KFL – December 2018 monthly update

1
Monthly Update
December 2018
A word from the Manager
Market Environment
NZ equities stabilised in November after the sharp sell-off
in October, with the S&P/NZX50G up 0.8%.
While the defensive characteristics of NZ equities
generated slight outperformance vs global equities during
the volatile October month, similarly NZ equities slightly
underperformed the global equity market stabilisation/
rebound in November. Global equities were up 1.2% while
emerging market equities were up 4%, having been the
most harshly dealt with over recent months.
Unsurprisingly defensive sectors such as
Telecommunications and Utilities, (sectors that typically
do not suit our style) were the top performers in October.
However, it was surprising to see the same defensive
sectors (Telecommunication, Utilities and Real Estate)
outperform the market again during the market stabilisation
in November. The worst performing sectors during the
month were Materials and Information Technology.
The Portfolio
The a2 Milk Company provided its AGM trading update
reporting strong sales growth of +41% for the first four
months of the financial year with EBITDA ahead of
expectations, driven by higher than expected operating
leverage and the deferral of marketing expenditure. The
revenue outlook for the full year was for “strong revenue
growth to continue but at a slightly more moderate rate”.
Shortly after the AGM the Chinese authorities announced
the extension of the existing treatment of English label
infant formula imported via the cross-border e-commerce
channel, which is good news for a2.
Fisher & Paykel Healthcare delivered its first half 2019
result. The result was in line with prior guidance and the full
year guidance remained consistent. The homecare division
delivered slightly better than expected mask sales (+2%)
despite having had no new respiratory masks launched for
some time. The company stated that the next new mask
would be launched in the 2019 calendar year, followed
by further mask launches in 2019. The key value driver,
(hospital consumables) continued to grow strongly (+22%)
but overall hospital growth was held back by slow device
sales as customers deferred capital expenditure on the
legacy MR850
2
device while waiting for the updated F&P950
3

device to be rolled out. Overall, the result was in line with our
expectations.
Fletcher Building downgraded its full year 2019 EBIT
guidance at its November AGM from an implicit $684m
to $630-680m, citing an outage at its cement plant, (circa
$10m) but also weaker volumes and margins in Australia due
to the soft residential market, which may compromise the
company’s prospect of an improved Australian result. New
Zealand is performing as expected. These announcements
came as a negative surprise for the market.
Infratil held an investor tour and analyst briefing late in
the month where they reaffirmed the attractiveness of the
Canberra Data Centres (CDC), and stated that the business
was performing better than expected. Following recent
contracting wins, CDC’s existing facilities are now almost fully
let and CDC has a contracted EBITDA run rate of A$120m at
March 2019, up from the A$70m full year 2018 run rate. CDC
is now anticipating building one new data centre every year,
and is forecasting to be three to four times the size it is today
within five years.
Mainfreight reported its first half 2019 result, with strong
EBITDA of $108m beating most expectations with solid
performance across most divisions. Management remain
more positive and confident about the business outlook,
with customer and market growth coupled with the organic
expansion of their network into new regions (Japan,
Scandinavia and regional Australia). Pleasingly, a few of
the sticking points in recent times have been addressed,
including better service to retain customers, and turnarounds
in the Asian and Carotrans business following management
changes. This was a strong result and shows that the long
term growth strategy is on track in all regions.
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)
2
MR850 is a heated humidifier used for the full range of F&P Healthcare therapies across the respiratory care range.
3
F&P950 is the new humidification system which supersedes the MR850.
KFL NAV
$
1.42
SHARE PRICE
$
1.37
DISCOUNT
1
3.2
%
as at 30 November 2018
WARRANT PRICE
$
0.04

Key Details
as at 30 November 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
$1.37
SHARES ON ISSUE
195m
MARKET CAPITALISATION
267m
GEARING
None (maximum permitted 20%
of gross asset value)
Sector Split
as at 30 November 2018
3
%
25
%
HEALTH CARE
16
%

UTILITIES

MATERIALS
29
%
INDUSTRIALS
6
%
INFORMATION
TECHNOLOGY
10
%
CONSUMER
STAPLES
4
%

CASH
7
%
CONSUMER
DISCRETIONARY
Sam Dickie
Senior Portfolio Manager
Fisher Funds Management Limited
Port of Tauranga held an investor day during the month,
outlining the next phase of its port development strategy
which will lift container capacity to circa 2.9bn twenty foot
equivalent units (TEU). This longer term forecast is up from
the earlier estimates of circa 1.25bn TEU in the full year 2019,
when costs are forecast to be circa NZ$310m. This reaffirms
our view that Port of Tauranga is a high quality asset with a
high quality management team.
Restaurant Brands received a Takeover Notice from Finaccess
on 26 November, which we should see followed by a formal
Takeover Offer by Christmas. The board has recommended
the offer conditional on the Independent Expert Report and
the announcement flagged that Yum! approvals are on track.
Pushpay delivered second quarter 2019 revenue at the
mid-point of its guidance range but delivered a sharp
improvement in the first half 2019 operating result with
operating costs held flat despite +44% year on year revenue
growth. The company re-affirmed guidance for breakeven
by December 2018 on a monthly basis and now expects to
deliver positive EBITDA for full year 2019, (well ahead of
expectations) as the company expects to generate significant
operating leverage over time from improved interchange fees
and constrained overhead cost growth.
Ryman reported a strong first half 2019 result slightly ahead
of expectations with underlying earnings per share up
+14%, with new sale gains bolstered by stronger Melbourne
development margins. Operating metrics are all in solid
shape highlighting that the demand story remains firmly
intact. Occupancy is at 97%, with the highest level of presales
(over $200m and equivalent to full year 2016 total new sales),
resales stock of 1.2% and strong waitlists. Full year guidance
implies +10% to 17% underlying growth, with the lower end
of the guidance reflecting the possibility of softer sales and
resales due to normal variability.
Portfolio Changes and Strategy
We reduced our target weighting in Fletcher Building as the
impact of a slowing Australian cycle appears to be offsetting
the Australian profit improvement strategy.
2

November’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 30 November 2018
INFRATIL
+8
%
MAINFREIGHT
+7
%
MICHAEL HILL
-6
%
PUSHPAY HOLDINGS
-7
%
FLETCHER BUILDING
-21
%
FISHER & PAYKEL
HEALTHCARE
13
%
THE A2 MILK COMPANY
12
%
FREIGHTWAYS
10
%
MAINFREIGHT
10
%
INFRATIL
7
%
3
Performance to 30 November 2018
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return2.1%(3.9%)+13.2%+12.4%+10.6%
Adjusted NAV Return(0.8%)(8.3%)+5.9%+11.8%+10.7%
Portfolio Performance
Gross Performance Return(0.6%)(8.2%)+7.3%+14.4%+13.3%
S&P/NZX50G Index0.8%(5.3%)+7.8%+13.1%+13.0%
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, before fees and tax, 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 30 November 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 9.7m of its
shares on market in the year to 31 October 2019
»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.