BRM – February 2019 monthly update

1
Monthly Update
February 2019
BRM NAV
$
0.63
SHARE PRICE
$
0.59
WARRANT PRICE
$
0.01
as at 31 January 2019
A word from the Manager
Market Overview
Following the torrid December quarter the ASX200
rebounded +3.9% during January. The rebound was broad
based with all but one of the GICS
2
sectors finishing in
the green during the month. Buoyed by rising crude oil
prices, Energy (+11.5% in A$) was the best performing
sector, followed by Information Technology (+9.3%),
Communication Services (+7.8%) and Materials (+7.0%).
Only Financials bucked the trend, falling -0.2% for
the month as the market braced for the final Royal
Commission report into the sector which is being released
in early February.
Portfolio News
Barramundi also had a broad based, solid start to the year,
with 20 out of 26 portfolio positions finishing the month in
the green.
A feature of the sell-off in the December quarter was that
high growth companies share prices fell more than the
market. As risk sentiment towards higher growth companies
improved in January, their share prices typically rebounded
more strongly than the market.
A similar pattern was observed across our portfolio
companies. Although there was no substantive news
related to the individual companies, it was pleasing to
see the share prices of a number of our higher growth
companies also rebound strongly in January. These
companies included Wisetech (+20.4% in A$ for the
month), Nanosonics (+17.6%), Carsales (+14.6%) and
Technology One (+13.2%).
During the month we had two companies (Credit Corp and
Resmed) report financial results.
Credit Corp (+17.2% in A$ for the month) reported a
solid set of results, and upgraded their earnings guidance
for the full year. The company continues to do well in
organically growing its profitability in the US purchased
debt ledger market, and was added to a further two
panels including one of the largest purchased debt
ledger sellers in the US. Closer to home, in Australia,
management are also successfully growing the consumer
lending business, attracting new customers without
compromising their credit standards. This financial
discipline was also evident in the Australian purchased
debt ledger results. Credit Corp has elected not to chase
business in this division at the cost of price. While this
results in slower earnings growth in the near-term, in the
long run we think the company and its shareholders will
be rewarded for this discipline.
Resmed (-17.9%) fell after reporting its second quarter
financial year result. Sales of Resmed devices in markets
outside the US were substantially below expectations in
Q2. Resmed had benefited in 2018 from some regulatory
changes in France and Japan, and it became apparent
that this one-off benefit was larger at the time than the
market had appreciated. We do not think that this ‘miss’
is a reflection of a negative structural shift in the longer
run outlook for sales. Outside of this division, the market
also had some question marks about the recent step-up in
Resmed’s investment in software related to the provision
of medical care to patients. The execution and pay-off of
these software related investments is long dated. In the
near-term large earnings growth from this expansion won’t
be evident and this also disappointed the market. We
think that the logic and investment rationale behind this
software strategy is sound. As long as it is well managed,
this investment in software adds another plank to
Resmed’s growth profile. We remain comfortable with our
investment in the company.
Industry reports released in January suggest that
Aristocrat’s (+12.8%) digital social casino operations
grew faster than market growth rates during the
December quarter. Similarly, from these reports Aristocrat
looks to have continued winning market share within the
North American land based casino market across the
December quarter.
Diversified miners Rio Tinto (+11%) and BHP (+6.1%)
continued their strong share price performance of
recent months. Both benefited from strengthening iron
DISCOUNT
1
6.0
%
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)
2
The Global Industry Classification Standard (GICS) is the MSCI & Standard & Poors sector classifications, including Energy, Materials, Industrials,
Consumer Discretionary, Consumer Staples, Health Care, Financials, Information Technology, Real Estate, Communication Services and Utilities Sector.

Sector Split
as at 31 January 2019
Key Details
as at 31 January 2019
FUND TYPE
Listed Investment Company
INVESTS IN
Growing Australian companies
LISTING DATE
26 October 2006
FINANCIAL YEAR END
30 June
TYPICAL PORTFOLIO SIZE
25-35 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
BENCHMARK
Changes in the NZ 90 Day Bank
Bill Index + 7%
PERFORMANCE
FEE HURDLE
15% of returns in excess of
benchmark and high water mark
HIGH WATER MARK
$0.67
SHARES ON ISSUE
170m
MARKET CAPITALISATION
$100m
GEARING
None (maximum permitted 20%
of gross asset value)
10
%

FINANCIALS
20
%
11
%

INDUSTRIALS
20
%
COMMUNICATION
SERVICES
INFORMATION
TECHNOLOGY
21
%
HEALTH CARE
2
%

CASH
8
%
CONSUMER
DISCRETIONARY
ore prices on the back of signs in January of seasonal
inventory re-stocking by Chinese steel mills. BHP was also
a beneficiary of rising oil prices with Brent (+12.6%) and
WTI Crude (+18%) up strongly across the month. Most
poignantly, both companies are indirect beneficiaries
of the collapse of a tailings dam wall at one of Vale’s
mining sites in Brazil. The collapse of the dam wall, which
has come with a high human and environmental cost
is expected to disrupt the seaborne iron ore market.
This led to a spike in iron ore pricing (up +16% over the
month) and has underpinned the rise in both RIO and
BHP’s share prices.
2
%

REAL ESTATE
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
6
%

MATERIALS
Portfolio Changes
Outside of topping up our Resmed position post their
Q2 results, there were no substantive changes to the
portfolio composition in January.
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January’s Biggest Movers in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
WISETECH GLOBAL
+20
%
NANOSONICS
+18
%
CREDIT CORP GROUP
+17
%
RESMED
-18
%
CARSALES.COM
+15
%
5 Largest Portfolio Positions as at 31 January 2019
CSL LIMITED
7
%
CARSALES.COM
7
%
SEEK
7
%
COMMONWEALTH
BANK OF AUSTRALIA
5
%
XERO LIMITED
5
%
The remaining portfolio is made up of another 21 stocks and cash.
Oct
2006
Oct
2007
Oct
2008
Oct
2009
Oct
2010
Oct
2011
Oct
2012
Oct
2013
Oct
2015
Oct
2016
Oct
2014
Share Price/Total Shareholder Return
$
1.00
$
1.20
$
0.8 0
$
0.60
$
0.40
Share PriceTotal Shareholder Return
$
1.60
$
0.20
$
0.00
$
1.40
Oct
2017
Oct
2018
Total Shareholder Return to 31 January 2019
1 Month3 Months1 Year3 Years
(annualised)
Since Inception
(annualised)
Company Performance
Total Shareholder Return+1.7%(4.1%)+8.0%+8.1%+3.4%
Adjusted NAV Return+5.3%(0.7%)(0.4%)+6.1%+3.6%
Portfolio Performance
Gross Performance Return+5.4%+0.3%+2.8%+9.5%+6.9%
Benchmark Index^+3.9%+0.5%+0.4%+10.1%+2.6%
Performance to 31 January 2019
^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, 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,
»adjusted NAV return – the return to an investor after fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection and currency hedging 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 Barramundi Non–GAAP Financial Information Policy. A copy of the policy is available at http://barramundi.co.nz/about-barramundi/barramundi-policies/
3

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 Barramundi 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 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
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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 Barramundi
Barramundi 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 25 and 35 quality
growing Australian companies
through a single, professionally
managed investment. The aim of
Barramundi is to offer investors
competitive returns through
capital growth and dividends.
Capital Management Strategies
Regular Dividends
»Quarterly distribution policy introduced in
August 2009
»Under this policy, 2% of average NAV is targeted
to be paid to shareholders quarterly
»Dividends paid by Barramundi 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
»Barramundi 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
»Barramundi has a buyback programme in place
allowing it (if it elects to do so) to acquire up to 8.4m 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 16 October 2018, a new issue of warrants (BRMWE)
was announced
»The warrants were issued 1 November 2018 at no cost
to eligible shareholders and in the ratio of one warrant
for every four Barramundi shares held
»Exercise Price = $0.64 per warrant, to be adjusted down
for dividends declared during the period up to the
Exercise Date
»Exercise Date = 25 October 2019
»The final Exercise Price will be announced and an
Exercise Form will be posted to warrant holders in
September 2019
Management
Barramundi’s portfolio is managed
by Fisher Funds Management
Limited. Robbie Urquhart
(Senior Portfolio Manager),
Terry Tolich (Senior Investment
Analyst) and Delano Gallagher
(Investment Analyst) have prime
responsibility for managing the
Barramundi portfolio. Together
they have significant combined
experience and are very capable
of researching and investing in the
quality Australian companies that
Barramundi 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 Barramundi
comprises independent
directors Alistair Ryan (Chair),
Carol Campbell and Andy
Coupe; and non–independent
director Carmel Fisher.