Barramundi – September 2017 Quarter Newsletter

Quarter Update Newsletter
30 June 2017 – 30 September 2017
Notable Returns for the Quarter
in Australian dollars
»»The»Reserve»Bank»of»Australia»points»to»emerging»signs»of»
an»economic»uptick
»»Company»performance»through»results»season»was»
somewhat»pedestrian
»»The»Australian»/»New»Zealand»Dollar»exchange»rate»
remained»volatile
Over the quarter the Barramundi portfolio was up 3.1%¹,
comparing favourably with the portfolio benchmark² which
was up 1.8% in New Zealand dollars. Barramundi’s positive
relative performance over the quarter was broad based, seeing
out-performance across most market sectors. This points to
the continually improving performance environment for the
STEEPP investment approach. Barramundi’s currency hedge
cost some performance as the New Zealand dollar lost ground
to its Australian counterpart on uncertainty related to the New
Zealand general election.
Australia’s fortunes, at least over the short-run, have been heavily
dependent on the direction of the key commodities it sells. Since
2012, weakness in the prices of these commodities has pressured
economic growth rates, income and demand for goods and
services. In New Zealand Dollars Australian annual share market
returns of 5.8%² since the end of 2012 to 30 September 2017
have lagged those of New Zealand (+15.1%), the United States
(+18.4%) and Europe (+11.3%)³. So investors in Australian shares
have been keenly waiting for signs of improving conditions.
Reasons to be optimistic
In his most recent statement on monetary policy, the Reserve Bank
of Australia (“RBA”) Governor, Dr. Philip Lowe, outlined some
reasons for optimism. Dr. Lowe pointed to an improving global
economy, stronger global labour markets and a normalisation of
monetary policy in the United States. He particularly emphasised
the strength in the economies of Australia’s key trading partners.
More encouragingly he predicted that growth rates in Australia
will begin to pick up, that investment levels have improved and
that business conditions are strong, citing high levels of residential
construction activity and a pick up in retail sales. Importantly he
spoke to an ever stronger labour market, and the prospect for
wage growth on the horizon.
While we saw scant evidence of a strong improvement in
conditions when analysing full year company results, it is worth
noting that conflicting signals are typical of turning points in the
economic cycle. Corporate earnings would usually follow rather
than lead an upswing.
WISETECH
GLOBAL
+26
%
BHP BILLITON
+14
%
CARSALES.COM
+13
%
RAMSAY
HEALTHCARE
-14
%
BABY BUNTING
-18
%
BRM NAV
$
0.64
SHARE PRICE
$
0.58
DISCOUNT
9.5
%
as at 30 September 2017
WARRANT PRICE
$
0.002
%
4
2
0
-2
Source: ABS
1997 2002 2007 2012 2017
Australian economic growth slowing over time
GDP Growth
%
4
2
0
-2
Year-ended
Quarterly
1
¹ Gross of fees and tax and adjusting for capital management initiatives
² S&P/ASX 200 Index (hedged 70% to NZD)
³ S&P/ASX 200 Index, S&P/NZX50, S&P 500 Index and STOXX Europe 600 Index respectively
Australian prices trending down over time
Consumer Price Inflation*
%
5
4
3
2
1
0
-1
Sources: ABS; RBA
1997 2002 2007 2012 2017
%
5
4
3
2
1
0
-1
Year-ended
Quarterly (seasonally adjusted)
Manuel»Greenland»»
Senior Portfolio Manager
* Excluding interest charges prior to the September quarter
1998 and adjusted for the tax changes of 1999-2000

2
Company News
Dividend Paid 29 September 2017
A dividend of 1.30 cents per share was paid to Barramundi shareholders on 29 September 2017, under the quarterly distribution policy.
Interest in Barramundi’s dividend reinvestment plan (DRP) remains high with 38% of shareholders participating in the plan. Shares
issued to DRP participants are at a 3% discount to market price. If you would like to participate in the DRP, please contact our share
registrar, Computershare on 09 488 8777.
Performance
as at 30 September 2017
3 Months
3 Years
(accumulated)
Since Inception
October 2006
(accumulated)
Corporate Performance
Total Shareholder Return(1.5%)+20.9%+30.6%
Adjusted NAV Return +2.9%+19.8%+38.6%
Manager Performance
Gross Performance Return+3.1%+32.4%+96.9%
Benchmark Index¹+1.8%+25.6%+27.5%
1
Benchmark Index: S&P/ASX Small Ords Industrial Gross Index until 30 September 2015 & S&P/ASX 200 Index
(hedged 70% to NZD) from 1 October 2015
Non-GAAP Financial Information
Barramundi uses non-GAAP measures, including adjusted net asset value, gross performance return and total
shareholder return. The rationale for using such non-GAAP measures is as follows:
»adjusted net asset value – the underlying value of the investment portfolio adjusted for capital allocation
decisions,
»gross performance return – the Manager’s portfolio performance in terms of stock selection and hedging of
currency movements, and
»total shareholder return – the return to an investor who reinvests their dividends, and if in the money,
exercises their warrants at warrant maturity date for additional shares.
All references to adjusted net asset value, gross performance return and total shareholder return in this newsletter
are to such non-GAAP measures. The calculations applied to non-GAAP measures are described in the Barramundi
Global Non-GAAP Financial Information Policy. A copy of the policy is available at
http://barramundi.co.nz/about-barramundi/barramundi-policies
Disclaimer: The information in this newsletter has been prepared as at the date noted on the front page. The information has been prepared as a general summary of the matters covered only, and it is
by necessity brief. The information and opinions are based upon sources which are believed to be reliable, but Barramundi Limited and its officers and directors make no representation as to its accuracy
or completeness. The newsletter is not intended to constitute professional or investment advice and should not be relied upon in making any investment decisions. Professional financial advice from
an authorised financial adviser should be taken before making an investment. To the extent that the newsletter contains data relating to the historical performance of Barramundi Limited or its portfolio
companies, please note that fund performance can and will vary and that future results may have no correlation with results historically achieved.
Barramundi Limited
Private Bag 93502, Takapuna, Auckland 0740
Phone: +64 9 489 7074 | Fax: +64 9 489 7139
Email: enquire@barramundi.co.nz | www.barramundi.co.nz
The Barramundi quarter update newsletter is produced for the March
and September quarters only. The annual and interim reports cover
the June and December periods. If you would like to receive future
newsletters electronically please email us at enquire@barramundi.co.nz
COMPANY
% Holding
ANSELL
4.0%
APN OUTDOOR
1.6%
ARB CORPORATION
4.4%
AUB GROUP
3.6%
BRAMBLES
3.2%
CARSALES
6.2%
COMMONWEALTH BANK
4.4%
CREDIT CORP
3.3%
CSL
7.0%
DOMINO'S PIZZA
2.1%
GATEWAY LIFESTYLE GROUP
1.6%
INGENIA COMMUNITIES
1.6%
LINK ADMINISTRATION HOLDINGS
4.2%
MEDIBANK PRIVATE
1.8%
NANOSONICS
2.1%
NATIONAL AUSTRALIA BANK
4.5%
NEXTDC
2.6%
OOH! MEDIA
2.2%
RAMSAY HEALTH CARE
3.0%
RESMED
3.1%
SEEK
6.6%
SONIC HEALTHCARE
3.8%
TECHNOLOGY ONE
2.9%
TOXFREE SOLUTIONS
2.4%
VIRTUS HEALTH
2.7%
WESTPAC
3.0%
WISE TECH GLOBAL
4.3%
EQUITY»TOTAL
92.2%
AUSTRALIAN DOLLAR CASH
5.7%
NEW ZEALAND DOLLAR CASH
1.0%
TOTAL»CASH
6.7%
CENTREBET RIGHTS
0.2%
FORWARD FOREIGN EXCHANGE
CONTRACTS
0.9%
TOTAL
100.0%
Portfolio Holdings Summary
as at 30 September 2017
Manuel»Greenland»
Senior Portfolio Manager, Fisher Funds Management Limited
25 October 2017
Muddying the positive outlook is the high level of debt Australians have
assumed to buy houses. Should house prices fall Australian banks risk losses
related to the falling value of their collateral, and households risk their
principal asset losing value. Perhaps most importantly, even if house prices
do not fall, Australians pay a record proportion of their income servicing
mortgages instead of spending in other parts of the economy or saving.
Servicing lofty mortgages crimps demand and investment just like a tax. It
is likely for this reason that the RBA chose to leave interest rates at a record
low 1.5% for now, notwithstanding the early signs of an improving outlook.
Portfolio Outlook
Among Barramundi’s largest positions are CarSales.com, Seek, ARB and the
large banks, all of which will fare well should interest rates remain low and
demand steadily improve. Growing earnings and low financing costs could
provide for buoyant share prices, and provide a very welcome reprieve for
investors after the difficulties of the last few years. Returns in the Australian
share market may well begin to catch up with global peers.