BRM – September 2023 Quarterly Newsletter

Barramundi ended the quarter with gross performance of +0.8%, while the
adjusted NAV return for the quarter was -0.01%. This compares with the
benchmark return which was down -0.9%. The portfolio rose strongly across
July and August following some robust financial results delivered by our
portfolio companies. However, rising interest rates and mixed economic data
weighed heavily on equity markets in September.
The Australian 10yr Government bond rate rose sharply in September from
4.0% to 4.5% in the month. This followed economic indicators which
suggested that, while inflation has come down, it is proving to be stickier
than the Reserve Bank of Australia (“RBA”) anticipated. Hence while interest
rate hikes by the RBA this economic cycle may be close to peaking, it could be
some time before cost pressures for households are alleviated through interest
rate cuts.
Gyrations in inflation and interest rates may impact equities in the near term.
However, the ability of our companies to grow their earnings and widen the
economic moats around their businesses is likely to be the predominant long-
term driver of their returns.
Pleasing financial results from a number of portfolio companies drove
Barramundi’s outperformance in Q3. These returns and the stewardship by the
respective management teams bolsters our confidence in the outlook for our
portfolio companies.
Audinate’s video product suite is showing promise
Networked audio company, Audinate’s (+45.6% in A$) share price rose
strongly on the back of easing supply chain restrictions for its audio products.
This led to over 50% revenue growth in FY23. Augmenting its audio product
revenue, Audinate recorded over US$3m in revenue from its nascent video
division and noted that it has won a large number of design wins in the video
market. This lays the groundwork for strong revenue and earnings growth in
the future.
Importantly, Audinate has also reached sufficient size and scale now that
it can grow customers and revenue without having to spend as much in
business functionality to support this growth. This has led to an inflection in its
profitability which has been well received by investors.
Strong contribution to the portfolio from new addition,
Johns Lyng Group
Helped by a strong set of financial results, Johns Lyng Group rose 25% since
we added it to the portfolio in August.
Johns Lyng Group is Australia’s leading service provider of insurance building
and restoration services. Through its network of 14,000 subcontractors, it
provides repair and restoration work for properties damaged by insurable
events including: impact, weather and fire events. It is also a top 5 strata
management provider in Australia and has a nascent US repair and restoration
business.
It is the largest service provider of insurance repair work in what is a
fragmented market in Australia. Its national and regional scale afford it
the ability to respond quickly, and provide make-safe work and repairs
reliably, efficiently and effectively. This has enabled it to grow its share of the
Australian repair and restoration market.
We are attracted by the non-discretionary nature of Johns Lyng’s revenue.
Insurance repairs are not linked to the economic cycle. They have to be
completed when ‘insurance events’ occur. This baseload of day-to-day repair
and maintenance work is also complemented by make-safe and cleanup work
resulting from large catastrophe events like the northern rivers floods and
Australian bush fires. This work offers big but lumpy revenue opportunities
for Johns Lyng. This offers countercyclical upside to our portfolio from the
economic devastation caused by such events.
Johns Lyng’s strong performance-based culture has been key to its growth
story. The company operate an equity partnership model, where the majority
of its 130+ subsidiary businesses are partially owned by management. This
creates a strong alignment with shareholders. It is similar to the ‘owner-
driver’ model that has proved to be a successful formula for our longstanding
investment in insurance broker, AUB Group.
Good stewardship by our classified (and outdoor)
advertising business management teams
Signs that the Australian economy is slowing has weighed on advertising
businesses during the year. However, management teams across our classified
and outdoor advertising businesses have all demonstrated that the aspects of
their businesses that are within their control, are being well managed. This
speaks to the high calibre of the teams running these businesses.
Outdoor advertising business ‘oOhMedia’s share price was weak during
May and June. Happily, it rebounded +21% during Q3. oOH!Media won
some notable advertising contracts in Australia. In delivering a credible set of
financial results in August, it referenced strong revenue growth and market
share gains across a number of its advertising formats. Management also kept
cost growth in check, bolstering overall profitability.
Although oOH!Media operates in a cyclical industry, outdoor advertising
formats in Australia continue to take market share from other traditional
media formats (such as linear TV). This will be driven by ongoing digitisation
of its asset base, increasingly sophisticated audience measurement giving
advertisers confidence of the return on their spend, and greater programmatic
trading of out-of-home inventory giving advertisers more flexibility. As such,
we think oOH!Media will continue growing its earnings structurally through
time.
Share prices of our classified advertising businesses, Carsales (+18.6%), REA
Group (+8.4%) and SEEK (+2.6%), also all rose in Q3. The resilience of their
earnings in the face of a more mixed economic environment was evident in
each of their financial results. All three companies in particular have lifted their
prices meaningfully, offsetting inflationary pressures and the softer advertising
environment.
In addition, we note that Carsales has invested heavily in expanding its
presence in the US and Brazilian markets in recent times. In August it
delivered a strong set of financial results. This highlighted the value of having
an earnings base that is now widely diversified across multiple geographies
including Australia, South Korea, the US and Brazil.
A tough Q3 for ResMed
ResMed’s (-28%) share price fell in response to the market’s focus on the
potential impact on its business of semaglutide obesity drugs such as Ozempic
and Mounjaro. Obesity and heart disease are comorbidities of obstructive
sleep apnea (“OSA”). To the extent that obesity drugs can have a positive
impact on these comorbidities, they might reduce the size of ResMed’s
potential OSA market. These drugs have captured the market’s attention, and
ResMed’s share price has suffered.
It is early days for ResMed. Our initial view is that the long-term impact on
ResMed’s earnings prospects will likely be modest. There are numerous hurdles
to widespread displacement of ResMed’s OSA product suite. Amongst others,
this includes adherence challenges over the long term for patients (when
they stop taking the drugs, the weight returns); the amount of muscle (as
opposed to fat) that is lost and implications for the overall health of patients;
reimbursement regulations (the drugs aren’t cheap). Moreover, OSA is not
necessarily caused by a weight problem. Even in the US, the world’s most
developed OSA market, less than 20% of sufferers are diagnosed and treated.
Consequently, we remain of the view that ResMed has a long growth runway
ahead of it despite the potential impact from obesity drugs. We will continue
to monitor developments.
1
¹ Share price premium to NAV (using the net asset value per share, after expenses, fees and tax, to four decimal places).
1 July 2023 – 30 September 2023
$
0.7 2
Share Price
as at 30 September 2023
QUARTERLY NEWSLETTER
BRM NAVPREMIUM
1
$
0.7 11. 8
%
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
13 October 2023

PERFORMANCE
as at 30 September 2023
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder
Return
+3.5%+8.6%+13.1%
Adjusted NAV Return (0.01%)+10.1%+10.0%
Portfolio Performance
Gross Performance
Return
+0.8%+12.7%+12.8%
Benchmark Index¹(0.9%)+11.3%+7.0%
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 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 Barramundi Non-GAAP Financial Information Policy. A copy of the policy is available at
barramundi.co.nz/about-barramundi/barramundi-policies.
Company% Holdings
Ansell1.7%
ANZ Banking Group2.3%
AUB Group4.9%
Audinate Group2.5%
Brambles4.0%
Carsales5.6%
Commonwealth Bank4.4%
Credit Corp3.9%
CSL9.5%
Domino's Pizza4.0%
Fineos Corporation Holdings2.7%
James Hardies Industries Plc3.2%
Johns Lyng Group2.9%
Macquarie Group4.5%
Nanosonics1.6%
National Australia Bank2.9%
NEXTDC3.6%
oOh! Media3.0%
PWR Holdings2.0%
REA Group4.4%
ResMed4.8%
SEEK5.2%
Westpac1.5%
WiseTech Global6.4%
Woolworths Group2.3%
Xero Limited4.3%
Equity Total98.1%
Australian cash0.7%
New Zealand cash0.3%
Total cash1.0%
Forward foreign exchange contracts 0.9%
Total 100.0%
PORTFOLIO HOLDINGS
SUMMARY
a s a t 30 September 2023
COMPANY NEWS
Dividend Paid 22 September 2023
A dividend of 1.44 cents per share was paid to Barramundi
shareholders on 22 September 2023, 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
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. 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: 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
AUDINATE
GROUP
+46
%
PWR HOLDINGS
+28
%
JOHNS LYNG
GROUP
+25
%
oOH!MEDIA
+21
%
RESMED
-28
%