KFL – September 2018 monthly update

1
Monthly Update
September 2018
A word from the Manager
Market Environment
The New Zealand market resumed its remarkable
outperformance relative to its international peers with the
S&P/NZX50G up 4.4% in August.
The stock market performance was the best performance
during an earnings reporting season in 18 years. Was
it justified? In other words, did companies materially
outperform consensus earnings expectations and did
we see a raft of earnings upgrades? The answer is no.
Company earnings in aggregate were basically in line
with consensus expectations and the outlook comments
resulted in 2% NPAT downgrades for future earnings. A
number of companies were slightly ahead of their revenue
targets, however higher costs meant that some fell just
short of their earnings forecasts.
On the whole, our portfolio scorecard for the results season
was OK. We had more companies beating their forecasts
than falling short, with five reporting results ahead of target,
two in line with target, & four falling short of their targets.
(I.e. 60% of results were in-line or better). This compares to
the market that had 16 misses, 14 beats and 7 in line. So for
the total market 56% of results were in line or better.
Portfolio Developments
August was another busy month for Kingfish with a number
of portfolio companies providing results and announcing
meaningful market updates.
Auckland International Airport full year result was
broadly as expected. Their retail and property was
particularly strong, reflecting recent capital expenditure
initiatives, but these were offset by greater than expected
operating expenses, (largely front-loaded, with growth in
FY19 expected to slow) such that the overall result was in
line with expectations. AIA’s guide for international seat
capacity is an uplift of around 6% in FY19, and while they
see short-term challenges (jet fuel, local infrastructure
constraints etc) they remain generally positive and
confident in the longer-term picture on aviation and
NZ tourism. FY19 guidance implies growth of only 3%,
reflecting in part the drag from increased interest and
depreciation from the ongoing capital expenditure
burden. However, we believe that the company has built in
an element of conservatism.
Fisher & Paykel Healthcare held its Annual Shareholders
Meeting which reported an upgrade of earnings guidance
due to currency.
Fletcher Building delivered its FY18 result which was
in line with expectations. They announced there would
be no further loss provisions. The detail of the result
revealed most of the NZ manufacturing businesses
deteriorated during the second half of their financial year,
as the residential cycle softened and input cost pressures
escalated (energy, input costs, labour). Their guidance
for next year of $685m was broadly in line with market
expectations, but appears to show a decline in their core
NZ businesses, offset by some cost savings and Australian
performance improvements helping to maintain, rather
than improve earnings.
Meridian delivered an in line result, driven by a recovery
in the second half from better hydro inflows. They
announced a new capital management plan of $250 million
over two years. This will commence in August 2020 and
is a continuation of the existing program that ceases in
February 2022. No change to the existing ordinary dividend
policy of 75%-90% payout of free cash flow.
Infratil indicated at its Annual Shareholders Meeting that
they see earnings at the top end of the guidance range of
NZ$500-540m.
Port of Tauranga result was broadly as expected with
strong volumes across all categories and total trade up
10%. After recent weakness the share price rebounded well
on the positive news.
Summerset reported a solid interim result, in line with
guidance.
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)
KFL NAV
$
1.59
SHARE PRICE
$
1.45
DISCOUNT
1
7.4
%
as at 31 August 2018
WARRANT PRICE
$
0.07

2
Key Details
as at 31 August 2018
FUND TYPE
Listed Investment Company
INVESTS IN
Growing New Zealand companies
LISTING DATE
31 March 2004
FINANCIAL YEAR END
31 March
TYPICAL PORTFOLIO SIZE
15-25 stocks
INVESTMENT CRITERIA
Long-term growth
PERFORMANCE
OBJECTIVE
Long-term growth of capital and
dividends
TAX STATUS
Portfolio Investment Entity (PIE)
MANAGER
Fisher Funds Management
Limited
MANAGEMENT
FEE RATE
1.25% of gross asset value
(reduced by 0.10% for every 1% of
underperformance relative to the
change in the NZ 90 Day Bank Bill
Index with a floor of 0.75%)
PERFORMANCE
FEE HURDLE
Changes in the NZ 90 Day Bank
Bill Index + 7%
PERFORMANCE FEE
15% of returns in excess of
benchmark and high water mark
HIGH WATER MARK
$1.41
SHARES ON ISSUE
193m
MARKET CAPITALISATION
280m
GEARING
None (maximum permitted 20%
of gross asset value)
Sector Split
as at 31 August 2018
4
%
27
%
INDUSTRIALS
15
%

UTILITIES
INFORMATION
TECHNOLOGY
27
%
HEALTHCARE
7
%

CASH
10
%
CONSUMER
STAPLES
2
%

MATERIALS
8
%
CONSUMER
DISCRETIONARY
Sam Dickie
Senior Portfolio Manager
Fisher Funds Management Limited
Vista Group delivered its half year result which
demonstrated solid growth albeit slightly behind our
expectations. The Cinema business performed ahead of
expectations with +22% revenue growth but this didn’t
deliver margin improvement as the company continues to
invest in the likes of migration towards cloud deployment.
Movio (the marketing and campaign management company
in the group) was slightly behind expectations, while the
other ecosystem companies were a mixed bag and corporate
overheads grew more than anticipated. The business has
solid growth prospects but this is now reflected in the
share price, having gained approximately +60% in the last
12 months following a marked shift in investor sentiment.

August’s Biggest Movers
Typically the Kingfish portfolio will be invested 90% or more in equities.
The remaining portfolio is made up of another 11 stocks and cash.
5 Largest Portfolio Positions as at 31 August 2018
THE A2 MILK COMPANY
+21
%
DELEGAT GROUP
+20
%
RYMAN HEALTHCARE
+16
%
FREIGHTWAYS
-4
%
FLETCHER BUILDING
-10
%
FISHER & PAYKEL
HEALTHCARE
12
%
THE A2 MILK COMPANY
10
%
FREIGHTWAYS
10
%
MAINFREIGHT
9
%
RYMAN HEALTHCARE
8
%
3
Performance to 31 August 2018
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+3.7%+8.6%+24.2%+12.7%+12.2%
Adjusted NAV Return+4.1%+8.5%+21.1%+18.4%+13.9%
Portfolio Performance
Gross Performance Return+4.6%+9.4%+23.5%+21.2%+16.8%
S&P/NZX50G Index+4.4%+7.6%+19.1%+18.1%+15.5%
Non-GAAP Financial Information
Kingfish uses non-GAAP measures, including adjusted net asset value, adjusted NAV return, 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 after fees and tax,
»adjusted NAV return – the net return to an investor after fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection, 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, adjusted NAV return, gross performance return and total shareholder return in this monthly update are to such non-GAAP measures. The calculations applied to non-
GAAP measures are described in the Kingfish Non-GAAP Financial Information Policy. A copy of the policy is available at http://kingfish.co.nz/about-kingfish/kingfish-policies/
Total Shareholder Return to 31 August 2018
Mar
2004
Mar
2005
Mar
2006
Mar
2007
Mar
2008
Mar
2009
Mar
2010
Mar
2011
Mar
2012
Mar
2014
Mar
2015
Mar
2013
Mar
2016
Share Price/Total Shareholder Return
$
2.50
$
3.00
$
2.0 0
$
1.50
$
1.00
Share PriceTotal Shareholder Return
$
4.50
$
0.50
$
0.00
Mar
2017
$
3.50
Mar
2018
$
4.00

Disclaimer: The information in this update 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 Kingfish Limited and its officers and directors make no representation as to its accuracy
or completeness. The update 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 update contains data relating to the historical performance of Kingfish 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.
Kingfish Limited
Private Bag 93502, Takapuna, Auckland 0740
Phone: +64 9 489 7094 | Fax: +64 9 489 7139
Email: enquire@kingfish.co.nz | www.kingfish.co.nz
4
Computershare Investor Services Limited
Private Bag 92119, Auckland 1142
Phone: +64 9 488 8777 | Fax: +64 9 488 8787
Email: enquiry@computershare.co.nz | www.computershare.com/nz
About Kingfish
Kingfish is an investment company
listed on the New Zealand Stock
Exchange. The company gives
shareholders an opportunity to
invest in a diversified portfolio
of between 15 and 25 quality
growing New Zealand companies
through a single, professionally
managed investment. The aim
of Kingfish is to offer investors
competitive returns through
capital growth and dividends.
Capital Management Strategies
Regular Dividends
»Quarterly distribution policy introduced in
June 2009
»Under this policy, 2% of average NAV is targeted
to be paid to shareholders quarterly
»Dividends paid by Kingfish may include dividends
received, interest income, investment gains
and/or return of capital
»Shareholders who prefer to have increased
capital rather than a regular income stream have
the opportunity to participate in the company’s
dividend reinvestment plan (DRP)
»Shares issued to DRP participants are at a 3%
discount to market price
»Kingfish became a portfolio investment entity on
1 October 2007. As a result, dividends paid to
New Zealand tax resident shareholders have not
been subject to further tax
Share Buyback Programme
»Kingfish has a buyback programme in place allowing
it (if it elects to do so) to acquire up to 9.4m of its
shares on market in the year to 31 October 2018
»Shares bought back by the company are held as
treasury stock
» Shares held as treasury stock are available to be
re-issued for the dividend reinvestment plan and to
pay performance fees
Warrants
»On 2 July 2018, a new issue of warrants (KFLWE) was
announced
»The warrants were issued at no cost to eligible
shareholders and in the ratio of one warrant for
every four Kingfish shares held
»Exercise Price = $1.37 per warrant, to be adjusted
down for dividends declared during the period up to
the Exercise Date
»Exercise Date = 12 July 2019
»The final Exercise Price will be announced and an
Exercise Form will be posted to warrant holders in
June 2019
Management
Kingfish’s portfolio is managed
by Fisher Funds Management
Limited. Sam Dickie (Senior
Portfolio Manager), Zoie Regan
(Senior Investment Analyst) and
Matt Peek (Investment Analyst)
have prime responsibility for
managing the Kingfish portfolio.
Together they have over 40 years
combined experience and are
very capable of researching and
investing in the quality New
Zealand companies that Kingfish
targets. Fisher Funds is based in
Takapuna, Auckland.
Board
The Manager has authority
delegated to it from the
Board to invest according to
the Management Agreement
and other written policies.
The Board of Kingfish
comprises independent
directors Alistair Ryan (Chair),
Carol Campbell and Andy
Coupe; and non-independent
director Carmel Fisher.