BRM – August 2019 monthly update

1
Monthly Update
August 2019
BRM NAV
$
0.72
SHARE PRICE
$
0.63
WARRANT PRICE
$
0.03
as at 31 July 2019
A word from the Manager
Market Overview
The ASX 200 Index started the second half of 2019 calendar
year on a positive note, returning +2.9% in A$ over the July
month. However, it’s worth noting that at the time of putting
this monthly update together higher levels of volatility have
returned to the Australian and global markets in August.
Consumer Staples (+9.8%) led the gains at a sector level,
buoyed by a strong performance from supermarket
heavyweight Woolworths (+7.2%). Healthcare (+5.9%),
Information Technology (+5.0%) and the Consumer
Discretionary (+4.9%) sectors also contributed strongly to the
overall return. All sectors finished the month in the green.
Reflecting an environment of slower economic growth, and
following a 0.25% cut in June, the RBA cut its benchmark
interest rate by a further 0.25% in July. This took the cash rate
target to 1.0%, a new record low. In sympathy with the moves
in global interest rates, the Australian 10yr government bond
rate continued to fall as well, closing the month with a 1.2%
yield, also a new all-time low.
On the one hand this is reflective of a slower growth
environment (globally and in Australia). On the other hand,
lower interest rates help stabilise house prices in Australia
and it is also helpful for consumer spending more generally.
The re-election of the Coalition government in May also
seems likely to be business friendly. The government has
already passed a large tax cut package through parliament
which should help with growth in the medium term.
Entering the August reporting season we look forward
to catching up with the management teams of our
portfolio companies and to see how they are faring in this
environment.
Portfolio News
Barramundi had a gross performance return of +4.5% in July,
while the benchmark returned +3.0%. The adjusted NAV
return was +4.3%.
July is typically a quiet month on the news front as many of
our companies are in a news blackout ahead of the August
reporting season.
In a supportive environment for software businesses,
Wisetech (+15.3%) and Xero (+8.3%) rose strongly
with no new incremental news from either company in
the month.
oOH! Media (+14.6%) more than regained its June share
price weakness. (There was also no new incremental news
from the company in the month.)
Resmed (+10.7%) kicked off reporting season with a
reasonable quarterly financial result released late in
the month. Resmed’s masks division delivered a strong
showing, growing its market share in key markets. The
company also controlled its costs well which helped
to increase profitability. Underlying revenue growth in
Resmed’s software businesses was also sound. In all, there
was not much to complain about.
Rio Tinto (–4.7%) fell as concerns over the lack of
progress in discussions on trade between the US and
China weighed on the mining sector late in the month.
This concern more than offset Rio Tinto’s financial result
which was in line with market expectations. Management’s
spending discipline of recent years was again evident in
the deployment of the high levels of cash generated by
the company. Rio Tinto pleasingly announced a US$1bn
special dividend to complement the US$2.5bn regular
dividend payment in the period.
Credit Corp (–5.2%) retraced some of its gains after a
strong run up in the previous three months. Credit Corp
reported a solid set of financial results in early August. The
company delivered results in line with market expectation.
Credit Corp showed continued strong growth in its fast
growing US business. Closer to home, we were pleased
with the continued discipline Credit Corp is showing in
bidding for debt ledgers in Australia. Management have
not paid high prices to win business (which increases the
cost and reduces the profitability of such actions). This
has come at a short term cost to Credit Corp’s growth
in Australia, as it has purchased a lower volume of debt
ledgers as a consequence. But we think it will pay off for
the company in the long run and it would seem that Credit
DISCOUNT
1
11.2
%
1
Share Price Discount to NAV (including warrant price on a pro-rated basis)

Sector Split
as at 31 July 2019
Key Details
as at 31 July 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
FEE HURDLE
Changes in the NZ 90 Day Bank
Bill Index + 7%
PERFORMANCE FEE
10% of returns in excess of
benchmark and high water mark
HIGH WATER MARK
$0.64
PERFORMANCE FEE CAP
1.25%
SHARES ON ISSUE
172m
MARKET
CAPITALISATION
$108m
GEARING
None (maximum permitted 20%
of gross asset value)
11
%
INFORMATION
TECHNOLOGY
20
%
12
%
CONSUMER
DISCRETIONARY
19
%
COMMUNICATION
SERVICES

HEALTHCARE
21
%

FINANCIALS
10
%

INDUSTRIALS
Corp has won some business despite not paying high
prices. This is because the sellers of debt ledgers value
Credit Corp’s reputation and compliance track record
when it comes to dealing with customers. This is another
sign of the benefits of having strong, high quality
management running a business like Credit Corp.
Portfolio Changes
In July we invested for the first time in PWR Holdings
Ltd. PWR specialises in manufacturing cooling systems
for global high end motorsport teams such as in Formula
One, Nascar and Formula E. The company has also used
its expertise to win a number of contracts to provide
cooling systems to high-priced car manufacturers such as
Aston Martin and Porsche. The technology can also be
used in electric vehicles.
2
%

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

MATERIALS
The company has a culture of innovation and invests a
meaningful proportion of its revenues back into researching
and developing new cooling systems each year. We think
this has the potential to broaden PWR’s customer base
to include companies in other industries. Along with the
expanding number of contracts that PWR is pursuing with
car manufacturers (and growth in motorsports), this provides
PWR with many years of revenue and earnings growth
potential.
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The Barramundi portfolio also holds cash.

July’s Biggest Movers in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
WISETECH GLOBAL
+15
%
OOH! MEDIA
+15
%
AUB GROUP
+14
%
CARSALES.COM
+9
%
RESMED INC
+11
%
5 Largest Portfolio Positions as at 31 July 2019
CARSALES.COM
7
%
CSL LIMITED
8
%
SEEK
7
%
XERO LIMITED
5
%
COMMONWEALTH
BANK OF AUSTRALIA
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
$
1.80
$
0.20
$
0.00
$
1.40
Oct
2017
Oct
2018
$
1.60
Total Shareholder Return to 31 July 2019
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+0.5%+6.2%+14.2%+9.0%+9.9%
Adjusted NAV Return+4.3%+8.0%+10.5%+8.9%+9.8%
Portfolio Performance
Gross Performance Return+4.5%+8.7%+14.0%+12.1%+13.4%
Benchmark Index^+3.0%+8.3%+11.9%+11.9%+10.5%
Performance to 31 July 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.