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Origo Quest 1Investor Presentation
November 2018
November 20182
Disclaimer
“This document produced by Origo Capital contains general marketing information about its investment products.
Although the content is based on sources judged to be reliable, Origo Capital will not be liable for any omissions or
inaccuracies, or any loss whatsoever which arises from reliance on it. If Investment research is referred to, you should if
possible read the full report and the disclosures contained within it, or read the disclosures relating to specific
companies found on www.origocapital.se. Information relating to taxes may become outdated and may not fit your
individual circumstances. Investment products produce a return linked to risk. Their value may fall as well as rise, and
historic returns are no guarantee of future returns; in some cases , losses can exceed the initial amount invested. Where
either funds or you invest in securities denominated in a foreign currency changes in exchange rates can impact the
return. You alone are responsible for your investment decisions and you should always obtain detailed information
before taking them. For more information please see inter alia the simplified prospectus and information brochure for
the fund available at www.origocapital.se. If necessary you should seek advice tailored to your individual
circumstances from your bank advisor.”
"We invest in Change!
We are a selective, value oriented and long-term small-cap investor
that are specialized in companies undergoing
or expected to undergo change..."
November 20184
Who we are
➢ Independent investment firm founded 2011*
➢ Under the supervision of Finansinspektionen (Swedish Financial Authority) since 2012
➢ Members of Swesif (ESG-forum) since 2016
➢ Manages the alternative fund Origo Quest 1 since 1 February 2013
➢ Specialized in small and mid cap companies
➢ Assets under management, appr. 400 MSEK (as of Oct 31, 2018)
About Origo Capital
* Origo Capital is an registered AIF (Alternative Investment Fund) manager in Sweden
November 20185
Team Origo
Local team with extensive experience and complementary skillsets
Investment Team Investor Relations & Operations
Stefan Roos, Managing Partner
➢ 25+ years in the sector
➢ Several fund management awards
➢ Head of Swedish Equities, SHB Funds
➢ Head of Nordic Equities, SEB Asset Mgmt
➢ Managing Partner / Investment manager
Carl Rydin, Investment Analyst
➢ 10+ years in the sector
➢ Previously at New York-based L/S equity fund Lucerne Capital
➢ +5 years corporate finance experience
➢ Investment Analyst
Anders Nilsson, Investor Relations
➢ 25+ years in the sector
➢ Previously money market and FX-advisor
➢ Background: Danske Bank, SHB and ABN
➢ Investor Relations Manager
Karl Eckberg, Chief Operating Officer
➢ +10 years in the sector
➢ Previously Legal Counsel at Nordnet Bank
➢ Attorney at Wistrand Advokatbyra
➢ Specializing in securities and financial markets law
November 20186
Origo Quest 1 - Key Characteristics
Unique strategy and alignment of interests
Quest 1 Traditional Equity Fund
Return target Competitive risk-adjusted return Relative return over a benchmark
Risk target Below small cap index In a range around the market risk
Strategy Long-term, value and change driven Index driven / opportunistic
Real active ownership Yes No
Responsible investments (ESG) Yes Sometimes
Number of holdings 10 - 20 50 - 100
Can take short positions Yes No
Can hold substantial cash position Yes No
Correlation with the market* Limited (~0.3) High correlation (~1.0)
Fee structure Performance related Fixed fee
Liquidity & NAV Monthly, weekly Daily
Fund company Independent small-cap specialists Generalists
* 36m rolling numbers
November 20187
Origo Quest 1 – Performance since 2014
Highly competitive returns with low market correlation*
* Beta reflects the tendency of a security or portfolio´s returns to respond to a swing in the market. A beta of less than 1 means that the portfolio historically has had less correlation with the market trend. Performance numbers as per 1/1-2014 – 22/11-2018. Source: hedgenordic.com, Origo Capital
1/1/2014 Quest 1 OMXSGI NHX EQUITY
Yearly Returns 10.9% 8.9% 4.6%
Beta 36m 0.3 1.0 0.3
St. dev. 36m 10.6% 10.9% 3.6%
➢ Quest: Total Return of 66% with a systematic market risk of 0.3
➢ Similar funds (alternative equity) has gained 25% (NHX Equity)
➢ OMXSGI incl. dividends has gained 52%
65,6%
51,7%
24,6%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Quest since 2014
Quest 1 OMXSGI (Incl.div.) NHX (Equity Hedgefund index)
November 20188
➢ Liquidity
➢ Larger universe of potential investments
➢ Utilize market volatility
➢ Short-term oriented market participants
➢ Focus on business analysis (not transactions)
➢ Limited/poor small-cap analyst coverage
Unique and Proven Investment Approach
➢ We invest in companies listed on public markets
➢ Our active and research-driven investment approach can be compared to business analysis found within private equity
Combining the best of
two practices
➢ Focus on low risk investments
➢ Long-term investment horizon
➢ Focus on fundamental analysis
➢ Throrough due-diligence
➢ High conviction cases
➢ Concentrated portfolio
We combine the best characteristics found within both public markets and private equity
Public Markets Private Equity
November 20189
Investment Philosophy
➢ Our investment universe (Nordic Small Cap´s) often include mispriced and misunderstood companies
➢ We focus on change and company specific value drivers
➢ We are value investors. High return on invested capital and free cash flow growth are important metrics to us
➢ We have a long term investment horizon (3-5 years at least)
➢ We prefer to have a close contact with the management/Board and to engage in a change process
➢ We believe in specialization and are highly focused
➢ The fund is concentrated and has approximately 15 long and 15 short positions
Fundamentally driven investment approach and focus within core competences
November 201810
We are Active Owners
➢ Focus on value creation in the portfolio companies
➢ Protect our unit holders common interest
➢ Reduce investment risk
➢ Maximize return on invested capital
Using share holder rights to maximize share holder value
November 201811
Research-driven Investment Process
Ideageneration
In-depthresearch
Define valuedrivers
Definelong/short potential
Executionand
monitoring
➢ Own idea
➢ Idea from industrial advisors
➢ Screenings
➢ Industrial focus
➢ Sustainability issues (ESG)
➢ Market position
➢ Long term view
➢ Change analysis
➢ Value drivers & risks
➢ Possibilities to be an active owner
➢ Private equity approach
➢ Potential for fair value
➢ Catalysts / triggers
➢ Liquidity
➢ Impact on the portfolio
➢ Active ownership
➢ Follow-up on value drivers
➢ Portfolio adjustments
We view ourselves as business analysts, not stock analysts
➢ Our investment process is research-driven
➢ Emphasis is placed on identifying the competitive situation and specific value drivers
November 201812
We Identify Clear Value Drivers as Catalyst
➢ Industrial segments
➢ Geographies
➢ Channels
➢ Corporate governance
➢ ESG improvements
➢ Shareholder value
➢ Strengthen existing products
➢ Introducing services, new tech. etc.
➢ Business model
➢ Structure portfolio
➢ Spin-off underachievers
➢ Optimize capital structure
The Origo model for analyzing the value drivers
Differentiate Expand
Transform Execute
November 201813
Why We Focus on Small-caps
12,7%
10,5%
8,8%
5,1%
23,0%
17,4%
12,2%
3,4%
Small-Caps Large-Caps Corp. Bonds Gov't. Bonds
Annual Return
Annual Volatility
Over time, small-caps generate higher return but also with higher volatility
Source: Ibbotson, Origo Capital
55
131
560
Large Caps (SEK >57bn)
Mid Caps (SEK 10-57bn)
Small Caps (SEK <10bn)
# of Nordic Listed Companies
Higher Return but Also Higher Volatility in Small-caps Larger Universe of Potential Investments in Small-caps
➢ There are over 500 small-cap publicly traded companies in the Nordic region
➢ Less than 25% of these are covered by the local research brokerage houses, leading to an advantage for a research-
driven investment firm like Origo Capital
➢ Smaller companies have historically grown faster and have outperformed as an asset class, but with higher volatility
November 201814
Market participants tend
to disregard any positive
changes >2 years away
Why Our Long-term Investment Approach Makes Sense
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
The Market (average) Origo Capital
➢ In general, investors have gradually targeted low-volatility returns, and have turned to investing in short-term focused
vehicles to achieve this, leading to average holding periods decreasing to less than 18 months today
➢ We view this as an excellent opportunity for long-term investors such as Origo Capital
➢ We have both patience and conviction to step outside of the crowd and take a contrarian view
Our long-term investment view is one of Origo Capital’s most important advantages
0
2
4
6
8
1940's 1950's 1960's 1970's 1980's 1990's 2000's 2010's
Holding Period (years)
Source: S&P, NYSE, Cremers and Pareek 2016, Origo Capital
Average Equity Holding Periods Decreasing Longer Investment-horizon has Outperformed
Short-term holding period
increases risk as more
investments are loss-
making on average
November 201815
Optimal Portfolio Construction to improve risk-adjusted return
Long
Short
➢ 10 - 20 long positions
➢ 3 - 5 year investment horizon
➢ Market cap typically SEK 5 - 20bn
➢ Engaged and active owner
➢ Focus on change as value driver/catalyst
➢ Short positions in Small & Mid-caps
➢ Pair trades where applicable
➢ Market hedges (futures)
Our portfolio is long-biased with select short positions to reduce risk and maximize return
➢ On average we hold 10 - 20 long positions and aim to take small (1-4%) short positions in over 15 companies
➢ We analyse our potential short positions with the same scrutiny and in-depth fundamental analysis as our long positions
➢ Our model implies reduced market risk and increased stock selection impact
November 201816
Business Partners
Administrator / Risk Mgmt AuditorCustodianCompliance
Origo Capital has a lean organization and utilizes professional third-party functions
➢ With a view to focus on both the core business (management and marketing of the fund) and reducing the risk of
conflicts of interest, Origo Capital have consulted professional contractors for various functions of the business
➢ Our Chief Operating Officer, Karl Eckberg, has a close relationship and daily communication with representatives of our
outsourced functions
Distribution / platforms
November 201817
Case Studies (long)
COMPANY DESCRIPTION
➢ A pure-play logistic property firm with modern and strategically
located logistic properties in Sweden and Denmark
➢ Current market cap: SEK 7.3 bn
INVESTMENT THESIS
➢ Significant underperformance versus peers in a strong sector
➢ Main shareholder’s agenda not aligned with minority shareholders
ORIGO ENGAGEMENT
➢ Active partner in informal investment consortium
➢ Voiced dissapointment towards Tribona’s management and
governance structure
➢ In 2015, Catena made a public offer to acquire Tribona
COMPANY DESCRIPTION
➢ Owner and developer of fast-growing and profitable gaming,
media and entertainment companies
➢ Portfolio covers B2C gaming operations B2B gaming technology
and gaming marketing platforms
➢ Current market cap: SEK 8.0 bn
INVESTMENT THESIS
➢ B2B game developer Yggdrasil should be separately listed
➢ Communication and governance to be improved
➢ List on OMX Nasdaq Stockholm
ORIGO ENGAGEMENT
➢ Open letter to BoD addressing issues and voicing rationale for
listing Yggdrasil (Origo estimates EV of SEK 3.5 – 4bn)
Catena acquired Tribona Origo sends letter to BoD
November 201818
Case Studies (short)
COMPANY DESCRIPTION
➢ Sports retailer with a focus on selling apparel and equipment at
the lowest prices from its large physical stores and online
➢ Current market cap: NOK 5.8 bn
INVESTMENT THESIS
➢ Short-term issues including high inventory levels and expensive
expansion outside of the Nordic region
➢ Longer-term structural shift towards E-commerce
➢ Net Debt to EBITDA at high levels which puts dividend at risk
➢ Aggressive accounting methodology with like-for-like growth
excluding any cannibalization effects
➢ Insiders net sellers while criticizing short sellers
➢ Darling among sell-side analysts with downside revisions inevitable
COMPANY DESCRIPTION
➢ Equipment rental company for the construction and other
industries in the Nordics and continental Europe
➢ Current market cap: EUR 0.6 bn
INVESTMENT THESIS
➢ Overvalued both on an absolute and relative basis with 60% price
/ book value premium compared to Cramo
➢ Deteriorating ROIC and a lack of ability to generate free cash flow
even in a positive underlying market
➢ Although some self-help in terms of margin improvement, the
market has priced in any potential upside
➢ Asset/investment-heavy company in a extremely competitive
environment
Origo prized for XXL idea Ramirent is leaking cash
November 201819
Summary
➢ Experienced team with well-documented results
➢ Unique philosophy and process - combing the best of Public markets and Private Equity
➢ We aim to continue to deliver equity-like performance or more, with much less market correlation
Quest 1 - Alternative equity approach that adds value to your portfolio
