4x 3.0x 2017 EV:EBITDA 6.3x 5.1x 10.7x 9.4x 24.0x 14% N/A 3.7% 3.7% 8.6% Sales Growth Net. -0.3x -0.5x 2.2x 1.4x 0.2x Debt:EBITDA 1 Discount to NAV as of 29 March 2018 and using GHS mid-price of 825.38p Source: Bloomberg Data for FTSE All-Share, Small Cap and AIM market, Company Accounts and House Broker Forecasts for GHS Portfolio Holdings as of 29 March 2018 2 See slide 8 3 “Stock Pickers are poised to reap gains from falling correlations” Cormac Mullen, Bloomberg, 4 August 2017 4 GHS Current and Forecast values strip out 3 investments that currently are private companies and do not have public forecasts and 1 public company that has forecasts under review (Quarto plc). Metrics take into account the discount to NAV and are calculated at a portfolio level. Forecasts are calendarized to December year-end. Current represents 2017, forecast represents 2018. Market ratios | PAGE 3 based on rolling 12 months.
Public Equity – The Market Opportunity FTSE All Share median EV/EBITDA multiple (x) 14 Smaller companies attractively priced 11.5 12 ▪ The valuation differential between large stocks above 10 7.7 8 £250m and smaller, less liquid stocks is significant 6 ▪ The valuation dislocation has been increasing 4 2 ▪ Significant opportunity to generate superior long-term 0 returns investing in good quality, intrinsically Mkt Cap below £250m Mkt Cap above £250m undervalued smaller companies Source: Bloomberg data to 29 March 2018 Value Versus Growth 2.0 Value stocks set to outperform +2 Std Dev 1.8 ▪ Recent relative under-performance of value versus +1 Std Dev 1.6 growth provides potentially strongest argument for value Trend 1.4 -1 Std Dev in 40 years -2 Std Dev 1.2 ▪ Stocks with value characteristics have been overlooked 1.0 for much of the last five years 0.8 0.6 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: Bloomberg data to 29 March 2018 | PAGE 4
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