BRM – September 2019 monthly update

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A word from the Manager
Market Overview
Share price returns across the ASX200 Index in August were
heavily influenced by the individual company financial reports
and management commentary during the semi-annual
‘reporting season’. As reflected in the ASX200’s return of –2.4%
(in A$), these reports (and earnings outlooks) disappointed the
market in aggregate. According to JP Morgan, post reporting,
earnings were revised –1.9% lower across the ASX200, which
is the lowest earnings revision since 2016. Negative revisions
were broad based and contributed to the negative returns
across the majority of sectors in the month. Healthcare (+3.6%)
and Real Estate (+2.3%) were the standout sectors from a
performance perspective. The Information Technology (+0.3%)
and Consumer Discretionary (+0.2%) sectors also registered
positive gains. The latter sector was assisted by constructive
commentary from a few management teams citing signs of
‘green shoots’ regarding consumer activity which has been
assisted by a stabilising housing market. In contrast, concern
regarding the volatile gyrations in global trade discussions fed
into poor performances from the Materials (–7.5%) and Energy
(–5.6%) sectors which weighed on the ASX200 Index’s return.
Portfolio News
Against this backdrop, we were generally pleased with the
reporting season impact on Barramundi, which delivered a
gross performance return of +0.9% (in A$) for August. The
Adjusted NAV return for the month was +1.8%.
Nanosonics (+21% in A$) delivered a credible financial
result which demonstrated increased sales of its ultrasound
probe disinfection product (the trophon) in the key US
market. Pleasingly, revenue from sales of consumable
products used in the trophon rose by 50% in the US.
Consumables, a key source of recurring revenue, now
constitute 60% of Nanosonic’s total revenue. This helped
underpin the +200% rise in profit before tax.
Management commentary highlighted the strong, increasingly
multi-faceted growth runway in front of the company. Positive
comments were made regarding nearer term growth prospects
in the large European market. Further out, Nanosonics is
making progress in establishing a presence in the Japanese
market. The company also signalled that discussions have
begun regarding a potential entry into the Chinese market
within a few years. Lastly, the company mentioned that it is
close to launching a second product (this is a key focus for the
market). It is likely to provide a more detailed update in this
respect early in the new year.
Credit Corp (+16%) followed up its financial result released
in July (see last month’s commentary) with the acquisition in
August of Australian and NZ focussed debt ledger purchaser,
Baycorp Holdings. In conjunction with the acquisition, the
company upgraded earnings guidance for 2020.
Dominos (+12.3%) missed their earnings guidance by 3%.
This had been widely expected by the market (we were also
not expecting a strong result) and the positive share price
reaction suggests it was already factored into the share price.
Looking forward, the trading update for the first few weeks
of the 2020 fiscal year was encouraging. Domino’s Japanese
operations continue to perform well, and management are
confident on the outlook for the European division (particularly
in the bellwether markets of Germany and France) as 2020
unfolds. Growth in the Australian market continues to be a
drag as steps are taken to improve longer-term performance.
Management have for example been acquiring stores from
underperforming franchisees. This has slowed down the pace
of new store roll outs in Australia in the near-term. But it does
set the division up for better performance in the medium-term.
New addition to the portfolio, PWR Holdings (+10.9%)
recorded revenue growth of +26% and profit growth of +29%
in the year. All core divisions contributed to this strong result.
With some key expansion projects coming to an end, the
Board returned some of the strong cash flow generated in the
year to shareholders via a special dividend.
Rio Tinto (-8.4%) delivered a solid financial result,
underpinned by strong performance in the Iron Ore division.
Write downs and cost issues related to its Mongolian copper
operations took the gloss off the overall result. The share price
was also impacted by iron ore prices which fell approximately
25% across the month as global trade concerns rose.
Pleasingly, the company remained disciplined in allocating
the strong cash flow that is currently being generated by the
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Share Price Discount to NAV (including warrant price on a pro-rated basis)
Monthly Update
September 2019
BRM NAV
$
0.73
SHARE PRICE
$
0.64
WARRANT PRICE
$
0.03
as at 31 August 2019
DISCOUNT
1
11.5
%

Sector Split
as at 31 August 2019
Key Details
as at 31 August 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
$110m
GEARING
None (maximum permitted 20%
of gross asset value)
11
%

HEALTHCARE
20
%
13
%
COMMUNICATION
SERVICES
20
%
CONSUMER
DISCRETIONARY
INFORMATION
TECHNOLOGY
21
%

FINANCIALS
10
%

INDUSTRIALS
business with the announcement of a US$1bn special dividend.
This brings total cash returns for shareholders to US$3.5bn in the
half year.
Data centre owner, NextDC’s (-12.8%) results were in line
with expectation, albeit the market was disappointed at lack of
progress in the signing of large scale customer contracts. This is
likely a matter of timing. Management pointed out that demand
by large customers remains strong in Sydney and more recently,
interest in the Melbourne market has also picked up.
Brambles’ (-13.9%) FY19 result was slightly below expectations.
European operations performed soundly but face softer
economic conditions this year, particularly in the auto sector.
Initiatives to offset cost pressures in the Americas division’s key
US operation are progressing but will largely bear fruit beyond
this year. The division is also addressing earnings headwinds
in its Latin America and Canada operations. The resulting
guidance for FY20 sales and earnings growth at the lower
end of Brambles’ mid-single digit target range left the market
underwhelmed.
2
%

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

MATERIALS
oOH!Media (-30.5%) fell sharply in the month. Although the
company’s first half 2019 results were in line with expectations,
management downgraded full year earnings guidance due to
soft advertising markets in July and August. This weakness was
particularly pronounced in oOH! Media’s roadside billboard
category which is a highly profitable category for the company.
This is more of a cyclical rather than a structural issue and
should pass in time. oOH! Media is already seeing early signs
of an improvement in bookings for September as well as
across the December quarter.
Portfolio Changes
There were no substantive portfolio position changes during
the month.
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The Barramundi portfolio also holds cash.

August’s Biggest Movers in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
NANOSONICS
+21
%
CREDIT CORP GROUP
+16
%
WISETECH GLOBAL
+16
%
OOH!MEDIA
-31
%
INGENIA
COMMUNITIES GROUP
+15
%
5 Largest Portfolio Positions as at 31 August 2019
SEEK
7
%
CARSALES.COM
7
%
CSL LIMITED
7
%
XERO LIMITED
5
%
LINK ADMINISTRATION
HOLDINGS
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 August 2019
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+1.4%+4.0%+10.4%+9.5%+9.8%
Adjusted NAV Return+1.8%+6.9%+6.6%+10.7%+9.6%
Portfolio Performance
Gross Performance Return+1.6%+7.3%+9.5%+13.7%+13.0%
Benchmark Index^(1.7%)+4.4%+8.5%+12.1%+8.9%
Performance to 31 August 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 expenses, fees and tax,
»gross performance return – the Manager’s portfolio performance in terms of stock selection and currency hedging before expenses, 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 = $0.59
»Exercise Date = 25 October 2019
»Exercise details 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.