BRM – December 2021 Quarterly Newsletter

Uncertainty affiliated with the Omicron COVID variant and inflationary
concerns have tempered share price gains as we ended the 2021 year. In the
December quarter, Barramundi returned +0.8% (gross performance) and
the adjusted NAV return was +0.6%. This compares to the benchmark index
which returned +2.7% for the quarter.
Sonic Healthcare (+14.7% in A$) was our best performing company in the
December quarter. It continues to benefit from heightened COVID testing
volumes. Credit Corp (+10.3%) was another top performer for us in the
quarter. It was assisted by the acquisition in December of a consumer leasing
business in Australia. The acquired business diversifies Credit Corp’s revenue
base and boosts its future earnings growth.
Domino’s fell -26.4% in the quarter as its growth rates in the key Japanese
market subsided. Despite this, Dominos has had a good year returning
+38.2% over 2021. Two of our bank shareholdings, Westpac (-15.7%) and
CBA (-3.2%) also dragged down the quarter’s returns as pricing pressures
and elevated costs weighed on bank margins.
Although Barramundi had an indifferent December quarter, it has been a
great year overall for Barramundi investors. In 2021, Barramundi returned
gross performance of +23.5%, compared to the benchmark index which
returned +17.2%.
A bumper year for new listings
and acquisitions on the Australian
share market
Assisted by low interest rates and significant fiscal and monetary policy
stimulus, 2021 has been a good year for share markets globally. Investor
appetite for equities has been strong, leading to a boom in new companies
listing on the Australian stock exchange (known as Initial Public Offerings or
IPOs).
In total, close to 200 companies listed on the ASX during the year. Eight of
these listed with valuations of over A$1bn. It was the biggest year of new
listings in Australia since the mining boom in 2007. Like then, resources and
mining companies made up a large number of new listings in 2021.
This environment has also proved conducive for mergers and acquisitions
(M&A). A private consortium led A$24bn acquisition of Sydney Airport
proved that companies of any size could end up as takeover targets.
A number of our companies grew
through M&A this year
While we looked at a few IPOs closely during the year, ultimately we did
not participate in any IPOs. A large number of companies that listed (such
as resources companies) did not match our quality and growth focussed
investment process.
However, the surge in global M&A activity did keep us busy. A number of
our portfolio companies expanded by acquiring businesses during the year
including Credit Corp (mentioned above). We have also previously written
about Carsales’ expansion into the United States through an acquisition
earlier in the year which we supported.
More recently, in December CSL launched a large A$16.4bn takeover
offer for Vifor, a Swiss based pharmaceutical company. Vifor specialises in
nephrology (kidney complications), dialysis and iron deficiency therapies.
CSL has been researching Vifor for a number of years. With Vifor’s revenue
growth temporarily impacted by COVID and with its share price languishing,
CSL launched its takeover offer.
Vifor adds a new division to CSL’s armoury. This reduces its reliance on
plasma therapies. CSL also likes the rising demand for Vifor’s market leading
renal products. This is driven by ageing demographics in many countries,
dietary trends and an associated increase in diabetes. With its global reach
and scale, CSL believes it can help Vifor accelerate its distribution of these
products. CSL believes that Vifor’s longer-term revenue growth rate and
profitability is a match for its core plasma business. It also sees this as a
compelling acquisition given it is being undertaken at a discount to CSL’s
overall valuation.
CSL have a long track record as an astute acquiror of peers. Its equity raising
to help fund the deal was well supported by investors.
Macquarie is well positioned to
grow
We added Macquarie Group to our portfolio in December. Macquarie has
grown into a high-quality diversified financials business with over 65% of
its income generated outside of Australia. Two thirds of its income is stable
and predictable. The balance is derived from more volatile financial markets
activity (like investment banking).
Macquarie is well run. It has a track record that includes over 50 years of
unbroken profitability and strong share price performance. Culture is critical
to its success. It invests in its people and has a history of developing and
promoting internal talent.
Macquarie is ramping up its investment in fast growing areas of the global
economy such as the growth in renewable energy generation. To facilitate
this, Macquarie has bolstered its balance sheet by raising A$2.8bn in equity
in the quarter. It also recently cut its dividend, to retain more cash, that it can
use to invest in these growth projects.
Macquarie has positioned itself well to grow and we are pleased to have it in
our portfolio.
We remain confident in the
longer-term outlook for our
portfolio companies
As always, entering 2022 brings with it a range of uncertainties for equity
markets including (again!) how much COVID will disrupt our lives for
another year.
We remain confident that our portfolio mix of high quality and growing
companies will stand us in good stead over the next few years.
1
¹ Share price premium to NAV (using NAV to four decimal places)
1 October 2021 – 31 December 2021
$
0.9 8
Share Price
BRM NAV
$
0.8 5
as at 31 December 2021
QUARTERLY NEWSLETTER
PREMIUM
1
14.9
%
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
17 January 2022

PERFORMANCE
as at 31 December 2021
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder
Return
+0.2%+33.0%+20.8%
Adjusted NAV Return +0.6%+25.1%+16.6%
Portfolio Performance
Gross Performance
Return
+0.8%+28.5%+19.8%
Benchmark Index¹+2.7%+14.0%+10.3%
1
Benchmark Index: S&P/ASX 200 Index (hedged 70% to NZD)
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
Ansell3.4%
ANZ Banking Group4.4%
AUB Group4.4%
Audinate Group1.9%
Brambles4.3%
Carsales6.5%
Commonwealth Bank5.6%
Credit Corp3.4%
CSL8.8%
Domino's Pizza2.4%
Fineos Corporation Holdings3.6%
Macquarie Group2.0%
Nanosonics2.7%
National Australia Bank4.5%
NEXTDC4.7%
Ooh! Media2.5%
PWR Holdings2.0%
REA Group4.0%
ResMed4.0%
SEEK4.6%
Sonic Healthcare1.9%
Westpac3.9%
Wise Tech Global6.6%
Woolworths Group2.8%
Xero Limited4.7%
Equity Total99.6%
Australian cash0.2%
New Zealand cash0.9%
Total cash1.1%
Centrebet Rights0.0%
Forward foreign exchange contracts(0.7%)
Total 100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 31 December 2021
COMPANY NEWS
Dividend Paid 17 December 2021
A dividend of 1.81 cents per share was paid to Barramundi
shareholders on 17 December 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
SONIC
HEALTHCARE
+15
%
CREDIT CORP
GROUP
+10
%
AUDINATE
GROUP
-12
%
WESTPAC
BANK
-16
%
DOMINO’S
PIZZA
-26
%