MLN – June 2023 Quarterly Newsletter

1
Ongoing rebound in markets driven by corporate
earnings, easing inflation and the possibility of a soft
landing
Marlin ended the quarter with gross performance up 10.2% and the adjusted NAV
return up 9.7%. This compared with our global benchmark which was up 6.0%.
Global market backdrop
While macro gyrations come and go, it is corporate earnings that is the most
important driver of stock price performance in the medium and long term. The US
reporting season closed with 78% of companies beating earnings expectations.
This is the best upside earnings surprise (off a subdued base) in several quarters.
The European reporting season was a little more subdued, with 61% beating
earnings expectations and helps explain the ongoing underperformance of
European equities (+10% for calendar year to date) vs US equities (+17% calendar
year to date).
Most importantly, year ahead earnings expectations are now getting upgraded, and
in some cases sharply. The recession has been pushed out for now, corporates
have been quicker to cut costs and demand remains stable. For example, the
S&P500 ex-energy (because energy is too volatile to include sensibly) has been
upgraded by 5% recently. Nasdaq year ahead earnings have been upgraded by
12%. European earnings on the other hand have been upgraded a more modest
4%.
Portfolio
Alphabet (+15%) rallied following its I/O developer conference held in early May. At
the conference, Google demonstrated how it is incorporating Generative AI (GAI)
into key products including Search, assuaging concerns that the company is falling
behind Microsoft in terms of AI innovation. The shares modestly pulled back in
June (-3%) as market sentiment soured on Google’s ability to maintain advertising
dominance and profitability in the era of GAI and conversational search. While it is
early days, the ubiquity of Google Search, Google’s trove of first party data, and its
AI research and investment capabilities put the company in a good position to win
in the GAI era.
Amazon (+26%) reported mixed earnings. AWS
2
, Amazon’s cloud computing
platform, reported better than expected revenue and earnings. However,
management guidance for the upcoming quarter was weaker than expected.
AWS headwinds in recent quarters have been driven by tightening IT budgets and
customers rationalising spend through optimisation. We think these headwinds are
abating and AWS’ growth should re-accelerate later in the year as the structural
trend toward cloud computing continues. Over the past 2 years Amazon has made
major investments into its logistics infrastructure. This will begin to pay off from now
on as the company grows into the expanded footprint and profit margins go up.
Amazon’s advertising business was a star in the quarter, growing 23%. There is a
long growth runway ahead for advertising as the business continues penetrating
Amazon’s merchant base.
US’s largest discount retailer, Dollar General (-19%) declined on the back of a
disappointing quarterly update where the company lowered full year earnings
guidance. Concerns have centred around increased competition (from Walmart
and Family Dollar) and potential underinvestment in labour. Dollar General disclosed
US$100mn of additional labour spend to add eight extra employee hours per store
each week. Our view is that the US$100m investment in increased labour hours
may rise. However, we think there will be a payback on that investment, and we
think the market had already priced in a more adverse outcome than US$100m.
Icon (+17%), a leading clinical research outsourcing company, had a tumultuous
quarter down 14% at one point before ending the quarter strongly. The
pharmaceutical services industry has been facing slowing growth from small
biotech customers over the last eighteen months. Many of these biotech
customers rely on external funding (either from the venture capital industry or via
public listings) to run clinical trials for new drugs, and this funding has come back
to more normal levels from the heady levels seen during 2020 and 2021. We think
the impact and duration of the slow-down should be limited and that the secular
growth drivers for pharmaceutical R&D spend are still intact. And we took advantage
of the price weakness to add to our position. In the last couple of weeks, Icon’s
management have shifted to a more optimistic tone around biotech demand.
Meta (+35%) had a strong earnings report that saw its shares bounce 11% post-
announcement in April. Strength continued through the rest of the quarter as digital
advertising spend re-accelerates. Meta is well positioned to continue to take global
advertising spend market share as AI improves advertiser return on investment. And
Reels
3
and click to message (messenger and Whatsapp) are also driving improving
revenue.
New entrants into the portfolio
Danaher is a leading player in the Lifesciences and Diagnostics industries where
it provides its customers with the cutting-edge tools to help them to diagnose
disease; and discover and manufacture new drug therapies to treat those
diseases. An aging population and growing healthcare spend are driving the need
for increased innovation in the diagnosis and treatment of chronic disease. With
a leading portfolio of tools and services in these customer healthcare markets,
Danaher is well-positioned to benefit from this investment in healthcare innovation.
Driven by a well-renowned culture of continuous improvement and investment, we
expect Danaher to grow its market share as it becomes an increasingly essential
partner to its customers.
MSCI is a leading provider of indices, benchmarks, index data and analytics tools
for the financial industry, and is particularly known for its global and emerging market
indices. Customers use the company’s indices to define the investment universe
for their products, benchmark their performance, and construct exchange traded
funds (ETFs) that will track an existing index or thematic. MSCI’s analytics software
and tools give customers insights into their asset allocation, portfolio construction
and risk management decisions. MSCI’s ESG & Climate business is a global leader,
providing customers with ESG & climate data, analysis and ratings on corporates
and entities to help customers assess the risk of these various factors. The
company serves over 6.6k clients in 95 countries and MSCI has $13.7tn in assets-
under-management benchmarked to its various indices. MSCI is the most innovative
index provider, and its wide moat is driven by its strong brand, scale, switching
costs and network effects which all result in high customer retention rates. The index
industry structure is attractive and dominated by three companies, each known for a
certain segment of the market, limiting competition between the firms.
UnitedHealth Group was originally a health insurance company, UnitedHealth
Group has expanded into the leading healthcare services company in the United
States, encompassing insurance, provision of healthcare and other related
businesses including pharmacy services, and technology services. UnitedHealth
Group is well positioned to benefit from three key trends in healthcare: an aging
population and the increased outsourcing of this care to providers such as
UnitedHealth; a shift towards value-based care; and the leveraging of data and
analytics to drive efficiency. UnitedHealth Group has a wide moat driven by a
combination of local scale, supported by large national infrastructure and a vertically
integrated model – which should allow UnitedHealth to continue to gain market
share across its business.
¹
Share price discount to NAV (including warrant price on a pro-rated basis and using the net asset value per share, after expenses, fees and tax, to four decimal places).
2
Amazon Web Services
3
Meta Platform Instagram Reels is a dedicated platform on which users can post short form videos
as at 30 June 2023
1 April 2023 – 30 June 2023
MLN NAVDISCOUNT
1
$
0.931.4
%$
0.92
Share Price
QUARTERLY NEWSLETTER
Sam Dickie
Senior Portfolio Manager
Fisher Funds Management Ltd
17 July 2023
Warrant Price
$
0.01

PERFORMANCE
as at 30 June 2023
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
Email: enquire@marlin.co.nz | www.marlin.co.nz
Headquarters Company
%
Holding
China
Alibaba Group2.8%
Tencent Holdings3.6%
Ireland
Icon7.0%
United Kingdom
Greggs Plc4.1%
United States
Alphabet7.0%
Amazon.Com8.5%
Boston Scientific4.9%
Danaher Corporation3.9%

Dollar General4.0%
Dollar Tree2.8%

Edwards Lifesciences Corp.5.1%
Floor & Décor Holdings5.0%
Gartner Inc5.4%
Mastercard5.0%
Meta Platforms Inc5.9%
Microsoft5.5%
MSCI0.2%
Netflix3.1%
NVR Inc1.0%
PayPal Holdings2.1%
salesforce.com5.5%
UnitedHealth Group2.5%
Equity Total94.9%
New Zealand dollar cash3.8%
Total foreign cash4.6%
Cash Total8.4%
Forward Foreign Exchange(3.3%)

TOTAL100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 30 June 2023
COMPANY NEWS
If you would like to receive future
newsletters electronically please email us
at enquire@marlin.co.nz
Dividend Paid 23 June 2023
A dividend of 1.75 cents per share was paid to Marlin
shareholders on 23 June 2023, under the quarterly distribution
policy. Interest in Marlin’s dividend reinvestment plan (DRP)
remains high with 39% 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+10.2%+6.7%+11.2%
Adjusted NAV Return +9.7%+5.9%+8.2%
Portfolio Performance
Gross Performance Return+10.2%+8.7%+11.1%
Benchmark Index¹+6.0%+11.5%+7.2%
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 percentage change in the adjusted NAV value,
»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
META
PLATFORMS
+35
%
NETFLIX
+28
%
AMAZON
+26
%
ALIBABA
-19
%
DOLLAR
GENERAL
-19
%
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 dili-
gence to determine the account holders’ jurisdiction of tax residence. If shareholders have not previously self-certified, they will receive
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.