IOOFadviserbriefing

“Australia – are we digging a hole for ourselves?”

2012

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Disclaimer

This presentation is for financial adviser use only – it is not to be distributed to clients.

Issued by IOOF Investment Management Limited (IIML), ABN 53 006 695 021, AFSL 230524. IIML is a company within the IOOF group of companies, consisting of IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate.

Examples are for illustrative purposes only.

 

Past performance is not a reliable indicator of future performance.

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

The rise of resources

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Resources dominate EPS growth

-5%

0%

5%

10%

15%

20%

25%

EPS g

row

th (

pa)

Source: Bloomberg

Consumer(Discretionary)

Industrials Financials Consumer(Staples)

ResourcesTelecoms Energy Utilities Healthcare

Earnings growth 2002-2012

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

25%

4%

72%

Today

25%

4%

Change can be rapid

14%

20%

66%

March 2000 (dot.com bubble)

Source: Legg Mason/ASX/IOOF

Everything else

Resources

Telecoms

Australian share market composition

Resources

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Resources have dominated… but for how much longer?

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

90

100

110

120

130

140

150

160

170

180

190

Resource market outlook

PROJECTED

Strong analyst forecast for resource earnings

EPS (

base

d t

o 1

00)

Source: Bloomberg

Resources

Financials

2013 2014 2015May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

20122011

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Resource market outlook

0

5

10

15

20

25

30

35

40

Pri

ce

ea

rnin

gs r

ati

o

Historical P/E near long-term average

Source: Bloomberg

Actual P/E ResourcesAverage P/E Resources

2001 2003 2007 20092005 2011

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

7

8

9

10

11

12

13

14

15

China GDP forecast to slow

Source: Bloomberg

Median

High

Low

PROJECTED

GD

P g

row

th (

%)

1998 2000 2002 2004 2006 2008 2010 2012 13 14

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Massive increase in iron ore supply

0

50

100

150

200

250

300

350

400

450

500

Seaborne iron ore exports

Source: Bloomberg

Mill

ion m

etr

ic t

onn

es

2001 2003 2005 2007 2009 2011

Brazil

Rest of world

Australia

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

New iron ore projects

Perth

Geraldton

Kalgoorlie

Port Hedland

Significant increases in supply ahead

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

40

60

80

100

120

140

160

180

Iron ore price forecast

Iro

n o

re U

SD

/t

No growth in iron ore price

Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Q2 Q3 Q4 2013 2014

2009 2010 2011 2012

Source: Bloomberg

PROJECTEDIron ore price

Analyst forecast

Futures prices

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Slower resource growth

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

??Phenomenal resource growth coming to an end

Last 10 years

Next 3 years

Beyond 2015

Annual earnings growth (pa)

Source: Bloomberg

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Positioning portfolios post-boom

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Watch for long-term trends

-40

-20

0

20

40

60

80

Tota

l ret

urn

(%pa

)

1998

Source: Bloomberg

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

TelstraBHP

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Watch for long-term trends

-40

-20

0

20

40

60

80

Tota

l ret

urn

(%pa

)

Source: Bloomberg

TelstraBHP

1998

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Under 15 (US)

Over 65 (US)

0

5

10

15

20

25

30

Ageing US population

% P

op

ula

tio

n

The world is getting older

1980 1985 1990 2000 20051995 2010 2015

Source: Bloomberg

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

0

5

10

15

20

25

30

% P

op

ula

tio

n

Chinese population also ageing

The world is getting older

Under 15 (US)

Over 65 (US)

1980 1985 1990 2000 20051995 2010 2015

Under 15 (China)

Over 65 (China)

Source: Bloomberg

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

0

5

10

15

20

25

30

Japan is worst-case scenario

The world is getting older

Source: Bloomberg

Under 15 (Japan)

Over 65 (Japan)

1980 1985 1990 2000 20051995 2010 2015

% P

op

ula

tio

n

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

11%

Other89%

US

8%

Other92%

UK

4%

Other96%

Australia

Healthcare under-represented

Room for growth in Australian healthcare

Source: Bloomberg

Healthcare

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

Opportunities in healthcare

Australian health stocks can be winners

IPO 5 years on Today

CSL

Resmed

Mesoblast

9,400%

339%

3,675%

Source: Bloomberg

20 billion

18 billion

16 billion

14 billion

12 billion

10 billion

8 billion

6 billion

4 billion

2 billion

The next ten years won’t look likethe last ten years

What are the implications for public policy?

How do we manage this transition as investors?• Look for emerging sources of EPS growth• Employ active management to capture value

from emerging trends

IOOFadviserbriefing 2012“Australia – are we digging a hole for ourselves?”

IOOFadviserbriefing2012