KFL - September 2024 Quarterly Newsletter

In the September quarter Kingfish delivered a gross performance
return of +10.5% and an adjusted NAV return of +10.1%, versus the
+6.0% return of the S&P/NZX50 gross index.
There were several solid contributors, with holdings exposed to the
local economy responding positively to the Reserve Bank of New
Zealand's first interest rate cut. In addition, the quarter saw strong
performance again from Fisher & Paykel Healthcare (+16% total
return) and cinema software provider Vista (+20%) off the back
of positive trading updates. Infratil (+10%) and EBOS (+15%) both
performed well. Detractors from performance this quarter were a2 Milk
(-6%) and Contact Energy (-7%).
Across the New Zealand market, despite the plethora of economic
data and anecdotes suggesting difficult trading conditions have
continued through the year, on balance earnings figures still managed
to disappoint and saw forward expectations lowered.
All of Kingfish’s portfolio companies provided updates in the quarter,
either through financial results delivered in August or trading updates
around annual meetings. The good news was that on balance the
portfolio companies are performing well. Many of these updates were
covered in detail in last month's update, which is worth re-reading as
there are too many to cover again here.
There is renewed optimism despite challenging economic
conditions persisting
As we discussed last quarter, the economic data has not improved
as 2024 has progressed, in fact it has worsened. However, during the
quarter share prices rebounded as investors became more optimistic
the economic outlook may improve in the next year. In July, the
Reserve Bank of New Zealand (RBNZ) noted inflationary pressures are
subsiding and then followed through in August by cutting interest rates
by a quarter of a percent and foreshadowing further cuts.
Companies across the market that would benefit from a stronger New
Zealand economy saw their share prices lift. This extended to several
in the portfolio, such as Port of Tauranga (+26%) courier company
Freightways (+20%), steel distributor Vulcan Steel (+17%), and trucking
and logistics company Mainfreight (+5%).
In addition, retirement operators Summerset (+28%) and Ryman
(+21%) benefited as the RBNZ cuts enable lower mortgage rates,
with the potential to breathe life into the housing market. A tougher
environment for vendors has meant residents are having a harder time
selling the family home in advance of moving in, which has forced the
operators to reduce their build rates to conserve cash and match unit
deliveries to demand. The business model also sees greater value
accrue to operators in a rising housing market, as vacated units can
be resold at higher prices. In addition, listed retirement operator peer
Arvida (circa +80%) saw a board-endorsed takeover approach at a
material premium, which illustrates that share prices in the sector had
become overly pessimistic, with private investors willing to pay much
higher prices by taking a longer-term view.
Ryman provided two positive updates during the month. Early in
September, it announced a business improvement programme. The
company is recalibrating its fees to residents to more sustainable
levels, commensurate with its quality offering, which will improve
financial performance. It is also restructuring its team to operate
more efficiently and following its decision to halt breaking ground on
new villages until after it has delivered existing projects and recycled
capital to reduce debt. Ryman also announced late in the month that
it is appointing Naomi James as its new CEO. She has a sound track
record, having assisted Refining NZ (now Channel Infrastructure) in
successfully transforming from an oil refinery to a fuel import terminal.
It is also pleasing to see she is appropriately incentivised to build
value for shareholders. These updates reflect well on the new board
and provide us with increased confidence in the future strategy and
performance of the business.
In terms of the newfound optimism, we are not yet seeing tangible
signs of stronger economic growth, but believe interest rate cuts were
a necessary first step to seeing better conditions for our companies
with local operations in 2025 and beyond.
The New Zealand share market sprung to life with share issues
Generally speaking, we prefer offers to fund compelling incremental
growth opportunities. For instance, Infratil raised $1.275 billion in
June to fund growth opportunities across its portfolio. Most capital is
earmarked for its CDC Data Centres business, which is seeing strong
demand growth, and every new dollar invested generates high rates of
return. We were supportive, given the company's long term track record
of investing wisely to create value, including at CDC.
In this vein, Auckland Airport (-1%) raised $1.4 billion to fund the
development of its new integrated terminal. We were expecting an
equity issue at some point, given the size of the overall project but
were surprised by the timing and quantum of the raise. While there
remains some debate around the finer details, there is no doubt the
existing dated infrastructure is in need of a material upgrade and
investors should be allowed a reasonable return on this investment.
We participated, given its position as New Zealand's premier airport
precinct.
Outside of the Kingfish portfolio, Synlait raised $218 million of new
equity and Fletcher Building raised $700 million. Both were from a
position of weakness, to repair overly indebted balance sheets while
earnings are under pressure. While their shares have recently rallied
from their lows as concerns around financial distress are alleviated for
now, they have respectively returned -59% and -36% for calendar 2024.
Both companies have a lot to prove having chequered track records of
allocating capital into poor investments and allowing too much debt to
accumulate on the balance sheet.
While not a share issue per se, Contact Energy (-7%) announced it
plans to buy near pure-play hydro generator Manawa for around $2
billion, with Manawa shareholders (including Infratil in respect of its
51% stake) receiving a combination of Contact shares and cash.
While the portfolio nicely complements Contact's hydro generation,
it will need to execute well to deliver the anticipated portfolio benefits
and cost savings to justify the price tag paid. The deal also means
Contact is issuing a large number of shares to Manawa holders in lieu
of needing to raise equity from existing shareholders, which dilutes
1
Share price discount to NAV (using the net asset value per share, after expense, fees and tax, to four decimal places).
QUARTERLY NEWSLETTER
1 July 2024 – 30 September 2024
as at 30 September 2024
1
KFL NAV
$
1.41
$
1.26
Share Price
DISCOUNT
1
10.9
%

2
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 Kingfish 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 Kingfish 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.
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+10.7%(7.0%)+6.8%
Adjusted NAV Return+10.1%(1.2%)+7.5%
Portfolio Performance
Gross Performance
Return
+10.5%(0.0%)+9.3%
S&P/NZX50G Index+6.0%(2.2%)+2.6%

Non-GAAP Financial Information
Kingfish 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,
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 Kingfish Non-GAAP Financial Information Policy. A copy of the
policy is available kingfish.co.nz/about-kingfish/kingfish-policies.
LISTED COMPANIES% Holding
Auckland Intl Airport9.8%
Contact Energy6.1%
Delegat Group1.4%
EBOS Group7.3%
Fisher & Paykel Healthcare17.9%
Freightways3.2%
Infratil17.0%
Mainfreight10.7%
Meridian Energy2.5%
Port of Tauranga2.9%
Ryman Healthcare3.1%
Summerset8.4%
The a2 Milk Company2.6%
Vista Group International5.4%
Vulcan Steel1.0%
Equity Total99.3%
New Zealand dollar cash0.7%
TOTAL100.0%
PORTFOLIO HOLDINGS SUMMARY
as at 30 September 2024
COMPANY NEWS
Dividend Paid 27 September 2024
A dividend of 2.66 cents per share was paid to Kingfish shareholders
on 27 September 2024 under the quarterly distribution policy.
Interest in Kingfish’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.
PERFORMANCE
as at 30 September 2024
Kingfish Limited
Private Bag 93502, Takapuna, Auckland 0740, New Zealand
Phone: +64 9 489 7094
Email: enquire@kingfish.co.nz | www.kingfish.co.nz
If you would like to receive future
newsletters electronically please email
us at enquire@kingfish.co.nz
upside potential to existing Contact shareholders. The deal is subject to
Commerce Commission approval and comes at an interesting juncture
for the sector given recent media and political scrutiny. While it remains
to be seen if the deal will get approval, it is also worth noting it is yet
another high-value exit for Infratil, a significant position for Kingfish.
SIGNIFICANT RETURNS
IMPACTING THE PORTFOLIO
DURING THE QUARTER
SUMMERSET
GROUP
+28
%
PORT OF
TAURANGA
+26
%
RYMAN
HEALTHCARE
+21
%
FREIGHTWAYS
GROUP
+20
%
VISTA
GROUP
+20
%
Matt Peek
Portfolio Manager
Fisher Funds Management Limited
11 October 2024