Welcome, everyone, and thank you for attending
this 20th meeting, which is obviously an anniversary,
and at the same time it's a beginning
of a new era for this company.
We are very excited to tell you about the opportunities,
because clearly this will be different to what
we had before.
As you're well aware, the company changed its name,
and it's now eligible to invest across the Middle East, Africa,
and Eastern Europe.
Obviously, on this slide, we want
to show just that we still have assets in Russia.
They are still part of [INAUDIBLE] fund,
even after being discounted and frozen for now
by different regulators.
As you can see [INAUDIBLE] top five positions
of that frozen assets.
If we move on, this is the world of opportunities.
So how this will be different?
So what we have, in terms of the breadth of the markets, clearly
we got biggest markets, which are South Africa and Saudi
Arabia, at the same time just followed
by the United Arab Emirates and Qatar, Kuwait, and then,
smaller degree, Turkey, Greece, Poland,
Hungary, and Czech Republic.
Where we see opportunities in how
we invested the fund, because we were
able to do it from the beginning of February,
we believe this would--
countries like Saudi Arabia, South Africa, and Greece
look much better [INAUDIBLE].
That's where [INAUDIBLE] right now.
And in terms of the risk factors which we see,
the major one will be Turkey, where
we're not certain about the outlook on the market.
And it's probably likely to have some political turbulence
as well.
We're obviously all aware of the earthquake
and just the social and economic impacts of that disaster.
And in terms of cash in Kuwait, that's sort of temporary issues
as we proceeding with the rollout of market access.
In terms of the sectors, this is a classic emerging-market
situation, where the financials and materials will dominate
market for quite a while.
We will be very excited to look deeper in the market.
And these are our top 10 holdings.
So as you can see, just in terms of the opportunities,
we do like the companies related to materials and financials.
The financial sector in the Gulf is a leverage
on domestic growth and global interest cycle, which obviously
helps them to generate.
It's a very well-capitalized area, in terms of banking.
And in terms of South African banks,
I think just I will let Pandora to talk more about that,
as well as just the opportunities in the commodity
sector.
Look, we're all aware, the prices of oil,
[INAUDIBLE],, and gas, that's opportunity in the Gulf.
I will pass it to Pandora for the next couple of slides.
So I get the best bit, actually, to tell you
what we are excited about and how we think about the region.
There are three ways we think about the region.
Firstly its mass-market consumption,
secondly its commodities, as Oleg
alluded to, and lastly its something
we call "technology adopters."
So firstly, on mass-market consumption,
we know that 60% of the population in this region
is actually under the age of 25 years old.
And according to the UN figures, this
is going to continue to grow into 2050.
The very youthfulness of this population
is absolutely brilliant as a base for consumption.
They are also increasingly women.
They're very tech savvy.
They're obviously young, as I mentioned.
And while it might not translate into naturally rising incomes,
what it does gives us opportunity
is to look at companies that are selling affordable product
or differentiated products.
One such example, which I'm sure Oleg can attest to, which he
met last week, is [INAUDIBLE].
It's a company that holds, owns, and operates a chain of gyms
in Saudi Arabia.
According to them, for every gym they
open that is women-focused they are actually full.
True?
Yeah.
[INAUDIBLE] even waiting lines.
So that's a kind of population growth
through changes in the way people are consuming that is
giving us a lot of interest.
So that's number one.
The second, as I mentioned, is commodities.
The region has a breadth of commodities,
everything from energy and oil in Saudi Arabia to platinum,
copper, gold in South Africa.
We are very excited about owning companies here
that are solving for the energy transition.
A good example of this, again, is
copper, where it's used to bind, connect,
anything with batteries, modules, electricals,
networks in any wind, solar, or EV transmission product.
Anglo American is a company we own in the fund.
It is a diversified company--
not only has copper, it also has iron ore, platinum,
and even diamonds.
So we are able to take advantage of them holding
a breadth of commodities.
Lastly, with technology adopters,
what we are thinking here is really about innovation--
companies that use technology and provide a service
or leapfrog structural challenges in the continent--
for example, in Africa.
One such organization is [INAUDIBLE]..
Through its mobile money and its payment platform,
it's making it easier for populations
to access a bank account, buy insurance, and also pay
for things.
So an example of this is a company
they own in Kenya, that you can use every single day
and not actually need to use cash.
So from the minute you wake up to the minute
you go to bed, whether you're paying bills,
paying for a taxi paying, for a coffee,
or paying your rent bill, you can do this on their phone.
So we like those kind of companies.
And I'll take you through page 7.
It's how a company actually makes it into the portfolio.
We have around 10-plus analysts that look specifically
at the stocks in this region, and they all
follow the same process we all do.
First things first.
The first stage is strategic classification.
The second one is an [INAUDIBLE] checklist.
And lastly, they produce a five-year expected return.
For the strategic classifications,
what do they do?
They look at the economics of the business
in order to answer the question, is this
a company we want to own?
They look at, does it pay dividends?
Does it have a high return?
Does it have debt on their books?
So those are the things that capture that.
Secondly, they look at duration of the story.
Because we have a very long-term lens,
is this a company that's going to be around
in the next 3, 5, and 10 years?
They will determine that.
And lastly, they look at the governance.
Who's on the board?
Who's at the board?
Do they follow processes?
Have they been banned from anything?
They dig deep and look at that.
The second part the process analysts follow
is an [INAUDIBLE] checklist.
It is 40 questions that are concerned
with environmental, social, and governance questions.
It paints for us a picture of where the company sits
along these ESG lines.
Secondly, they also fill out what we
call a "materiality framework."
this is simply looking at the company
in context of its own industry.
So if you take a mobile-phone company,
how does it stack against other mobile-phone companies,
along these ESG lines?
Lastly-- which is where the numbers come in-- they produce
what we call a "five-year expected return."
They put together earnings growth, any dividends
a company makes which is of great interest to us,
any change in valuation, and lastly they
adjust for a US dollar amount, which is the currency.
They produce a figure which is either 9--
anything between 0% to 10% or negative, and we
make decisions.
That's when we sit down and look at a company
and decide whether that should enter the portfolio in a sense.
So that, in a nutshell, is the opportunity
in terms of the region and secondly
in how a company actually makes it into the portfolio.
So now, if we look how it's all assembled in the new portfolio,
as we explained to you just before
and you know for many years, generally JP Morgan
is quality-biased.
So if you want to put us in any particular bracket,
we'll be looking for the quality business at a reasonable price.
And that's the focus.
In specific for this product, we will
be extremely focused on the income
generation for the company.
And the other factor, we will be looking
at the relatively dispersed positions
in terms of market caps.
When you look at this chart, one of what you probably
will notice is just [INAUDIBLE] dominated
by the trading companies.
Explanation for that-- A, this region is very young.
So to get to quality of the premium,
we need to have five-plus years of the positive [INAUDIBLE]..
Just remember, five years ago, just Saudi Arabia and UAE
was not part of MSCI at all.
So that's a massive change.
The other factor is for the region dominated
by the commodity names.
And that's a massive factor.
So, for us, as we will be progressing through the time,
I'm sure 5 years down the road, 10 years down the road,
you will see this picture, slightly different,
as a structure of the region.
And its depth will evolve.
And if anyone would ask me, 10 years ago, [INAUDIBLE] Saudi
Arabia [INAUDIBLE] the biggest market globally
in terms of market cap, I may not believe in that.
But here we are, 10 years fast-forward,
and [INAUDIBLE] is the case.
It is not as deep as China or America yet,
but, as you can see, the difference
between this new benchmark for the company
and what we had before, it's 600-plus names
in the benchmark.
So it's by far more diverse, in terms of opportunities.
Which makes us very excited, because ultimately it's
completely upside down from what we
used to have with the Russian market,
where the index was extremely small
and opportunity set was quite limited.
So that's how this all come up.
As you can see, just, again, old story-- just,
we focused on return on equity.
That's a prime driver.
When we discuss companies, this is
one of the key factors which we can see them.
So, relative to the index, we will
be in the companies which generate high income
and high return on equity.
Finally, I just want to make a summary.
The company will continue to be focused
on generating the maximum returns from diverse portfolios
in the new region--
which is the Middle East Africa, and emerging Europe.
We continue to focus on the high-quality businesses.
As I told you before, we are quality-biased,
so that's a priority for us.
And we believe [INAUDIBLE] we have depth and strength
in the team, to provide and just properly explore
this opportunity.
Finally, just, this is the market
which is right now just sort of still
going through the evolution stage and expansion stage.
So the number of names, the type of names, which we all
have in the portfolio today and five years down the road
will evolve significantly.
Just to give you ideas--
for last year, we had more than 20 IPOs.
Here to date, we have 5 IPOs already, in two months.
So markets evolve, grow, and that creates
very exciting opportunity.