Boutiques on Wednesdays

Boutiques on Wednesdays

29th September 2021

Agenda

1. Don't be scared of the Big Bad Wolf SA Economy

? Domestic stories we are looking for

2. BlueAlpha BCI Equity Fund

? Changes in the portfolio ? Performance

3. The valuation dilemma ? where to allocate?

2

Don't be scared of the Big Bad Wolf SA Economy

Domestic stories we are looking for

- We accept the consumer is stressed out - Companies can help themselves by getting rid of deadwood - Market share growth is important - We want these companies to benefit as the economy re-opens - In essence, we are looking for `ugly duckling' businesses on their way to becoming swans

3

Woolworths ? evolution of free cash flow

6 Year Free Cash Flow Conversion (cumulative 2015 - 2020)

56%

100% -5%

-69%

2% -80%

? Woolworths was converting 82% of earnings into FCF, and then one poor decision happened. Woolworths bought David Jones in FY 2015

Source: Credit Suisse Holt, Woolworths

4

Woolworths ? evolution of free cash flow post David Jones

6 Year Free Cash Flow Conversion (cumulative 2016 - 2021)

? Now that David Jones is the review mirror, the cash flow looks a lot healthier.

Source: Credit Suisse Holt, Woolworths

5

Woolworths ? SA food division soars high

Woolworths EBIT June 2021

? For all the talk about David Jones, we want to really focus on the SA Food Business, because that is the asset we are buying

Source: Bloomberg, Woolworths, RMB Morgan Stanley

6

Woolworths - Return on Assets

Source: Bloomberg

? The South Africa business far exceeds it's cost of capital

? One bad decision depressed the returns of the group

? Lesson learnt

7

Getting rid of dead wood

MTN:

- Exiting non-profitable jurisdictions - Stopped license bidding in dubious countries - Selling down stakes in Ghana, Nigeria & Rwanda - Planning to sell their tower assets

Woolworths:

- Cutting the purse strings with David Jones - Closing sub optimal clothing space in SA

Shoprite:

- Exited Nigeria in 2020 after 15 years - Exited Kenya this year - Planning to withdraw from Uganda

8

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