L1 Long Short Fund Limited (LSF) Earnings Call Transcript & Summary

Good morning, everyone, and thank you so much for joining us for the L1 Long Short Fund Investor Webinar. My name is Mark Landau, and I'm the Joint Managing Director and Chief Investment Officer of L1 Capital. Today, I'll give you an overview of how we've been performing, the outlook for markets and where we see some of the best opportunities. There's been a bunch of questions that people have submitted. We've tried to incorporate all of them into the presentation and please feel free to follow up with us afterwards if you have any other questions. Over the past year the portfolio has returned 31% and LSF shares have returned 36%. By comparison ASX 200 has returned 10% and MSCI World is full on 5%. So it's really pleasing returns both in an absolute sense and relative sense how the portfolio has performed. Internally what we must proud of is a quality and depth of the performance. We've had 27 different stocks that have contributed more than 1% to portfolio returns and we've only had 5 stocks that have detracted more than 1%. So a really good win rate and not too many errors. In terms of portfolio construction, we've benefited from positioning the portfolio to be long energy and commodities, which is one of the only sectors to have done well in the Aussie market over the past 6 months or so. We've been a beneficiary of being along the reopening trade, and also, we've obviously been positioned for higher inflation, which is something we've spoken about a lot over the last 12 months. On the flip side, the things that we've been short have also helped. We've been short of those over winners and many of those stocks have collapsed over the last few months, and we've also been short of those profitless concept stocks but have finally, had a reality check. And that part of the market is down 60% to 70%. So both at a stock level and also a portfolio construction level, we've really been able to generate a lot of alpha and protect investors' capital from those parts of the market that have been sold off the hardest. So turning to performance in a bit more detail. Over the past 6 months, we're really proud of the fact that we've been able to deliver a 10.5% return across the portfolio. And that compares to about 3.5% of the ASX 200 and negative 12% for the MSCI World. Our portfolio is partly a function of the Aussie market, and it's partly a function of the MSCI World. We've got about half of our net long to Australia and half of our net long to Global. So we provide both indexes on this page. Over the past year, the portfolio has returned 31% compared to 10% for the Australian market and negative 5% for the global market. And over the past 3 years, we've delivered 29% per annum compared to 9% for the Australian market and roughly 9% for the MSCI World. So whether you're looking in absolute or relative terms, the portfolio has performed incredibly strongly. We're also very proud of the fact that the strategy since inception is now the best performer over 1 year, 3 years, 5 years, 7 years and since inception. We've returned close to 24% per annum compared to 8% for the ASX 200 and 6% per annum for the MSCI World. It's really a great testament to the quality of the research that our team does. We have an investment style that's had a headwind for 7.5% of the last 8 years. We're a value manager. It has been the worst possible time to be a value manager. We're a contrarian investor when momentum has been the dominant factor. So really, the quality of the research, the quality of the company and industry research we do, we think, has been able to overcome that headwind and deliver much better returns to the market. We finally feel that this market is starting to turn our way. So hopefully, that will be an opportunity for us to continue those strong returns going forward. One of the unique aspects of the performance track record of the Long Short Strategy is not just the performance overall, but the performance in down markets. What you can see on this page is the performance in up markets, the portfolio has been able to keep up with the market. So over the 8 years of the Long Short Strategy, there's been 58 occasions when the markets rallied. And in aggregate, we've been able to keep up with the market in those up markets. So what's called 100% upside capture. In the case of down markets, there's been 34 different times when the market has fallen, on average by 3.1%. In those same months, the portfolio has actually preserved 100% of investors' capital. We've actually rallied by 0.2% in those months when the market has been down 3.1% on average. On 85% of occasions, we've outperformed the market in a falling market. And we're one of very few funds in Australia that's been able to preserve capital in falling markets, and it's one of the unique attributes of the strategy. We focus a lot on valuations. We focus a lot on balance sheets. We focus a lot on industry structure. We also have an average net long that's closer to 70% than 100% for a passive strategy. So what we think we've been able to do is deliver really positive double-digit returns over the long term, but to do that in a way where we tend to protect capital in down markets. Not to suggest that we will always do better than the market in a selloff. But we've proven over a long period of time that we tend to do that on average, and that reflects on the process, the amount of research we do and also the way that we structure the portfolio. Turning to portfolio contributors and detractors. What you can see on this slide is a very broad range of stocks that have been very important in driving the strong returns over the past year. The first stock on the slide, Cenovus is an energy stock listed in Canada. It's had very strong operational performance, has a really low-cost operating structure, and it's also been rapidly de-gearing and paying out 100% of cash flows to shareholders. Flutter has been a clear negative for the portfolio. It's a stock that we really like long term, but the market has been concerned about U.K. regulatory risk and also their path to profitability in the U.S. We think both of these concerns are overstated, and we've been adding to our position given the recent price fall. In the case of Qantas, they had an extremely positive trading update in the last few weeks. They signaled that their domestic capacity has increased from 65% to over 100% just in the last couple of months. And you're also seeing really encouraging signs both across the international business and also their loyalty business. QBE had a really strong update at their recent AGM, flagging a 19% increase in gross written premium, improved combined operating ratio and also a lot of leverage to rising interest rates, given that they have $28 billion of investments that are largely invested in short-dated bonds. And obviously, with rising interest rates, that's a huge advantage for them. In the case of Ramsay Health Care, they had a takeover bid from a KKR-led consortium. That bid was at a 37% premium to the share price prior to the deal announcement, and we believe that there's further upside in that stock given it's trading at quite a large discount, so that will be price. In the case of SES, and that's a European-listed telco company. They received just over USD 1 billion from their C-band payments. So these are the payments that they're getting in return for providing the 5G spectrum that enables 5G technology in the U.S. market. They're also expected to get a further USD 2.4 billion in a couple of years' time. That equates to about 60% of the market cap of the company. And then on top of that, you've got a huge cash flow generating business. In the case of Tabcorp, they provided a really encouraging lotteries update. Their performance was ahead of market estimates. They're on track to do the demerger next month. And we remain positive about the outlook for the business. Teck Resources delivered an excellent operating performance. It's obviously a beneficiary of rising copper, coking coal and zinc prices, and we recently exited the position not because of anything wrong with the company, but purely because the share price had quadrupled over the past 2 years. Turquoise Hill, another company that received a takeover offer in the portfolio. Rio Tinto made a bid for the company at a 32% premium and we decided to exit the stock on the back of that bid. And lastly, Worley was also a positive contributor and they've been a beneficiary of rising oil prices and better sentiment towards the energy sector, and we also exited that stock given the strong share price rally. We believe LSF has a number of key advantages over many other funds across market exposure, shorting and international. In terms of market exposure, the ability to adjust up or down our net long provides us the ability to manage risk across the portfolio and also generate more returns when the market looks particularly attractive. In the case of shorting, we're obviously able to benefit from share prices falling, not just from share prices rising. And often, you find share prices that are just mispriced in a range of different areas and being able to short is obviously a huge advantage. And lastly, in International, we have the ability to exploit our research insights overseas, not just in Australia. And often the best opportunity and the best valuation might be a company overseas, not just the relatively small number of stocks listed in Australia. So turning to the next page, you can see that market exposure for the portfolio was very considerably over the past 2 years. It's been a very dynamic market. Share price has been moving all over the place, and we've wanted to respond to those moving share prices. What you can see is that coming into COVID in January 2020, the portfolio was sitting at a relatively normal 65% net long. And over the course of the history of the strategy, we've averaged about 70%. This was a relatively normal setting coming in. And then obviously, the market had a very abrupt sell-off. It fell 37% in the space of only a few weeks, and we felt that, that was an incredible opportunity, and a once-in-a-decade opportunity to really go aggressively and buy shares, and we increased our net long from 65% to around 100% in the space of only a couple of months. On the back of that research that we did on the vaccine, we built further insight into the likelihood of success. We felt that the likelihood of a good outcome on the vaccine was much higher than what the market was pricing and we made a conscious decision to go above 100%, which is the only time in the history of the strategy we've done that. We increased our net long from roughly 100% to 120%, we ended up having really positive data in November of 2020 from Pfizer and Moderna, and you saw a huge rally in some of those oversold stocks that we felt would be the biggest beneficiaries of positive news. We then, on the back of a big share price rally across the market, we then brought down the market exposure. We brought our net long down from around 130% back to 100%. And then again, in the middle of 2021, when everyone was very nervous about the outlook for energy, it was very cautious about the valuations of commodity stocks, we decided that this was another great opportunity to increase our exposure to that part of the market, and we increased our net long again as we felt that the oil price was unlikely to stay at $40 or $50 or $60. We also felt that the outlook for commodities was much better than what the market was pricing. And again, we used that opportunity to dial up market exposure. And more recently, over the last 6 months, we've been dramatically reducing exposure as we felt that the market was more fully priced and the risk reward is more balanced. Over time, you should expect us to sit closer to that 70%. In terms of shorting, we feel it's a fantastic opportunity to add value for the portfolio, and it's also a way of reducing risk across the portfolio in case of a market selloff. Two of the stocks that we've been short over the past year have been Shopify and Peloton. In the case of Shopify, we felt it was one of these concept stocks that was incredibly overvalued. The market was extrapolating a one-off event in terms of the shift to online as shops were closed and people had to buy online. And Shopify is essentially an e-commerce platform for small and medium-sized businesses. They had a huge uplift in volumes and profits during the pandemic. And then the market was mistakenly extrapolating that growth going forward. And we felt like their trends were going to collapse as people return to buying goods in stores rather than just online. At the time that we shorted the stock, the share price was around $1,300, $1,400. On the back of that negative update as well as rising [indiscernible] we saw the share price collapsed from $1,400.00 to around $400.00 and then we closed down our short. In the case of Peloton, it's an exercise bike and treadmill business. It's obviously very popular during COVID as gyms were closed down and people were essentially forced to their exercise at home. So they had a big benefit from the pandemic and we felt that their accounting was incredibly aggressive. So, when we went through the accounts, we saw that they were recognizing the full 40-month subscription that someone would pay to buy a Peloton bike that were recognizing that only month 1. The cash flows were also being financed so they would receive all of the cash in month 1. So, as their sale started to slow you would say a much bigger impact on profit and cash flows than what the market appreciated. And that's why the shares fell from around $120.00 to around $50.00 when it closed out the shops. One of the things we love about the Long Short Strategy is its ability to invest overseas not just in Australia. Lot of the research we do is better exploded overseas than just in Aussie market. And international positions have actually contributed 30% of the returns in calendar year 2022. It's been a great source of alpha for the portfolio. One of the things that really illustrate this benefit is when you look at the copper stocks. In Australia, there is only one copper stock in ISX100 and that's Oz Minerals. And over this calendar year today it's down around 11%. The copper is a sector and a commodity that we really like. We think the outlook is fantastic as the world transitions to electric vehicles and as the developing world starts to electrify their grid. One of the things that's been a great opportunity for us is the copper stocks in North America. So 2 of the companies that we invested in are Turquoise Hill and Teck Resources. Turquoise Hill owns one of the best copper project anywhere in the world, and it actually recently got a bid from Rio Tinto given how attractive that long-term project is. In the case of Teck Resources, they own one of the top 5 copper mines globally. It's an incredibly low-cost asset. It's got a huge mine life, and it's got really good operators in a really safe jurisdiction as well. So we feel like the ability to find those companies that are really undervalued that are really high quality and to have the whole world as the opportunity, not just Australia, is a huge structural advantage for the Long Short Strategy. In terms of our market outlook, we feel like we're in a very different place to where we were 2 years ago. Two years ago, we were unbelievably bullish about the outlook for equities we felt like valuations were amazing given the crash during the March 2020 period. You had excessive pessimism, massive monetary and fiscal stimulus. You had corporate earnings that were likely to beat expectations and you also had a huge wave of M&A activity that was likely to come through. So for that reason, we had an unusually high net long, and we want to take advantage of what we thought was going to be a huge rally in the market. And what we've seen over those 2 years is the ASX 200 rallying from roughly 4,500 to roughly 7,000. So almost a 60% rally in the market. As we fast forward 2 years, we think the outlook for equities is much more subdued. We're not as excited about the market today as we were 2 years ago. The reason for that is that we think valuations today are pretty full. You've also got increased risk. You've got geopolitical tensions that are much higher. You've got the war in Ukraine, the situation between U.S. and China is more tense. You've got a reduction in central bank liquidity, you've got rising interest rates, and you've got a fragile global supply chain. So overall, we don't think that equities look terrible, but equally, we don't think they look amazing. And we think a lot of the return that investors are going to get going forward will have to come from alpha and will have to come from excess return generated by a fund manager that can deliver returns above the index. It will not come from beta, which is essentially the market return, which has really been driving investors 10% top returns over the past few years. We think that the last 30 years has been marked by investors getting a really big structural tailwind from falling interest rates. As interest rates have fallen from 18% to essentially 0 over the last 30 years, the price of assets has continued to increase at roughly 10% per annum for both equities and property. We think that those days are basically over. And essentially, the return that people should be able to get going forward will be much more modest and that, that has not been reflected in investors' attitudes to the stock market. People still think they're going to get a 10% return just by being in a passive strategy, just by getting the index return. And we think those days are basically over as interest rates are now no longer falling and they're actually rising. So we think there's going to be a great opportunity for us to be able to differentiate ourselves versus the index, to be able to differentiate ourselves and justify why you should pick an active manager rather than just investing in the index. If we look forward, one of the things we've been talking for the last year is a rotation out of growth stocks into value stocks. And what you can see here is the chart in front of you, which shows the value versus growth performance of the MSCI U.S. index and it shows the forward P/E of stocks in the growth basket versus the value basket. What you can see is that the rally that we saw in growth stocks over the past few years was just as large as the dot-com boom. It's almost identical those 2 charts between the year 2000 and 2022. The pace of fall is also very similar. We've seen incredibly abrupt fall in those valuations and those share prices over the last 6 months. And a lot of the same issues and a lot of the same over valuation that we saw in the dot-com boom that people continue to deny over the last couple of years is now coming to the floor and it's becoming obvious to people how overvalued this part of the market was. The chart you can see on the nonprofitable tech basket, which is a basket that we shorted over the past 6 months, has now fallen by more than 60%. In a very short period of time, you've seen about a 70% to 80% fall in many of these stocks. These stocks rallied between the early part of 2020. Over the following 18 months, they rallied by more than 300% in many cases on the back of nothing other than a fall in interest rates and in some cases, a one-off benefit from COVID. The valuations of these stocks were not cheap at the start of COVID, and we think there's further downside in these stocks even after falling 60% over the last 6 months. One thing I'd ask investors to keep in mind is that we're a value manager. We consistently have a value bias in our portfolio. And what that means is that we tend to buy stocks with lower P/Es, and we tend to short stocks with higher P/Es on average. What that means is that for the last 8 years since we started the Long Short Strategy, we've had a huge headwind to our investment style. Low P/E stocks have dramatically underperformed high P/E stocks over that 8-year period. And it's only in the last 6 months and we started to get some of the benefit of that normalization. We've been able to deliver returns of close to 24% per annum compared to 8% for the ASX 200 despite that headwind. So we feel like it's an incredibly attractive time for us in terms of our investment style, not just because there's lots of opportunities at a company's specific level, but we finally feel like the market is going to give us a tailwind from this rotation out of growth and into value. What you can see as well on this page is that the valuation of these ultra-high P/E stocks have derated as a result of higher interest rates and also the market finally focusing on things that matter: cash flows and profitability, which has not appeared in many of the valuation metrics for these companies over the last 2 years. One of the other things we spoke about a year ago was the likelihood of higher inflation. At the time, in March 2021, when we did our presentation to the market, we talked about what we thought was going to be a much bigger increase in inflation than what the market was factoring in. At that time, consensus expectations for U.S. inflation were 2%, and you can see that on the chart on this page. But what we've seen since then is that inflation in the U.S. has gone from 2% to over 8%. The last 2 inflation prints in the U.S. have been over 8%. It's hard to believe. We've never seen anything like it since the 1970s to early '80s period. The CPI increase is being driven by a very wide range of factors: oil prices, supply chain issues, wages, the war in the Ukraine, hard commodities, soft commodities. It's really been pretty much everything. And I think while people today accept that inflation is going to be higher, they haven't adjusted their portfolios in a meaningful structural way to reflect the outlook of higher inflation. The last 30 years has been a period of falling inflation, falling interest rates, and that has really benefited long-duration assets like tech stocks, like long-duration bonds and we've really started to see it unwind in the last 6 months. We think that the period from 1973 to 1983 is really instructive in explaining to people how you're going to be best positioned in a high inflation environment. That is the most recent period of high inflation that the world has seen. And what we can see in this chart is that sectors like gold, low P/E stocks, value stocks, and commodities tend to dramatically outperform the things that have worked for the last 30 years: NASDAQ, long-duration bonds and other parts of the market that tend to benefit from low interest rates. So what we think is that our portfolio should be well placed to benefit from this. We are very well exposed to those sectors that have outperformed in the prior period of inflation and where short are not exposed to those parts of the market that are most at risk. The last thing, and the last thing that I would like to talk about in terms of the market outlook is mergers and acquisitions activity. One of the things we spoke about at the start of 2021 is that we were hearing, everything that we were saying in the market suggested that we were going to have an epic period of M&A activity. And as you can see on the chart 2021 was by far the biggest year for M&A that we have ever seen. Our portfolio was very well exposed to benefit from that because we tend to hold companies that are undervalued, have under-geared balance sheets and have strategic appeal and we had 5 stocks in the portfolio get takeover bids over that period. And you can see those companies on this slide: CIMIC, Ramsay, Link, Turquoise Hill and Zenergy. These were typically long-standing positions that we did not buy for M&A activity but we're an indirect beneficiary of this way of M&A activity. We think that over the next year, as volatility in the market gradually subsides, we think this M&A activity is going to come back. Private equity is very cashed up, corporates are looking to do lots of deals either for strategic reasons or because of COVID or because of ASG considerations. We build our portfolio bottom up. We're bottom-up stock because we want to understand our companies and industries way better than average investor. But if you step back and look at our portfolio from a top-down perspective, what you would say are 4 key themes that we think of compelling asymmetric risk award: U.S. sports betting, energy, the reopening trade and a corporate value unlock. U.S. sports betting is set to open up across the U.S. on a state-by-state basis. And those shares have sold off recently, they've actually been one of the worst performers in our portfolio as the market is being concerned by the regulatory impact in the U.K. We think these fears are totally overblown. There will be a negative regulatory decision that will come out in the next month, but we think it's more than reflected in current share prices. We think there's huge structural growth that's likely to occur across sports betting and iGaming with an industry that's likely to grow from $3 billion in 2020 to more than $20 billion by 2025. In the case of energy, we no longer like new energy. So that's a part of the market. Lithium stocks were something we were very positive on a year ago. Today, we think that the outlook for lithium is less exciting as share prices now reflect a much higher lithium price into perpetuity. In the case of old energy, we're still positive. We think that there's an absolutely historic underinvestment in new supply of oil and gas. And we think that the demand environment continues to improve as people start to drive to work again, as people start to fly, we think demand for oil will continue to increase. In terms of the reopening trade, we think that vaccine success has only partially been reflected in share prices. Companies like Safran, Qantas, Webjet, Airbus are really well positioned to benefit from people's inclination to start traveling again, and we saw that in the recent Qantas update. And lastly, in terms of corporate value unlock, we think there are many businesses that have a number of disparate assets that are very high quality, typically with an under-geared balance sheet that are starting to look at how they can restructure their business, asset sales, demergers some sort of corporate restructure that will be a catalyst for share price upside. The first theme that I'll touch on is U.S. sports betting. Two of the companies that we really like are Flutter and Entain In the case of Flutter, it's the #1 player in sports betting across the U.S., U.K. and Australia. It's got about 40% market share in the U.S., reflecting what a great job they've done in terms of their management team and also their product execution. The shares have sold off recently, as I mentioned before, because of U.K. regulation, and we feel like this has presented an amazing opportunity to top up that position at only a P/E of 16x despite the fact the company is going to grow more than 25% per annum for many years to come. In the case of Entain, they're also the dominant player in U.S. sports betting and iGaming. FanDuel in a combined sense has just over 25% market share, and Entain has just under 25% market share. So together, they control half the market. And we're buying these companies at relatively small market caps despite the fact that these end markets are going to be massive in 5 and 10 years' time. We think that the company, in the case of Entain, is dramatically undervalued. It's trading on a P/E of only 11x, which is roughly half the multiple of the ASX 200 index. An ASX 200 industrial today is trading at 22 or 23x with very low growth. Entain is trading at just over 11x P/E, with 20% to 25% EPS growth that's likely to occur for many, many years given the growth in the industry. In terms of energy, as I mentioned before, it's a sector that we think continues to be underappreciated. Investors are continuing to price these stocks as if the oil price is going back to $60 or $70 a barrel. Today's oil price of over $100, we think that, that risk award is incredibly attractive. As you can say on this chart, the inventories of oil, which surged as a result of COVID as people stopped driving, stopped flying, you had literally no storage in the world left for oil, the oil price went negative. And what we've seen since then is that oil inventories have continued to decline, and the red line on this chart is really the one to focus on. That's essentially how much oil inventory there is in the world and what the trend is in terms of declining inventories. We've seen inventories building and building and building. But for the last 20 months, we've seen a reduction in inventories as demand is actually greater than production. And the reason you haven't seen a shortage is that you have this glut from the last 2 years when people weren't driving and weren't flying. We think the oil market is going to get incredibly tight as we get towards the end of the year. And today's price of $100 might look cheap in 6 or 12 months' time, unless we see some sort of demand shock, which is possible but not our best case. In the case of Cenovus, on today's oil prices, we're getting close to a 25% free cash flow yield. We think the company is incredibly well placed. They have a breakeven operating cost of around $40 a barrel, which is way below today's prices. They've also got plenty of catalysts up their sleeve. They've just announced they're going to provide shareholders with 100% of their cash flows as capital management in the form of dividends and buybacks. They're also looking at other asset sales as a way to crystallize value for shareholders. Really shareholder-friendly Board and management team, and we continue to be very positive on it despite the shares performed very strongly over the last year. In the case of Santos, they obviously merged with Oil Search in late 2021. Their combined business is now run by Santos Management, which are very well regarded. They've got huge cash flow generation. They've also got the potential to exceed the merger synergies that they flagged at the time of their merger, and they've also got 2 catalysts in the form of asset sales in the PNG and Alaska. One of the other things you can see on this page, is the collapsing CapEx from the oil majors. Oil majors were spending just over USD 140 billion back in 2019. And then as a result of COVID, their investment in new production and new supply fell by 25%, and we've seen no increase in that over the last 2 years. That suggests that it's going to be very difficult to see meaningful new supply that's going to offset the increase in demand for oil. So despite the fact that the oil price has doubled over a relatively short period of time, we don't see a likely scenario where oil is likely to retrace back to that $60 or $70 level anytime soon. In the case of the reopening trade, we continue to be positive on those stocks that are likely to benefit as people start to travel again. In a domestic sense, we like Qantas. We think it's incredibly well placed as a result of surging customer demand. We've now seen the domestic market go from 65% capacity to over 100%. We're seeing improving fares. They're also getting the benefit of the $1 billion cost out program they announced during the crisis. If management are able to achieve their targets, you would get close to $1 of earnings per share, which means at the current share price, you're paying just over 5x P/E for a stock that we believe deserves to trade at closer to 12x to 15x. So if that's the case, you would get more than 100% upside in Qantas if they're able to achieve their targets and if it's able to trade at what I would consider a normal P/E. The other thing we think the market is missing is that the loyalty division is now actually quite a meaningful part of the business. The loyalty division is essentially the Qantas Frequent Flyer program, and it's been growing profits at double digits for over a decade. That part of the business is now almost 25% of earnings and would try it on a much high P/E than the 5x of the core business or the overall business is now trading in. In the case of Safran, we believe it's the world's highest quality aerospace company. It's a global leader in manufacturing in parts for narrow-body jet engines. So when you take a domestic flight, 60% of the time you're going to be flying on engines that have been produced by Safran. There is an enormous install bias of young engines that are going to require maintenance in parts for literally decades to come. They have also done a cost-out program which means their margins will be sustainably high than what they were pre-COVID and if the share price is going to get back to where it was pre-COVID it would be a 60% increase in the share price, not factoring any benefit for the cost-out program they've announced. As you can see on the chart, passenger traffic has been growing very strongly for the last 50 years. It's one of the absolute megatrends of the world. And if anything, it's likely to accelerate as the developing world has more of their population get into middle income and then they start flying. So we believe that Safran is essentially a play on global aviation traffic. They've suffered recently as China has been in lockdowns and China is actually operating at only 20% of pre-COVID levels. As China emerges from that lockdown period and people eventually start flying again in China, we think that Safran shares will be heading towards EUR 150, which would be 60% upside. In the case of corporate value unlock, the 2 stocks that we've mentioned here are Mineral Resources and SES. I won't spend a lot of time on these ones. In the case of Mineral Resources, we think that their lithium assets are dramatically undervalued and the chart here it really summarizes the whole slide. What you've seen is a 650% increase in the lithium price, but you've only seen a 23% increase in the Mineral Resources share price. So we think that surge in lithium price is that incredible outlook for lithium as the play in electric vehicles is definitely not being reflected in the Mineral Resources share price. And management are incredibly shareholder-friendly. They're incredibly entrepreneurial. We would expect them to find a way to unlock that value for shareholders. In the case of SES, they own the spectrum that enables 5G in the U.S. About 45% of all the C-band spectrum is owned by SES, and they're receiving payments that are the equivalent of the entire market cap of the company when we were talking about the stock a year ago, when the shares were about EUR 5 or EUR 6. Today, the shares are just over EUR 8, but we still think there's huge upside given that the core business is giving you a 15% free cash flow yield. And then on top of that, you've got another USD 2.4 billion, which is about 60% of the market cap you're getting on top of that for free. So we feel like from a risk award point of view, you're getting great odds. It's a company that is set to have a declining CapEx going forward, which means that free cash flow will come back to shareholders. What we've seen over the last 2 years is a dramatic reduction in the discount between the share price and the post-tax NTA. That's narrowed from 36% 2 years ago to only 3% as of the end of April. That's been on back of very strong portfolio returns and on-market buyback program, where we've brought back just over 3.2 million shares. We've also had direct buying, where we've invested a substantial amount of our own money into LSF shares. That's across the investment team as well as the independent directors. We've also been increasing the fully franked dividends to our shareholders. That's increased from $0.015 back in February '21, and to $0.03 in August '21 to $0.04. All of those dividends fully franked. The $0.04 dividend was in February '22, and the Board has made a commitment to sustainable and growing dividends over time. So in summary, the portfolio has performed very strongly in both relative and absolute terms. After a period of much stronger than normal equity returns over the last 2 years, we think that the outlook for the market is much more subdued and people should be expecting much lower returns for the market than they have over the previous couple of years. To achieve attractive real returns, we think that equity investors are now going to have to find sources of alpha or excess return rather than just relying on beta, which is the market return. We believe that we have a structural advantage. We're able to short stocks, we're able to invest overseas, we're able to adjust our market exposure to reflect the outlook for the market. We think there are 4 themes to look incredibly compelling at the moment: U.S. sports betting, energy, the reopening trade and the corporate value unlock. Each of those offer a compelling asymmetric source of upside that we think is not priced in at the moment. And lastly, we'd like to remind investors that we're likely to see a period of elevated volatility, both for the market and the portfolio, given how erratic things are over the last few weeks. These periods can be unnerving, but they are actually find opportunities to get the portfolio set in companies with fantastic source of upside, where the share price is totally mispriced. And we've seen that time and time again as we go through these risk-off periods we may go through a period of volatility, but then coming out of it, we tend to perform incredibly strongly. And that's been the example that we've had over the past 15 years at L1 since our very early days in 2007 when we had the GFC, we had the euro crisis, we've had various crises over time. But what they've done is provided us with mispriced stocks that we're able to take advantage of on the long side and also short side. So hopefully, that gives you a sense of how we're positioned. We're incredibly positive about the outlook for the portfolio. We've been heading to our position in LSF. And we're really grateful to you for your time today and also for your investment in LSF. Thanks very much.