Page 2 - Private Wealth Professional SMA (Moderate) PDF Factsheet

Sell GQG Partners Inc

The stock has performed well, baring a recent blip which saw the share price fall.

We believe the valuation is too rich relative to the cyclical nature of the business – i.e. we like to buy
and own cyclical stocks at or below their historical valuations and at reasonable discounts to the
market. Given the growth and size in their funds under management, there’s an added risk of funds
under management growth disappointment ahead along with risks regarding potential large investor
outflows if fund returns disappoint.

The fortunes of the stock are highly correlated to broader equity market movements, which means
the stock price rises and falls significantly more than broader markets do. With some equity markets
trading at all-time highs, we think these risks are too amplified at present. Market optimism for this
stock is high, regarding both funds under management growth and fund performance – i.e. there’s a
lot baked into the current share price which means a lot has to go right for the company ahead, some
of which is out of their control (e.g. broader market movements). As their funds under management
grows, there’s a risk of a reasonable drop off in the size and consistency of outperformance in their
funds

With listed fund managers, there’s always the conflict between raising as much funds under
management possible (beneficial for shareholders) and limiting the funds under management to assist
with high and more consistent levels of underperformance in their underlying funds (beneficial for
fund unitholders).
Sell TPG Telecom Ltd

We struggle with the catalysts for upside from here, with continued challenges and not enough wins
over the last twelve months or so. Earnings growth over the next 2 years doesn’t have enough
certainty attached to it, which has meant the stock has been failing our systematic screens more
recently.

We believe that continuing to own the stock would be a slow burn, with valuation that is fair-to-high,
and with earnings growth forecast not strong or certain enough. The company is only part of the way
through a multi-year simplification plan, with potential positives, but plenty of execution risks remain.

The company is also in the middle of a very large capital expenditure cycle to upgrade IT systems, 5G
rollout and the simplification plan, which has weighed on results in the short to medium term. Whilst
this investment is positive for the long-term execution risks and cost over-runs remain a concern.