BRM – March 2019 monthly update

1
Monthly Update
March 2019
BRM NAV
$
0.65
SHARE PRICE
$
0.59
WARRANT PRICE
$
0.01
as at 28 February 2019
A word from the Manager
Market Overview
The ASX 200 returned +5.98% (in A$) in February, the strongest
monthly return since July 2016. Financials (+9.1%) led the index
higher, enjoying a relief rally following the release of the Royal
Commission’s final report. All sectors bar Consumer Staples
(-1.5%) finished the month in the green as global equity markets
continued to rebound from the tough finish to 2018.
Portfolio News
February was dominated by reporting season with 14 of our
companies reporting results. These included the usual mixed
bag of strong results, middle of the road ‘as expected’ results
and a few that ‘missed’, whether on the result itself or on
management guidance. We’ve highlighted some of the notable
results below.
Nanosonics (+24.3% in A$ for the month) reported a strong
result, at both the revenue and profit lines. Management’s focus
on developing its disinfection technology for ultrasound probes
and in scaling the distribution of its products globally continues
to gain traction. Nanosonics released the second generation
trophon during the half year which drove solid unit placements.
However, the most pleasing aspect of the result was the growth
in the (recurring) consumable revenues, a benefit from the
tripling of its installed base of trophons since full year 2015.
Resmed (+11.3%) rebounded after its share price had been
marked down in January following its quarterly result (which we
wrote about last month).
Brambles’ (+10.5%) result included modest improvement in
underlying profit guidance for the full year as cost headwinds
seem to be moderating and have been enhanced by cost
recovery in pricing. Of greater consequence, Brambles
announced the sale of its IFCO plastic crates division in the
month which will release more than US$2.3bn of capital, the
majority of which will be used for a share buyback.
Seek (+8.4%) reported a strong result that included revenue
growth of over 10% in its core Australian division despite a tepid
employment advertising market. This points to the resilience of
the business model as price increases and depth penetration
drove the majority of the division’s growth. Seek’s Chinese
subsidiary, Zhaopin, is reaping the benefits of the decision taken
during 2017 to shift to a freemium based business model. This
change underpinned an increase of +38% in online users in the
half year, which has meaningfully improved its market position
relative to its key competitor in China.
CBA (+8.8%), NAB (+5.3%) and WBC (+9.8%) all benefitted
from a relief rally following the release of the Royal Commission’s
final report. The final recommendations corroborated the
measured sentiment struck in the interim report, and removed
a key area of uncertainty and downside risk for the banks. That
said, the CBA interim result highlighted that the operating
environment still remains challenging for the main banks. Soft
lending growth, margin pressures, and elevated remediation
costs continue to weigh on earnings growth.
Structural growth in outdoor advertising relative to other
advertising mediums was evident in Ooh! Media’s (-0.8%) full
year result. Management has been cautious in its outlook for
2019, because of uncertainty around advertising spend given
the timing of a state (NSW) and Federal elections, both of
which will be held in the next few months. Elections typically
have a negative effect on outdoor advertising. The market was
disappointed by the disclosure that the management of recently
acquired Adshel had signed a major contract on less profitable
terms than Ooh! Media’s management had originally envisaged.
With two large acquisitions in outdoor media having taken place
in 2018 (Ooh! Media’s acquisition of Adshel, and JC Decaux’s
acquisition of APN Outdoor), this year is likely to be one in which
both management teams are focussed on integration. Looking
further out, we expect that both companies will continue to
benefit from the structural trends in outdoor advertising and a
more consolidated competitive environment.
Wisetech (-5.3%) delivered a credible performance with
+68% revenue growth generated in the half year. The market
seemed disappointed that full year guidance was not upgraded
materially. Wisetech announced at the result that it will look to
roll out a new product (CargoWiseNexus) which will connect its
current logistics customers to their clients. While Wisetech will
not look to drive revenue from this product in the near future,
it potentially opens up a whole new market to the company
DISCOUNT
1
9.5
%
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)

Sector Split
as at 28 February 2019
Key Details
as at 28 February 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)
11
%
INFORMATION
TECHNOLOGY
20
%
11
%
COMMUNICATION
SERVICES
18
%

INDUSTRIALS

HEALTH CARE
20
%

FINANCIALS
5
%

CASH
8
%
CONSUMER
DISCRETIONARY
for a relatively low incremental cost of development. This
could be an exciting driver of future value generation for the
company and we will watch the development and progress of
CargoWiseNexus over the next few years with interest.
Dominos (-8.0%) disappointed the market with its result and
in guiding to the lower end of their previous forecast range
for the full year. By geography, Japan was a bright spot for the
company. Emerging signs of improved operating performance
was evident at the full year result in August and continued
through to the latest period. Europe continues to be a region
in transition as the integration of Hallo Pizza in Germany is
completed during 2019. While he still has some way to go, the
new French CEO is evidently starting to lift performance across
this division as well. The Australian and New Zealand division’s
performance mimicked that of the national rugby teams with
NZ performing strongly, offset by Australia where performance
did not meet management expectations.
Next DC’s (-8.9%) result was largely in line with our
expectations. The market penalised the business for the slow
sell through in the M2 Melbourne data centre and a change in
accounting policy which contributed to a negative net profit
2
%

REAL ESTATE
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
5
%

MATERIALS
for the half year. We suspect there is a timing element to
the lack of sell through in M2. Management is pushing
ahead with the roll-out of additional data halls at M2,
which is usually an indicator that they are making progress
in signing up new customers to absorb the additional
capacity. The longer run fundamentals for Next DC’s
business remain sound.
Portfolio Changes
After its strong recent share price performance, we
reduced our positioning in Technology One during the
month on valuation grounds.
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February’s Biggest Movers in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
NANOSONICS
+24
%
RESMED INC
+11
%
BRAMBLES
+11
%
WESTPAC
+10
%
RIO TINTO
+10
%
5 Largest Portfolio Positions as at 28 February 2019
CSL LIMITED
7
%
SEEK
7
%
CARSALES.COM
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 28 February 2019
1 Month3 Months1 Year3 Years
(annualised)
Since Inception
(annualised)
Company Performance
Total Shareholder Return0.0%(0.9%)+8.0%+8.1%+3.4%
Adjusted NAV Return+3.8%+5.1%+4.6%+8.1%+3.9%
Portfolio Performance
Gross Performance Return+4.1%+5.9%+7.9%+11.5%+7.2%
Benchmark Index^+5.7%+9.3%+6.2%+12.9%+3.1%
Performance to 28 February 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, Andy Coupe
and Carmel Fisher.