BRM – July 2019 monthly update

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Monthly Update
July 2019
BRM NAV
$
0.69
SHARE PRICE
$
0.63
WARRANT PRICE
$
0.02
as at 30 June 2019
A word from the Manager
Market Overview
The ASX 200 Index delivered another solid performance in
June, returning +3.8% in A$ over the month. The market
was helped by supportive offshore equity markets with most
major equity indices rising across the month. Domestically,
the ASX200 was also buoyed by the first RBA interest rate cut
since 2016 from 1.50% to 1.25%.
All sectors except the Consumer Discretionary sector (-1.5%
in A$) finished the month in the green. Materials (+6.7%)
led the way, supported by strong performances from sector
heavyweights BHP (+9.0%) and Newcrest (+17.4%), with the
latter assisted by a strongly rising gold price. The Industrials
(+5.4%), Health Care (+4.2%) and Financials (+3.5%) sectors
also delivered strong returns in the month.
Portfolio News
Barramundi returned +1.1% gross performance in the month
and an adjusted NAV return of +0.6%, with the majority of
our portfolio companies contributing positively to the result.
However a handful of notable detractors (discussed below)
resulted in Barramundi underperforming the market during
the month.
The market environment was supportive for a number of
high growth companies including Nanosonics (+24.9% in
A$), Wisetech (+13.8%) and Technology One (+10.2%)
with no materially incremental new news released from
these companies.
Brambles (+6.4%) announced the completion of the sale of
its IFCO reusable plastic containers pooling business in early
June for US$2.5 billion. It also commenced what will be a
long running buy-back of stock with the majority of the sale
proceeds.
CSL (+4.6%) is moving to a more direct model of
distributing albumin into China, which improves its control
over its supply chain. The net effect of this is that from an
accounting perspective, it recognises the sales a few months
later than it used to when it was more reliant on third parties
for distribution. While there is no change to albumin supply
or shipping schedules because of this, CSL clarified in June
that this delay will result in lower albumin revenue recorded
in the FY20 year. Given that this is only a timing or revenue
recognition issue, it has no material economic bearing on
the company.
Carsales (-0.4%) provided a trading update in June which
included a minor downgrade in revenue which was largely
recouped through efficient cost management. This reflects
the resilience of Carsales earnings in what has been a tough
advertising market (especially display) in Australia for the last
year. Notably, Carsales announced a strategic review of its
50.1% interest in Stratton Finance. This is a non-core, vehicle
finance broking business which Carsales acquired in 2014. It
has not contributed meaningfully to Carsales’ profitability,
but has been a distraction for management and the market
for a number of years. We think it’s a sound decision to
review and ultimately exit this division.
Domino’s (-3.8%) share price was weighed down by the
announcement that a class action lawsuit against it has
been filed in a registry of the Federal Court. Dominos has
yet to be served with the class action, but the unsealed
documents allege that Dominos misled franchisees about
required payment terms for some of their staff. The company
rejects the allegations and will defend the action. It is
early days in this process. While unhelpful for sentiment,
we note that class action lawsuits do arise periodically in
corporate Australia, with the majority settled out of court
or discontinued. We will no doubt be updated on the
proceedings in due course.
oOh! Media (-7.8%) retraced much of its gain in May as
post-election enthusiasm around a strengthening advertising
environment waned.
AUB Group (-10.8%) provided a trading update in the
month which included a modest downgrade in earnings
expectation. In addition to this, AUB is disbanding a
longstanding joint venture with an insurance broker network
which has traditionally been used to negotiate insurance
capacity with carriers and work for the benefit of the related
brokers. The insurance broker network has aligned itself with
DISCOUNT
1
7.8
%
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)

Sector Split
as at 30 June 2019
Key Details
as at 30 June 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
$0.64
SHARES ON ISSUE
172m
MARKET CAPITALISATION
$108m
GEARING
None (maximum permitted 20%
of gross asset value)
11
%
INFORMATION
TECHNOLOGY
20
%
12
%

INDUSTRIALS
19
%
COMMUNICATION
SERVICES

HEALTHCARE
21
%

FINANCIALS
10
%
CONSUMER
DISCRETIONARY
a competitor to AUB. While negative in one sense, the
disbanding of the joint venture is partially a reflection
of the evolution of AUB’s business over the years, which
is naturally changing its requirements from the joint
venture arrangement. We therefore think that the share
price reaction is overdone and have increased our
position sizing in AUB Group.
Link Administration (-16.3%) continued its slide post
the earnings update it gave in May (discussed in last
month’s newsletter). Also weighing on its share price in
June, Link has received negative press coverage in the
UK of an oversight role it performed for a fund manager
client that ended up suspending redemptions from its
investors. While the regulator is looking into the events
leading up to the redemption suspension, management
are satisfied that they met their required obligations in
the matter. Taken together with the reasons behind May’s
2
%

REAL ESTATE
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
2
%

MATERIALS
profit warning, we think the share price reaction is overdone
and that Link’s longer term outlook remains sound. We have
consequently topped up our shareholding in the company.
Portfolio Changes
As discussed above, we topped up our shareholding in
Link Administration and increased our weighting in AUB
Group during the month.
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The Barramundi portfolio also holds cash.

June’s Biggest Movers in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
NANOSONICS
+25
%
WISETECH GLOBAL
+14
%
TECHNOLOGY ONE
+10
%
LINK
ADMINISTRATION
-16
%
AUB GROUP
-11
%
5 Largest Portfolio Positions as at 30 June 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 20 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
$
1.80
$
0.20
$
0.00
$
1.40
Oct
2017
Oct
2018
$
1.60
Total Shareholder Return to 30 June 2019
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+2.1%+13.3%+15.5%+10.5%+9.4%
Adjusted NAV Return+0.6%+7.7%+5.6%+10.0%+9.2%
Portfolio Performance
Gross Performance Return+1.1%+8.3%+10.0%+13.2%+12.7%
Benchmark Index^+3.1%+8.1%+10.2%+13.3%+11.1%
Performance to 30 June 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/
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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.