BRM – December 2020 monthly update

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A WORD FROM THE MANAGER
In November Barramundi returned +7.8% (gross performance) and
an Adjusted NAV return of +6.8%. This compares to the ASX200
Index which returned +9.7% (70% hedged into NZ$).
November was a strong month for global equity markets helped by
a reduction in uncertainty and an easing of concerns post the US
election. Positive results from a number of COVID-19 vaccine trials
also buoyed hopes that the path to global economic normalisation
remains on track for 2021.
The combination of these events boosted global equity markets.
Dispersion of returns across the market was high. In particular
there was a strong rotation out of growth companies and those
that have ‘benefitted’ from the COVID-19 environment into ‘value’
companies, cyclicals and those that stand to benefit most from
economic normalisation.
This helped lift the ASX200 Index to one of its best monthly
performances in 32 years (source: Goldman Sachs). It also reversed
some of the significant outperformance during 2020 of ‘growth’ vs
‘value’ companies.

At a sector level, the Energy (+28.3%), Financials (+15.2%),
Communication Services (+13.6%) and Real Estate (+13.6%)
sectors led the market’s performance. In contrast Consumer Staples
(-0.7%), Utilities (+1.2%), Healthcare (+2.7%) and Information
Technology (+4.6%) lagged.
Portfolio News
At its early November AGM Credit Corp (+29.8% in A$)
reaffirmed guidance for a 6-25% drop in 2021 earnings versus
2020 NPAT prior to pre-emptive COVID-related provisioning.
However, commentary that first quarter 2021 collections for both
its Australasian and US debt buying businesses were strong and
that its consumer lending volume was recovering earlier than
expected suggest to us that the company will deliver a 2021 result
toward the more favourable end of its guidance.
Our banks shareholdings including ANZ (+22.5%), NAB (+24.8%),
CBA (+14.6%) and Westpac (+14.3%) performed strongly in
the month. They were helped by strengthening conditions for
the domestic economy and the style rotation from growth into
value. In addition, ANZ, NAB and Westpac’s interim results and
CBA’s quarterly release were also supportive with COVID-19 related
customers on repayment deferrals continuing to drop materially
for both household and business customers. This has increased the
market confidence in the banks’ bad debt provisioning as we head
into 2021. It also lays the groundwork for APRA to further relax
its restrictions on bank dividends in 2021 (we expect an update in
January) which will be well received.
Having underperformed the market in October, Nanosonics
(+29.3%) rose after providing an update on the new installed base
for its Trophon product line and related consumable sales growth
for the four months ended 31 October 2020. Consumable sales
rebounded +25% over the four months ended 30 June 2020.
For the same period +14% more Trophon units were installed in
North America and encouragingly, +64% in Europe (off a smaller
base). Hospital departments have in the most part reopened
and ultrasound volumes have been increasing. Hospitals appear
better equipped to manage the impact of subsequent waves of
COVID-19. However, if these waves do impede hospital access in
future, sales volumes could once again be negatively impacted.
oOH!Media’s share price was also up significantly (+27.5%)
despite there being no notable company specific news. The
continued re-opening of the Australian economy (especially in
Victoria) aid the recovery of audience levels in the public spaces
where oOH!Media’s advertising assets are located. Nonetheless we
expect it will be well into 2021 before the run rate in out of home
advertising spend has returned to pre-COVID levels.
REA Group (+22.8%) released its first quarter results in early
November. It posted revenue growth in its Australian residential
business despite Melbourne going back into lockdown in August
and September. Real estate listings fell -44% in Melbourne in
the quarter. This was in contrast to Sydney where listing volumes
increased +23% on the back of low interest rates, and improving
employment outlook and resilient house prices. Melbourne listings
volumes rebounded +14% in October with the easing of Covid-19
restrictions.
Xero (+20.3%) delivered a solid interim financial result. Xero has
generated robust customer growth across multiple key regions in
the past six months notwithstanding the pandemic. Xero was also
disciplined in reining in marketing spend during the period which
boosted profitability (and cash flow). As economies normalise we’d
expect marketing spend to increase and profit margins to fall back
towards historic levels.
Next DC’s (-11.7%) share price fell sharply during the month
despite no material new news. Next DC has been a strong
performer year to date and we suspect the underperformance was
related to the style rotation from ‘growth’ to ‘value’ experienced
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Share Price Premium to NAV (including warrant price on a pro-rated basis and using NAV to four decimal places).
MONTHLY UPDATE
December 2020
BRM NAV
$
0.78
$
0.98
Share Price
Warrant PricePREMIUM
1
$
0.20 31.3
%

as at 30 November 2020

SECTOR SPLIT
as at 30 November 2020
KEY DETAILS
as at 30 November 2020
FUND TYPE
Listed Investment Company
INVESTS IN
Growing Australian companies
LISTING DATE
26 October 2006
FINANCIAL YEAR END
30 June
TYPICAL PORTFOLIO SIZE
20-35 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
$0.66
PERFORMANCE FEE CAP
1.25%
SHARES ON ISSUE
210m
MARKET CAPITALISATION
$206m
GEARING
None (maximum permitted 20%
of gross asset value)
4
%
INFORMATION
TECHNOLOGY
21
%
20
%

INDUSTRIALS
18
%
COMMUNICATION
SERVICES

HEALTHCARE
26
%
3
%

FINANCIALS
CONSUMER
STAPLES
5
%
CONSUMER
DISCRETIONARY
through November. Toward the end of the month Next DC
confirmed it had upsized its senior debt facilities by A$350m to
A$1.85b. This will be used to partially fund the expansion of its
existing data centres and the build of its new data centre in Sydney
where construction has recently commenced.
At its AGM trading update in November Domino’s (-12.6%)
indicated strong but slowing same store sales momentum. This
is not unexpected as easing lockdown restrictions will take some
of the heat out of food delivery. The challenge for Domino’s
is to retain the new customers and higher purchase frequency
catalysed by COVID-19 restrictions. It addressed this at its Investor
Day on 30th November which provided granular insights into the
combination of product, service, image and price strategies it will
be pursuing to deliver value to customers, thereby securing recent
sales gains. This was well received with the share price closing up
+12% on 1st December.
Insurance claims software provider Fineos (-16.6%) delivered a
cautious trading update at its AGM. While near term Covid-19
related delays will impact the timing of its revenue growth,
the structural growth drivers remain robust. In the near term
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
tightening client budgets, particularly in Australia and NZ, and
pandemic and election uncertainty in the US meant the closing of
new deals were delayed. On the positive side, the onboarding of
the record 9 new customers won in FY20 is going according to
plan. Pleasingly Australian client QInsure signalled its intention to
upgrade from its Fineos on-premise solution to the latest Fineos
cloud edition. This bodes well for further Antipodean customers
shifting to the cloud.
Portfolio Changes
We increased our weighting in Fineos during the month on its
share price weakness (discussed above).
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The Barramundi portfolio also holds cash.

NOVEMBER’S SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO
during the month in Australian dollar terms
Typically the Barramundi portfolio will be invested 90% or more in equities.
CREDIT CORP
GROUP
+30
%
NANOSONICS
+29
%
OOH!MEDIA
+27
%
REA GROUP
+23%
NAB
+25
%
5 LARGEST PORTFOLIO POSITIONS as at 30 November 2020
SEEK
6
%
CSL LIMITED
8
%
XERO LIMITED
6
%
WISETECH
6
%
CARSALES.COM
5
%
The remaining portfolio is made up of another 22 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
Share PriceTotal Shareholder Return
$
0.00
$
0.50
$
1.00
$
1.50
$
2.00
$
2.50
$
3.00
Oct
2017
Oct
2018
Oct
2019
Oct
2020
TOTAL SHAREHOLDER RETURN to 30 November 2020
1 Month3 Months1 Year3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+17.3%+38.1%+58.1%+31.8%+21.0%
Adjusted NAV Return+6.8%+8.3%+15.9%+14.3%+12.1%
Portfolio Performance
Gross Performance Return+7.8%+10.4%+19.3%+18.0%+15.7%
Benchmark Index^+9.7%+6.8%(1.7%)+6.6%+9.2%
PERFORMANCE to 30 November 2020
^Benchmark index: S&P/ASX Small Ords Industrial Gross Index until 30 September 2015 & S&P/ASX200 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, after expenses, fees and tax,
»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 combines the share price performance, the warrant price performance, the net value of converting any warrants into shares, and the dividends paid to shareholders. It assumes
all dividends are reinvested in the company’s dividend reinvestment plan, and that shareholders exercise their warrants, (if they were in the money), at warrant expiry date
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 20 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
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.
Share Buyback Programme
»Barramundi has a buyback programme in place allowing it
(if it elects to do so) to acquire its shares on market
»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
Warrants
»On 26 August 2020 a new issue of warrants (BRMWF)
was announced.
»The warrants were issued at no cost to eligible
shareholders in the ratio of one warrant for every four
Barramundi shares held.
»The warrants were allotted to shareholders in October
2020 and the warrants listed on the NZX Main Board
from early October 2020. (Information pertaining to
the warrants was be mailed/emailed to shareholders in
September 2020).
»The Exercise Price of each warrant is $0.70, adjusted
down for dividends declared during the period up to the
announcement of the final Exercise Price
»The Exercise Date for the new warrants (BRMWF) is
29 October 2021
»The final Exercise Price will be announced and an Exercise
Form sent to warrant holders in September 2021