JPMorgan Indian Investment Trust plc - January 2020 - JP Morgan Asset Management
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
JPMorgan Indian Investment Trust plc January 2020
Investment objective and risk profile
JPMorgan Indian Investment Trust plc
Investment objective
The Company’s investment objective is to provide capital growth from Indian investments by outperforming the MSCI India Index.
The company will invest in a diversified portfolio of quoted Indian companies and companies that earn a material part of their
revenues from India. The company will not invest in other countries of the Indian sub continent including Sri Lanka. The company has
the ability to use borrowing to gear the portfolio to up to 15% of net assets where appropriate.
Risk profile
The value of investments and the income from them can go down and up, and you may not get back as much as you paid in. Past performance is not a
guide to the future.
Exchange rate changes may cause the value of underlying overseas investments to go down as well as up.
Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and
systems. Shares may also be traded less frequently than those on established markets. This means that there may be difficulty in both buying and
selling shares and individual share prices may be subject to short-term price fluctuations.
External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds could decline at the same time.
This trust may utlilise gearing (borrowing) which will exaggerate market movements both up and down.
This trust may also invest in smaller companies which may increase its risk profile.
Please refer to the Investor Disclosure Document, latest annual report, and Key Information Document (KID) for more information relating to the Company
1Performance and Positioning 2
Performance
JPMorgan Indian Investment Trust plc as of 31st December 2019
Market value
JPMorgan Indian Investment Trust plc (Diluted) GBP 831.0m^
Annualised performance (%)
Three Six One Three Five Ten Since
YTD
months Months year years years years Inception#
JPMorgan Indian Investment Trust plc -4.02 -7.03 -0.70 -0.70 5.88 7.18 7.04 8.71
MSCI India Index (NDR)* -2.05 -4.04 3.42 3.42 8.87 8.55 5.93 6.96
Excess return (Geometric) -2.02 -3.12 -3.99 -3.99 -2.75 -1.26 1.04 1.64
Calendar year performance (%)
2013 2014 2015 2016 2017 2018 2019
JPMorgan Indian Investment Trust plc -6.43 43.71 3.59 15.01 29.87 -7.95 -0.70
MSCI India Index (NDR)* -5.62 31.57 -0.69 17.57 26.74 -1.54 3.42
Excess return (Geometric) -0.86 9.22 4.31 -2.18 2.46 -6.51 -3.99
^JPM shadow valuation, # Inception: 1 July 1994 * Prior to 1 Oct 2003, BSE100 index
Source: J.P. Morgan Asset Management, MSCI, Thomson Reuters Datastream. Net asset value performance data has been calculated on a NAV to NAV (using the cum income NAV with debt at fair)
basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP.
Past performance is not a reliable indicator of current and future results
3Top 10 contributors/detractors to active returns
Benchmark MSCI India
JPMorgan Indian Investment Trust plc CY2019
Weight difference Stock return Impact
Top 10 contributors Country Sector % % %
Kotak Mahindra Bank Limited India Financials 4.75 25.88 0.91
HDFC Bank Limited India Financials 9.49 13.74 0.91
Mahindra & Mahindra Ltd. India Consumer Discretionary -1.36 -36.94 0.74
Yes Bank Limited India Financials -0.66 -65.90 0.66
Multi Commodity Exchange of India Limited India Financials 1.33 52.60 0.55
Indiabulls Housing Finance Ltd. India Financials -0.45 -68.20 0.51
Jubilant Foodworks Limited India Consumer Discretionary 2.12 24.52 0.40
GAIL (India) Limited India Utilities -0.70 -35.14 0.33
Zee Entertainment Enterprises Limited India Communication Services -0.57 -41.75 0.32
Vodafone Idea Ltd India Communication Services -0.18 -71.98 0.30
Weight difference Stock return Impact
Top 10 detractors Country Sector % % %
Reliance Industries Limited India Energy -11.19 27.67 -2.43
ITC Limited India Consumer Staples 2.76 -19.02 -0.84
Mahindra & Mahindra Financial Services Ltd. India Financials 1.62 -34.83 -0.80
Bharti Airtel Ltd. India Communication Services -1.86 49.01 -0.75
IndusInd Bank Ltd. India Financials 4.46 -10.83 -0.70
Bharat Heavy Electricals Limited India Industrials 1.35 -40.48 -0.69
Bajaj Finance Limited India Financials -1.73 50.80 -0.65
Ashok Leyland Limited India Industrials 1.75 -22.26 -0.63
EIH Limited India Consumer Discretionary 1.19 -31.87 -0.48
Larsen & Toubro Ltd. India Industrials 2.91 -14.18 -0.44
1 Source: J.P. Morgan Asset Management, MSCI, FactSet, gross of fees in GBP.
Data for Total Attribution shown (stock selection plus sector allocation). Attribution may not match official returns due to differences in systems, rounding. Past performance is not an indication
of current and future performance. The portfolio is actively managed. Holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment
Manager without notice. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.
4Portfolio positions
Benchmark MSCI India
JPMorgan Indian Investment Trust plc as of 31st December 2019
Fund Fund Relative
Top 10 holdings weight (%) Top 5 overweights weight (%) position (%)
Housing Development Finance Corporation Limited 10.3 HDFC Bank Limited 9.9 9.9
Kotak Mahindra Bank Limited 4.9 4.9
HDFC Bank Limited 9.9
Tata Consultancy Services Limited 9.5 4.4
Tata Consultancy Services Limited 9.5
Maruti Suzuki India Limited 6.2 4.2
Axis Bank Limited 6.5
IndusInd Bank Ltd. 4.1 4.1
Maruti Suzuki India Limited 6.2
Fund Relative
Top 5 underweights weight (%) position (%)
ITC Limited 5.4
Reliance Industries Limited 0.0 -11.3
Kotak Mahindra Bank Limited 4.9
ICICI Bank Limited 2.6 -4.1
Larsen & Toubro Ltd. 4.4
Infosys Limited 3.1 -3.4
UltraTech Cement Limited 4.2
Hindustan Unilever Limited 0.0 -3.3
IndusInd Bank Ltd. 4.1 Bharti Airtel Ltd. 0.0 -2.4
Source: J.P. Morgan Asset Management.
The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.
The holdings represent the current holdings of the fund. However, it cannot be assumed that these types of investments will be available to or will be selected by the fund in the future.
5India Market Outlook 6
Key Issues Slower Growth = fewer opportunities Quality earnings with optionality Valuations: relying on stock fundamentals Idiosyncratic opportunities Staying disciplined and true to process Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. 7
Growth slump – the key challenge
Real Gross Domestic Product (GDP) in India
11 (% YoY)
GDP (Real)
10
9
8
7
6
5
4
3
Jun12
Dec12
Jun13
Dec13
Jun14
Dec14
Jun15
Dec15
Jun16
Dec16
Jun17
Dec17
Jun18
Dec18
Jun19
Sep12
Sep13
Sep14
Sep15
Sep16
Sep17
Sep18
Sep19
Mar13
Mar14
Mar15
Mar16
Mar17
Mar18
Mar19
Source: MOSPI, CMIE, CLSA, latest data available as of January 2020
8Pockets of opportunity
Titan PAT and ROE Jubilant PAT and ROE
Adj. PAT RoE (%) Adjusted PAT RoE
71.7
67.5
50.1
49.2
48.0
48.9
37.6
36.2
30.5
30.5
28.5
43.4
25.2
42.5
42.5
42.4
21.5
20.3
41.0
13.0
12.7
8.7
35.5
33.0
28.0
24.9
24.0
20.6
19.7
19.4
-86.3
3.7
1,073
1,311
1,182
1,962
3,180
334
720
840
968
699
11,213
13,908
20
56
77
73
1,026
1,216
1,620
2,097
2,615
4,305
6,048
7,262
7,411
8,233
6,765
8,018
317
608
60
-6
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Company, MOSL Research, latest data as of Jan 2020 Source: Company, MOSL Research, latest data as of Jan 2020
PAT = Profit after Tax, RoE = Return on Equity PAT = Profit after Tax, RoE = Return on Equity
The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell
9Credit: contributing to the slowdown
Total Domestic Credit Growth Loan Growth of Non Banking Financial Companies (NBFCs)
Total Domestic Credit Growth (%) (% YoY) Loan growth of NBFCs ex top-rated/PSUs
20% 30 28
18% 27
16% 25
22
14%
20
12% 20
10%
8% 15
6%
4% 10 8
6
2%
0% 5
FY12
FY13
F19e
F16
Q2F20e
F14
F15
F17
F18
-
FY15 FY16 FY17 FY18 FY19 Jun-19
Source: Company Data, RBI, NHB, Morgan Stanley. Source: CLSA, Company data, latest data available as of January 2020
Opinions, estimates, forecasts, projections and statements of financial market trends are based NBFCs included: DHFL, IBHFL, Reliance Cap, Can Fin, Piramal, Edelweiss,IIFL, JM, Shriram
on market conditions at the date of the publication, constitute our judgment and are subject to Transport, MMFS, Chola, Muthoot, Shriram City, Magma Fincorp, Manappuram
change without notice. There can be no guarantee they will be met.
10Opportunities: strong getting stronger
HDFC Bank Bajaj Finance
AUM (Rs bn) RoE (%) (RHS)
1,400 30.0
1,200
25.0
1,000
20.0
800
15.0
PAT (INRb)
600
ROE (%)
10.0
400
5.0
200
7 9 11 16 22 29 39 52 67 85 102 123 145 175 211
FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19 - -
2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Companies, MOSL Research, latest data available as of January 2020 Source: Companies, MOSL Research, latest data available as of January 2020. AUM = Assets
PAT = Profit after Tax, ROE = Return on Equity under Management, ROE = Return on Equity
The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell
11Asset quality improving
Credit costs
4.0% (% of Avg loans)
Credit costs
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20CL
FY21CL
FY22CL
Source: CLSA, Company data, latest data available as of Jan 2020
Banks included: Axis, BOB, BOI, Canara, Corporation, HDFC Bank, ICICI Bank, OBC, PNB, SBI, Union, Yes Bank, IndusInd Bank, Kotak Bank.
Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change
without notice. There can be no guarantee they will be met.
12Axis Bank: An example of opportunity
Axis Bank
4.1%
PAT (INRb) Credit Cost (%) 127
3.1%
82
2.4%
74
62
52 2.2%
1.2%
42
25 1.7%
0.8% 34
1.5% 0.6% 0.7% 0.7% 0.7% 51
37 3
47
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Source: Company, MOSL Research, latest data available as of January 2020
PAT = Profit after Tax
Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change
without notice. There can be no guarantee they will be met.
The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell
13Earnings remain cyclically depressed – nearly flat for 5 years
BSE Sensex Earnings Per Share (EPS)
FY18-20: 12% CAGR
2236
FY08-18:
5% CAGR 1488 1723
FY03-08: 25% 1373
CAGR 1356
1333 1358 1340
1179
1109
FY96-03: 1% CAGR 1024
FY93-96: 45%
CAGR 833 820 834
720
540
446
361
250 266 291 278 280 272
81 129 181 216 236
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20E
FY21E
Source: Motilal Oswal Securities Ltd. Estimates as of 7th January 2020. CAGR = Cumulative Annual Growth Rate
Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change
without notice. There can be no guarantee they will be met.
The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell
14Polarisation
In stock performance… … and valuations
(rebased to 100)
170 Bharat Heavy Electricals vs. 11x vs. 46x
ABB India (FY 21 PE)
160
150 ITC vs. 17x vs 52x
Hindustan Unilver (FY21 PE)
140
130 1.5x vs 12x
LIC Housing Finance vs. (12 months
120 Bajaj Finance trailing book
value)
110
1.1x vs 6x
Shoppers Stop vs.
100 (12 month trailing
DMart
sales)
90
Mar-18
Jun-18
Mar-19
Jun-19
Dec-17
Sep-18
Dec-18
Sep-19
Dec-19
1.1x vs 4.4x
State Bank of India vs. (12 months
HDFC Bank trailing book
Top 10 Stocks Rest 40 stocks value)
Source: Datastream, UBS, J.P. Morgan Asset Management, Bloomberg, latest data available as of January 2020. The securities above are shown for illustrative purposes only. Their inclusion should
not be interpreted as a recommendation to buy or sell
Past performance is not a reliable indicator of current and future results
15Cognitive dissonance
Hindusan Unilever vs ITC Reliance: valuations vs returns
HUVR P/E (x) ITC P/E (x) ROA (%) (RHS) P/E (x)
Avg (x) Max (x)
70.0 21.0 Min (x) 7.0
17.4
17.0 15.7 6.0
50.0
54.2
12.3
13.0 5.0
30.0
9.0 4.0
18.5 8.2
10.0
Jul-12
Jul-17
Apr-11
Apr-16
Oct-13
Oct-18
Jan-10
Jan-15
Jan-20
5.0 3.0
Apr-16
Apr-11
Jul-12
Oct-13
Jul-17
Oct-18
Jan-10
Jan-15
Jan-20
Source: Companies, MOSL Research, Bloomberg, latest data available as of January 2020
Source: Companies, MOSL Research, Bloomberg, latest data available as of January 2020 ROA = Return on Assets Ratio
P/E = Price to Earnings Ratio
The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell
Past performance is not a reliable indicator of current and future results
16Valuations: Not cheap, but on cyclically depressed earnings
MSCI India Index P/E ratio MSCI India Index P/B ratio
25 MSCI India 7 MSCI India
PB
Fwd PE
23
10Y
10Y Average 6
21 Average
5Y Average
5Y Average
19
5
17
15 4
13
3
11
9
2
7
5 1
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: RIMES, MSCI, IBES, Morgan Stanley Research, latest data available as of January Source: RIMES, MSCI, IBES, Morgan Stanley Research, latest data available as of January
2020 2020
Fwd PE = Forward Price to Earning, 10Y = 10 Years, 5Y = 5 Years PB = Price to Book, 10Y = 10 Years, 5Y = 5 Years
17India offers a large universe of investable opportunities
The identification of superior growth, compounded over long periods of time, within an appropriate valuation
framework, is the primary way in which we seek to add value to client portfolios.
A solid in-house research team, analysis tailor-made to long term investing
101 Indian companies (market capitalisation of USD 1,395 billion) under formal coverage
68 companies classified as Premium or Quality (market capitalisation of USD 893 billion)
5 year USD expected return (compound annual growth rate)
For 101 stocks under coverage (market cap weighted) 11.95%
For 68 premium and quality stocks (market cap weighted) 12.40%
For ‘best 30’ Premium & Quality stocks (market cap weighted) 16.00%
‘Best 30’ Year 6 ROE forecast of 25.85%
Source: J.P. Morgan Asset Management. Data as of 20th January 2020. ROE = Return on Equity.
Forecasts are not a reliable indicator of future performance.
18Idiosyncratic opportunities
Multi Commodity Exchange of India (MCX) Apollo Hospitals Enterprise
10 Free cash flow
700 Average Daily Value Traded (INR bn) (Rs Bn)
8
FY12 ROE ~ 31% 8
600
6
6
500
FY19 ROE ~ 11% 4
4
400
2
2
300
1
-
200
(0) (1)
100 (2)
(2) (2)
0 (4) (4) (4)
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Mar-12
Nov-12
Mar-13
Nov-13
Mar-14
Nov-14
Mar-15
Nov-15
Mar-16
Nov-16
Mar-17
Nov-17
Mar-18
Nov-18
Mar-19
Nov-19
(6)
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20EFY21EFY22E
Source: Companies, Bloomberg, MOSL Research, Axis Capital, latest data available as of January 2020
Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change
without notice. There can be no guarantee they will be met. The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell
19YES Bank – Oh NO
YES Bank Stock Price YES Bank Price to Book (P/B) Ratio
Price (INR) P/B (x) Max (x) Min (x)
400 4.0
3.3
300 3.0
200 2.0
1.0
100 39 0.4
0.4
0.0
0
Jul-12
Apr-11
Apr-16
Jul-17
Oct-13
Oct-18
Jan-10
Jan-15
Jan-20
Apr-11
Jul-12
Apr-16
Jul-17
Oct-13
Oct-18
Jan-10
Jan-15
Jan-20
Source: MOSL Research, latest data available as of January 2020 Source: MOSL Research, latest data available as of January 2020
The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell
20Summary Slower Growth = fewer opportunities Quality earnings with optionality Valuations: relying on stock fundamentals Idiosyncratic opportunities Staying disciplined and true to process Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met. 21
You can also read
