MLN – December 2021 Quarterly Newsletter

1
Global markets end the year on a high, despite uncertainty
caused by inflation and Omicron
A final surge in the December quarter saw global markets end a strong
year at all-time highs. The gains came despite temporary volatility caused
by the Omicron variant and global central banks starting to unwind their
accommodative monetary policy settings. Marlin’s December quarter
gross performance was +4.2% and the Adjusted NAV was +3.5%,
compared to our global benchmark which was up 4.7%.
A strong year for global equities
It has been another strong year in global share markets, with the US S&P
500 Index up 27% and the MSCI World Index up 20%, resulting in solid
gains for many investors. While global markets have rallied, a lot has gone
on behind the scenes economically. Covid aftershocks, including supply
chain disruptions and elevated consumer spending featured strongly, and
the resulting inflation and interest rate increases have created uncertainty
for investors. Despite the uncertainty, global markets have continued
to climb given a strong economic impulse caused by reopening, policy
stimulus and a resilient consumer. This has fuelled strong corporate
earnings growth, particularly in the US, where over 80% of companies
reported earnings growth ahead of market expectations in the most
recent quarter. US corporate earnings are now more than 30% ahead of
2019 levels, despite the business disruption caused by Covid.
It isn’t only the US market that has had a strong run. Markets in Europe,
the UK, Japan and Australia were also up double digits. The only black
mark was China and emerging markets more generally, with the MSCI
China Index and the MSCI Emerging Markets Index falling 22% and 5%
respectively.
Fourth quarter portfolio developments
Strong performance from some of our smaller cap holdings including
Dollar Tree, NVR and Signature Bank wasn’t enough to offset the
performance drag caused by our emerging market stocks (Alibaba and
StoneCo) and PayPal in the December quarter.
Dollar Tree (+47%), a US discount retailer, was the top performer in the
portfolio in the quarter. Shares rallied on news that the company was
moving away from its fixed $1 price point. The announcement that they
are ‘breaking the buck’ and rolling out a new US$1.25 price point in all
8,000 Dollar Tree stores is a positive step given the inflationary pressure
the company has been facing. Freight costs have been a significant
headwind for the company recently and the 25c price increase should
help offset cost inflation and lift profit margins back to prior levels. Even
with this price increase, we still believe Dollar Tree retains a very strong
customer value proposition compared to peers. The rollout of $3 and
$5 price points will also allow the company to add new categories for
customers and offer the prospect of higher sales growth and margins in
the years ahead.
Signature Bank (+19%) continues to perform well. An update during
November was further evidence that the bank is outpacing its peers in
loan and deposit growth. While 2021 has been a standout year with
assets up 70% year-over-year, we continue to think the company can
produce robust growth going forward. The bank has a unique operating
model of hiring high-performing banking teams from competitors,
incentivising them well, and providing a high-touch service for clients.
This has allowed Signature Bank to continually grow organically and enter
new regions and markets. With best-in-class profitability and excess cash
on the balance sheet to deploy, we believe earnings can grow ahead of
deposit and revenue growth in the coming years.
On the negative side of the ledger, PayPal (-28%) sold off during the
quarter after the company lowered its 2021 revenue guidance and
provided 2022 growth expectations that were slightly below market
expectations. The weaker guidance was due to eBay transitioning away
from PayPal (a temporary headwind which should abate later in 2022),
but also due to more consumers shopping in-store this holiday season (to
reduce the risk of supply chain disruptions stopping ecommerce parcels
arriving in time for Christmas). On a positive note, PayPal announced
a partnership that will allow Amazon customers to pay with PayPal’s
Venmo app, which should drive incremental payment growth over time.
PayPal are also gaining traction in the buy now pay later space. Overall,
we believe PayPal is executing effectively on its long-term strategy, while
growing its payment volumes at over 30% per annum and its revenue and
earnings at close to 20% per annum.
Alibaba (-20%) continued to slide this quarter after reporting earnings
that showed slowing ecommerce growth due to Chinese economic
headwinds and intense competition. Over time there are three variables
that will drive Alibaba’s share price: its e-commerce market share, profit
margins and the level of investment required to keep driving growth.
We think the market is being too negative on the eventual outcome of
these drivers and we remain confident that growth in Alibaba’s core
e-commerce business will eventually accelerate. We also remain positive
on the company’s international retail and cloud computing segments
which both continue to grow strongly.
StoneCo (-51%), a Brazilian payment service provider, was the worst
performer in the portfolio during the quarter. While StoneCo’s third
quarter earnings showed that it continues to grow its customer base
and payment volumes rapidly, profitability missed expectations and
weighed heavily on the company’s share price. The main concern from
the earnings release was the company’s rising financial expenses (and
compressed margins) due to increasing interest rates, which it has not yet
been able to pass on to customers. The positive news in the quarter was
that the company continues to sign on new customers at a rapid rate,
more than doubling the client base in the past year to 1.3 million active
clients. We were disappointed by StoneCo’s results and are doing more
research to understand the company’s ability to pass higher interest rates
through to customers. We believe that the long-term tailwinds behind the
company are still intact, and the company’s strategy and products are still
being well received by customers.
While the recent performance of Alibaba, PayPal and StoneCo has
created a disappointing drag on performance, we believe these are quality
businesses that are well positioned to deliver continued growth and
strong shareholder returns in the years ahead.
¹
Share price premium to NAV (including warrant price on a pro-rated basis and using NAV to four decimal places)
as at 31 December 2021
1 October 2021 – 31 December 2021
MLN NAVPREMIUM
1
$
1. 2 621.8
%$
1.4 8
Share Price
QUARTERLY NEWSLETTER
Ashley Gardyne
Senior Portfolio Manager
Fisher Funds Management Ltd
17 January 2022
Warrant Price
$
0.20

PERFORMANCE
as at 31 December 2021
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 Marlin Global 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 Marlin Global 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.
Marlin Global Limited
Private Bag 93502, Takapuna, Auckland 0740, New Zealand
Phone: +64 9 484 0365 | Fax: +64 9 489 7139
Email: enquire@marlin.co.nz | www.marlin.co.nz
Headquarters Company
%
Holding
China
Alibaba Group5.1%
Tencent Holdings6.5%
Germany
Adidas1.7%
Ireland
Icon5.0%
United Kingdom
Greggs Plc3.4%
United States
Alphabet6.8%
Amazon.Com4.2%

Boston Scientific Co4.6%
Dollar General5.0%

Dollar Tree4.9%
Edwards Lifesciences Corp.3.3%
First Republic Bank San
Francisco
2.5%
Floor & Décor Holdings4.4%
Gartner Inc5.2%
Hexcel Corporation2.6%
Hilton Worldwide Holdings1.5%
Mastercard5.2%
Meta Platforms10.1%
NVR Inc3.0%
PayPal Holdings5.4%
Signature Bank6.0%
StoneCo1.1%
Equity Total97.5%
New Zealand dollar cash1.4%
Total foreign cash0.4%
Cash Total1.8%
Forward Foreign Exchange0.7%

TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 31 December 2021
COMPANY NEWS
If you would like to receive future
newsletters electronically please email us
at enquire@marlin.co.nz
Dividend Paid 17 December 2021
A dividend of 2.54 cents per share was paid to Marlin
shareholders on 17 December 2021, under the quarterly
distribution policy. Interest in Marlin’s dividend reinvestment plan
(DRP) remains high with 40% 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.
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+0.7%+35.6%+25.8%
Adjusted NAV Return +3.5%+26.3%+19.7%
Portfolio Performance
Gross Performance Return+4.2%+30.7%+23.9%
Benchmark Index¹+4.7%+18.4%+13.0%
1
Benchmark index: S&P Large Mid Cap/S&P Small Cap Index (hedged 50% to NZD)
Non-GAAP Financial Information
Marlin 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 net 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 Marlin Non-GAAP Financial Information Policy. A copy of the policy is available at http://marlin.
co.nz/about-marlin/marlin-policies/
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN LOCAL CURRENCY
DOLLAR TREE
+47
%
NVR INC
+23
%
ALIBABA
GROUP
-20
%
PAYPAL
-28
%
STONECO
-51
%
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.