BRM – June 2021 Quarterly Newsletter

Barramundi had a good June quarter, with gross performance of +10.5%
and an Adjusted NAV return for the period of +9.9%. This was ahead
of the benchmark ASX200 Index (70% hedged into NZ$) which returned
+7.9%. Market concerns about the risk of rising inflation, which
dominated sentiment in the first few months of the year, abated in the
June quarter. Linked to this, interest rates, which had risen strongly at the
start of the year stabilised. In fact, the Australian Government 10 year
bond yield fell from 1.79% in March to 1.53% by the end of June.
The rotation in sector leadership observed earlier in the year, where ‘value’
shares outperformed ‘growth’ shares reversed with this stabilisation in
interest rates. The Information Technology sector (+12.1% in the period)
led market returns alongside the Consumer Discretionary (+11.1%)
and Communication Services (+10.6%) sectors. In contrast, the Utilities
(-5.8%) and Energy (-2.9%) sectors were the only two sectors to deliver
negative returns in the June quarter.
Merger and Acquisition (“M&A”) activity
helped underpin the share rally in the
June Quarter
These low interest rates (and ample government and central bank
stimulus) have enabled companies and investors to borrow heaps of
money cheaply. This has spurred a boom in acquisitions that has also
helped underpin this recent rally in Australian shares. According to JP
Morgan, year to date there have been around 80 acquisitions amongst
the ASX200 companies. At an average size of A$1.6bn each, this is well
ahead of the value of acquisition related activity in recent years.
Core portfolio shareholding, Carsales (+12.8% in A$) contributed to this
activity in acquiring 49% of Trader Interactive (“TI”) for $800m in May. TI
owns a number of leading online classified advertising websites in the US
for recreational vehicles (campervans), commercial trucks, powersports
(jet skis and snowmobiles) and industrial equipment. This was a sizeable
acquisition for Carsales and $600m of the cost was funded from an equity
raising.
As we commented in May’s monthly update, we participated in this equity
raising and are supportive of this transaction. Carsales has significant
experience in supplementing its earnings growth through strategic
acquisitions in new geographies. It is applying the same playbook with TI.
Doing so opens up the US as another (large) market opportunity which
diversifies and expands Carsales’ runway for growth.
The source of Barramundi’s return was
broad based across the portfolio
Most of our portfolio companies delivered positive returns in the period.
Only one of our portfolio companies, Credit Corp (-9.0%) saw its share
price fall over the past three months. There was no notable negative
company development associated with this fall.
Our best performing company, Resmed, rose +30% (in A$) in the period.
It has been helped through a voluntary recall of sleep and respiratory care
products by Philips, its main competitor. Philips has discovered a quality
issue with a component in these products and may have to replace or
repair 3-4 million devices. Much of Philips’ production capacity will need
to be devoted to delivering replacement devices to those affected by the
recall. This will impair Philips’ ability to sell products to new customers.
This gives Resmed a great opportunity to grow its market share and fill the
void left in the market by Philips.
In addition to Resmed, our higher growing companies such as PWR
Holdings (+23.7%), REA Group (+19.3%), SEEK (+17.0%) and
Audinate (+15.7%) also delivered strong returns in the period. The
underlying business environment for each of these businesses continues
to improve as the global economy edges towards ‘normality’. In line with
the sector rotation discussed above, higher growth companies have also
benefitted from the abatement in inflation concerns. Simplistically, if
interest rates edge lower, the large, but more distant cash flows of these
businesses are discounted at lower rates, driving up their present value.
Similarly our Australian bank shareholdings, ANZ (+2.5%), CBA
(+16.0%), NAB (+3.2%) and Westpac (+8.2%) also had a solid June
quarter. All four banks provided earnings updates to the market. The
banks noted credit impairments are improving (fewer customers are
struggling to repay their loans). The banks are also focussed on reducing
costs and improving their operating efficiency. Bank management teams
and regulators have become increasingly comfortable with the state of
the underlying Australian economy. In line with this, analysts have been
upgrading earnings expectations in recent months and the banks have
increased their dividends which was welcomed by shareholders.
Xero (+8.4%) reported a strong set of financial results for the year ending
31 March 2021. Having reined in marketing costs in the first half of
the year as COVID descended on the world, Xero went on the offensive
and increased marketing expenditure in the second half of the year. We
were pleased to see the company step on the accelerator in growing
its customer base. This drove an outstanding six months of subscriber
growth for Xero, but came at the short-term cost of supressing near-
term profitability. While the market was initially disappointed with this, it
quickly ‘changed its mind’ and this saw Xero’s share price rally into June.
Portfolio Changes
It’s been a quiet period of portfolio activity for Barramundi. Our only
material change included topping up our Woolworths shareholding in
June.
In June, Woolworths (+9.8% over the three months) completed the de-
merger of its Endeavour retail drinks and hospitality (pubs/clubs) business
in Australia. For each share we owned in Woolworths, we received one
Endeavour share as part of the de-merger.
We own Woolworths primarily because we like the strong position of
its core supermarket division (Woolworths supermarkets in Australia
and Countdown in New Zealand). Endeavour was not a core part of
our investment thesis. Once it listed, we sold our Endeavour shares and
reinvested the proceeds into topping up our Woolworths shareholding.
1
¹ Share price premium to NAV (including warrant price on a pro-rated basis and using NAV to four decimal places)
1 April 2021 – 30 June 2021
Warrant Price
$
0.3 5
$
1.1 0
Share Price
BRM NAV
$
0.8 7
as at 30 June 2021
QUARTERLY NEWSLETTER
PREMIUM
1
36.8
%
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
15 July 2021

PERFORMANCE
as at 30 June 2021
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder
Return
+16.9%+37.1%+24.7%
Adjusted NAV Return +9.9%+17.2%+15.1%
Portfolio Performance
Gross Performance
Return
+10.5%+20.9%+18.4%
Benchmark Index¹+7.9%+9.7%+11.7%
1
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 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 newsletter 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/
Company% Holding
Ansell3.7%
ANZ Banking Group4.1%
AUB Group4.6%
Audinate Group1.9%
Brambles4.2%
Carsales6.9%
Commonwealth Bank5.5%
Credit Corp3.1%
CSL8.5%
Domino's Pizza2.7%
Fineos Corporation Holdings2.6%
Nanosonics2.3%
National Australia Bank3.5%
NEXTDC4.2%
Ooh! Media2.0%
PWR Holdings2.7%
REA Group4.1%
ResMed4.7%
SEEK6.0%
Sonic Healthcare2.7%
Westpac4.1%
Wise Tech Global5.7%
Woolworths Group3.6%
Xero Limited5.3%
Equity Total98.7%
Australian cash0.0%
New Zealand cash0.5%
Total cash0.5%
Centrebet Rights0.0%
Forward foreign exchange contracts0.8%
Total 100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 30 June 2021
COMPANY NEWS
Dividend Paid 25 June 2021
A dividend of 1.63 cents per share was paid to Barramundi
shareholders on 25 June 2021, under the quarterly
distribution policy. Interest in Barramundi’s dividend
reinvestment plan (DRP) remains high with 36% of
shareholders participating in the plan. Shares issued to DRP
participants are at a 3% discount to market price. If you
would like to participate in the DRP, please contact our share
registrar, Computershare on 09 488 8777.
Disclaimer: The information in this newsletter 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 newsletter is not intended to constitute professional or investment advice and should not be relied upon in making any investment
decisions. Professional financial advice from a financial adviser should be taken before making an investment. To the extent that the newsletter 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 93 502, Takapuna, Auckland 0740, New Zealand
Phone: +64 9 489 7074 | Fax: +64 9 489 7139
Email: enquire@barramundi.co.nz | www.barramundi.co.nz
If you would like to receive future
newsletters electronically please email
us at enquire@barramundi.co.nz
FOREIGN TAX COMPLIANCE ACT (FATCA) AND COMMON
REPORTING STANDARD (CRS)
As a result of the New Zealand Government agreeing to participate in the exchange of information with other jurisdictions under
the Foreign Tax Compliance Act (FATCA) and Common Reporting Standard (CRS), Financial Institutions are required to undertake
due diligence to determine the account holders’ jurisdiction of tax residence. All shareholders will have received a Tax Residency
Self-Certification form from Computershare depending on when they first purchased their securities. Please ensure you complete
and return this important document if you have not already done so. For more information please visit the IRD website: https://
www.ird.govt.nz/international-tax/exchange-of-information/crs/registration-and-reporting or contact Computershare if you are
unsure of whether you have completed your form.
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN AUSTRALIAN DOLLARS
RESMED
+30
%
DOMINO’S PIZZA
+25
%
PWR HOLDINGS
+24
%
REA GROUP
+19
%
SEEK
+17
%