BRM - December 2024 Quarterly Newsletter

Technology companies and Australian
banks: standout performers in 2024
Barramundi’s gross performance rose +12.1% across the calendar
year, while the ASX200 benchmark index (hedged 70% to NZD) has
risen +13.0%. In the December Quarter (“Q4”), Barramundi’s gross
performance fell -1.5%, and the adjusted NAV return was down
-2.0%, both lagging the -0.3% decrease in the benchmark return.
Interest rates stabilised in 2024. Subsiding inflation led the Reserve
Bank of Australia (“RBA”) to leave the cash rate unchanged during
the year. This supported the share market which also benefitted from
a more resilient economy than had been expected a year ago.
Information technology (+50% in 2024 calendar year) was the best
performing sector, led by increased demand globally for software
and the development of artificial intelligence (“AI”). Financials
(+28%), led by the Australian banks (see below), and the Consumer
Discretionary (+21%) sectors (reflective of resilient consumer
spending) also boosted overall market returns. Protracted economic
weakness in China weighed on commodities which dragged down
the Energy (-19%) and mining-heavy Materials (-17%) sectors in the
year.
Barramundi’s performance in the year and in Q4 was helped by our
technology and bank investments. Growing pains in our smaller
positions including Audinate and Johns Lyng Group (discussed in
previous quarterlies) detracted from performance. We think both
companies have bright longer-term prospects.
We have taken advantage of the strong bank share price
performance to re-orient our portfolio positioning in favour of
companies offering better investment opportunities on a 3yr+ view.
This has included adding a new investment to our portfolio in Q4
which we discuss below.
Technology investments have delivered
handsomely during 2024, despite a
bumpier Q4
The thirst for AI tools and increased software development has
benefitted our technology investments.
Logistics software provider WiseTech has returned +61% over
2024, and accounting software provider Xero has risen +50%. Both
companies added new customers in the year. New software products
developed by their teams has also broadened their reach across their
existing customers. Data centre provider NEXTDC (+11%) benefitted
from rising demand for data storage affiliated with AI and technology
more broadly.
Encapsulated within these annual returns was a bumpier return
picture during Q4.
Fineos’ share price (+31% in Q4) responded strongly to an investor
day (the first since 2019) held by the company during November.
Management did a great job communicating the progress Fineos has
made in developing its insurance claims software products over the
past few years. The company provided clarity on the strong, longer-
term earnings opportunity that lies ahead for Fineos with growth
stemming from both existing and new customers.
In contrast, share prices of Audinate (-24%) and WiseTech (-12%)
both fell during Q4.
Audinate has had a tough year. It is working through an inventory
overhang from customers that over-ordered too many of its chips
during the COVID pandemic. As discussed in the Q3 update, this will
weigh on its earnings for the rest of the financial year. Until then, the
shares remain unloved by investors. The long-term earnings prospects
for the company remain sound.
WiseTech’s share price was weighed down by management upheaval
which has now been resolved. WiseTech held a successful investor
day in December. We are excited by the new products the team has
developed. They should add meaningfully to earnings growth during
2025.
As a whole, we are pleased with the progress our technology
companies have made during the year. They are high quality
companies with some of the highest long term earnings growth
prospects across our portfolio. We think they will stand our investors
in good stead over coming years.
Australian banks have been a key driver of
share market performance in 2024
Financials, led by the four major Australian banks, comprise over
20% of the ASX200 index. They therefore have a meaningful
influence on the overall returns for the share market.
The past year has been a great one for the banks. The largest bank
CBA returned +13% in Q4, and +44% for 2024 overall. Westpac
and NAB returned +53% and +29% respectively for the year and
both rose strongly in Q4. ANZ had a weaker Q4 (-4%) but still
returned 18% for the year.
The banks have benefitted from the resilient Australian economy.
Robust credit growth for businesses and households and low levels
of bad debt has been supportive for earnings. This has enabled banks
to continue returning capital to shareholders through dividends and
share buybacks. With its open market economy and strong rule of
law, Australia has been seen as an attractive investment destination
for international investors in the Asia Pacific. This too has benefitted
the banks.
Barramundi owns shares in CBA, NAB and ANZ. We have
benefitted in absolute terms from this performance. However,
these shareholdings are smaller relative to the bank’s weightings in
the ASX200 index. Hence this strong share price performance has
weighed on Barramundi’s relative returns in 2024.
We focus on investing in high quality companies that can grow
their earnings through time. The banks are not the fastest growing
businesses in the portfolio. However, they benefit from scale
advantages (their economic moat) over smaller competitors. The
Australian banks are some of the highest quality banks globally. Their
share price performance during 2024 speaks to why they warrant a
place in the portfolio.
That said, their share prices have risen a lot more than their earnings.
In short, they are more expensively valued than they were a year
ago. We have therefore been reducing our weighting in the banks
in recent months. We have re-deployed the proceeds into other
investment opportunities that we think offer better prospects on a
3–5-year investment time horizon.
1
¹ Share price discount to NAV (using the net asset value per share, after expenses, fees and tax, to four decimal places).
1 October 2024 – 31 December 2024
$
0.6 9
Share Price
as at 31 December 2024
QUARTERLY NEWSLETTER
BRM NAVDISCOUNT
1
$
0.7 46.7
%

Maas Group benefits from growth in
Australian infrastructure and renewable
power generation
Maas Group, a new addition to the portfolio in Q4, has been one of
these investments.
Maas is a founder-led Australian focussed industrial business. With
over 40 quarries and 20 concrete plants, construction materials
contribute approximately 40% of its earnings. The strategic location
of these plants, across eastern Australia, positions Maas to benefit
from the long-term structural growth in infrastructure projects (road
and rail), assisted by population growth trends. The location and
long-life nature of these assets is a key source of its economic moat.
Aggregates (crushed rock) are heavy and don’t cost a lot. They can’t
economically be transported far distances. Maas’ quarries are well
positioned across the infrastructure growth corridors in Victoria, New
South Wales and Queensland.
It also has a large civil construction and plant hire division that
stands to benefit from the development of renewable energy power
PERFORMANCE
as at 31 December 2024
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder Return+6.2%(2.8%)+9.4%
Adjusted NAV Return (2.0%)+4.5%+11.1%
Portfolio Performance
Gross Performance Return(1.5%)+6.7%+13.6%
Benchmark Index¹(0.3%)+8.5%+9.0%
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
Ansell2.1%
ANZ Banking Group2.4%
AUB Group5.1%
Audinate Group1.5%
Brambles4.6%
CAR Group4.6%
Cochlear Limited2.1%
Commonwealth Bank2.0%
Credit Corp3.8%
CSL10.8%
Domino's Pizza2.3%
Fineos Corporation Holdings2.3%
James Hardies Industries Plc3.2%
Johns Lyng Group3.5%
Maas Group Holdings Limited2.2%
Macquarie Group5.1%
National Australia Bank3.5%
NEXTDC3.3%
oOh! Media2.7%
PWR Holdings1.9%
REA Group1.9%
ResMed4.5%
SEEK5.4%
WiseTech Global7.2%
Woolworths Group1.5%
Xero Limited5.1%
Equity Total94.6%
Australian cash0.5%
New Zealand cash5.2%
Total cash5.7%
Forward foreign exchange contracts (0.3%)
Total 100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 31 December 2024
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
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN AUSTRALIAN DOLLARS
FINEOS
+31
%
REA GROUP
+16
%
NEXTDC
-14
%
DOMINOS
-17
%
AUDINATE
-24
%
generation projects. These projects are key to the transition of the
Australian energy grid from ageing coal-fired infrastructure to more
sustainable, renewable generation. This transition is nascent, and we
expect the pace of development to ramp up in coming years.
Led by founder Wes Maas, the company has an entrepreneurial
culture. It has opportunistically invested in residential and commercial
property over the years. These divisions are a smaller (yet valuable)
part of the overall business.
Wes Maas owns about 50% of the shares in the company. His high-
quality management team is aligned with shareholders with over 80
of them incentivised through share-based remuneration. The Maas
team genuinely think like owners. They run the company in order
to maximise long term shareholder value. We are excited by the
company’s prospects.
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
15 January 2025