MUNRO GLOBAL GROWTH FUND - INNOVATIVE HEALTH, September 2018
Disclaimer The information contained in this document reflects, as of the date of publication, the views of Munro Partners and sources believed by Munro Partners to be reliable. There can be no guarantee that any projection, forecast or opinion in these materials will be realised. The views expressed in this document may change at any time subsequent to the date of issue. Grant Samuel Fund Services Limited ABN 48 129 256 104 AFSL 321517 (Grant Samuel Fund Services) is the responsible entity of the Munro Global Growth Fund ARSN 612 854 547 (Fund) and is the issuer of this information. This information has been prepared without taking account of the objectives, financial situation or needs of individuals. Before making an investment decision in relation to the Fund, investors should consider the appropriateness of this information, having regard to their own objectives, financial situation and needs and read and consider the product disclosure statement for the Fund dated 1 March 2018 (PDS) which may be obtained from www.gsfm.com.au, www.munropartners.com.au/access or by calling (02) 8188 1510. Past performance information given in this document is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. None of Grant Samuel Fund Services, Munro Partners, its related bodies or associates nor any other person guarantees the repayment of capital or the performance of the Fund or any particular returns from the Fund. No representation or warranty is made concerning the accuracy of any data contained in this document. This document is issued on 3 October 2018. The management costs are inclusive of GST and RITC. The Fund Exposure and Top 5 Holdings depict end of month figures and may have changed materially from holdings during the month or not disclosed due to confidentiality reasons. The Delta Adjusted Exposure includes impact of options hedging. Numbers may not sum due to rounding or compounding returns. The currency exposure of 0-100% is biased to maintaining high levels of hedging. The performance fee is calculated once the Fund exceeds the high watermark and hurdle rate. You should consider the PDS in its entirety before making a decision to acquire or continue to hold an interest in the Munro Global Growth Fund. 2
AREA OF INTEREST: INNOVATIVE HEALTH With a backdrop of ageing populations across the globe, health care innovation is more important than ever. Addressing rising costs in health care systems and finding new ways to treat and cure illnesses are two key areas of focus within the industry. AoI Sub - Trends Winners MEDICAL TECHNOLOGY GENOMICS INNOVATIVE HEALTH LIFE SCIENCES & DIAGNOSTICS MANAGED CARE PRICING HEADWINDS / DISTRIBUTORS 3
GENOMICS – DNA SEQUENCING THE KEY ENABLER The human genome is complex, consisting 23 chromosomes, in these chromosomes are large strands of DNA. In total there are 3 billion DNA bases in every cell in our body, with about 3 million differences between our sequences that make us unique. Whole Genome Sequencing (WGS) represents a complete blueprint for each of us. Genomic Insights – Use Cases Genomic insights could be used for: Predicting an individual’s predisposition to • disease Screening: Non-Invasive Pre-Natal Testing • Personalised medicine: Selecting the optimal • therapy for the treatment of disease 4
DNA SEQUENCING – FALLING COST, INFLECTING DEMAND As the cost of sequencing a genome comes down, the demand for genome sequencing is positively inflecting as more genomics insights are sought out by Governments, Academic Researchers and Commercial Players. Illumina is the market leader and has driven the cost down with each new product cycle. Cost Per Genome falling faster than Moore’s Law Source: Illumina 5
ILLUMINA – MARKET LEADER IN DNA SEQUENCING SYSTEMS Illumina has an installed base of over 11k instruments and >90% of all sequencing performed has been generated on Illumina technology. The throughput of sequencing increases with the release of each new product cycle, leading to higher consumables revenue as a % of group revenues. Razor-Razor Blade Model - Illumina has 87% Recurring Revenue $3,500 95% $3,000 90% Illumina Revenue (US$m) $2,500 Recurring Revenue % 85% $2,000 80% $1,500 75% $1,000 70% $500 $0 65% 2012 2013 2014 2015 2016 2017 2018e 2019e Instruments Consumables & Services Recurring Revenue % Source: Munro Est. 6
ILLUMINA – INVESTMENT CASE Positively inflecting Next Gen. Sequencing demand should translate into positively inflecting revenues with a greater mix of consumables leading to operating margin expansion and the potential for a further re-rating. Investment Case Illumina’s EBITDA positively inflecting Key Stock: Illumina Listed: US Market Cap: US$53bn Stock multiple: EV/NTM Adj. EBITDA 33x $350 $1.2 $1.1 Investment Case: $300 Forward EBITDA (us$Bn) $1.0 $250 $0.9 • Growth – Revenue growth to positively Share Price $0.8 inflect to 20-30% 3yr CAGR $200 $0.7 Operating Margins – expanding with a • $150 $0.6 positive mix shift to consumables and $0.5 $100 operating leverage $0.4 $50 $0.3 Should it hold 30x EBITDA, this equates to • Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 100% upside over a 3yr period Share Price Forward EBITDA Source: Munro Est. 7
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