BRM – September 2022 Quarterly Newsletter

Macro-economic (inflation and interest rate) and geopolitical concerns
continued to dominate headlines and influence share markets during the third
calendar quarter (Q3). Against this backdrop, Barramundi’s gross performance
was up 3.9%, outpacing the benchmark ASX index which rose 1.4% (70%
hedged into NZ$).
Interest rate gyrations added to
share market volatility during Q3
The Reserve Bank of Australia (“RBA”) joined the ranks of hawkish central
banks by accelerating its pace of interest rate increases in June, leading to a
sharp lift in bond yields and a sharp sell-off in the equity market in June. By
the start of Q3, interest rates had stabilised and then fell through to early
August. This buoyed the equity market. Rising interest rates once again drove a
retracement in share prices, as equity markets fell during September.
The quality of our portfolio companies
was evident during the biannual
reporting season
Barramundi’s performance was influenced by these moves. It was also
supported by a strong reporting season for our portfolio companies in August.
In reporting their financial results, it was heartening to see evidence that many
of our portfolio companies are lifting their prices and offsetting inflationary cost
pressures. Pricing power is a clear sign of a business with a strong competitive
advantage. It is a key consideration for us when evaluating the quality of a
business.
A second positive theme emerging through reporting season was that
pandemic related supply chain disruptions are showing signs of easing. This
bodes well for the continued normalisation of trading activity and future
revenue growth for affected companies.
Both these themes were reflected in Resmed’s (+10.4% in A$ in Q3) financial
results. Resmed circumvented microchip shortages and increased the supply of
sleep disordered breathing equipment and masks to its customers during Q3.
It lifted pricing 5% at the start of July and it is also growing its market share
at the expense of its key competitor, Phillips. Phillips has had to recall a large
number of faulty products, impairing its ability to meet customer demand in the
interim.
Insurance broker AUB Group (+10.4%) also reported strong profit growth
buoyed by a 9% increase in insurance premium rates and good cost
containment by the management team. Global pallet provider, Brambles
(+8.1%), is similarly benefitting from high demand for its pallets from
customers. This has enabled Brambles to meaningfully lift pricing when
contracts come up for renewal, more than offsetting strong lumber and
transport cost inflation.
Pricing initiatives also helped classified advertising businesses Carsales (+3.5%)
and REA (+3.4%) deliver strong financial results.
Supply chain constraints are also easing for our largest position, CSL (+6.6%).
It is benefitting from a rebound in plasma collections as customers, no longer
restricted by lockdowns, resume blood donations at its centres.
Near term headwinds present
investment opportunities in firms
with bright long-term prospects
Short term market concerns weighed on some of our companies that delivered
sound financial results in Q3. We took advantage of these near-term concerns
and added to some of our high-quality companies with bright long-term
earnings prospects.
Domino’s (-23.4%) for example is exercising pricing power. It introduced
delivery surcharges and altered the mix of its pizza menu promotions to
effectively lift pricing and protect its margins. However, Domino’s was also a
strong beneficiary of COVID lockdowns during 2021 when its delivery sales
skyrocketed. During 2022, it has faced a near term growth headwind as
lockdowns have eased, making it difficult to match its 2021 performance.
With a large presence in Europe, Domino’s has also been impacted by investor
concern about the broader economic impacts of the Ukraine war.
Domino’s remains a strong, well-run fast-food business. Our long-term growth
expectations for the company to almost double its store footprint in a decade
remains undiminished. With the share price back at pre-COVID levels we’ve used
this as an opportunity to add to our position in the company.
Strong financial results didn’t help some of our early stage, fast growing
companies such as data centre operator Next DC (-17.1%), Fineos (-15.5%)
and Audinate (-4.1%). These companies are navigating the environment
adequately. Audinate for example beat earnings expectations on the back of
price increases, cost discipline and an easing of its own supply chain bottlenecks.
However, these companies are investing strongly for growth which depresses
near term profitability. The bulk of the cash flows from these businesses will
consequently be generated years in the future. As such, their valuations are
disproportionately impacted by high interest rates because the discounting
effect of high rates on these long-dated cash flows is amplified compared to
businesses generating a lot of cash today. This dynamic has weighed on their
relative share price returns during Q3.
Patience is required with these shareholdings. However, as WiseTech (+37.5%),
our best performing company in Q3 has shown, when fast growing companies
begin reaping the benefits of getting to maturity, profitability inflects upwards.
The reward can be worth the wait.
WiseTech rewarded for the inflection
in its profitability
Demand for WiseTech’s software continues to grow as its key global freight
forwarder customers are increasingly seeing the benefits that this brings to the
efficiency with which they can run their own businesses. This increased demand
has underpinned strong revenue growth for WiseTech over many years including
a 25% increase in FY22.
What has positively surprised the market over the last year is that the company
has found ways to sustainably improve its efficiency and contained the growth
in its cost base.
We have been adding to high quality
companies with strong long-term
prospects
We have taken advantage of the volatility and dispersion in share price returns
across our portfolio to increase our weighting in companies such as AUB Group,
Credit Corp, Domino’s and REA. These are all high-quality businesses with strong
long-term prospects.
To fund these changes, we’ve trimmed our weighting in companies with either
narrower economic moats, or businesses that have outperformed and offer less
return upside or that have greater earnings uncertainty over the next couple of
years. This includes Ansell, Carsales, and SEEK.

1
¹ Share price premium 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).
1 July 2022 – 30 September 2022
$
0.7 1
Share Price
Warrant Price
$
0.0 2
as at 30 September 2022
QUARTERLY NEWSLETTER
BRM NAVPREMIUM
1
$
0.6 510.5
%
Robbie Urquhart
Senior Portfolio Manager
Fisher Funds Management Limited
14 October 2022

PERFORMANCE
as at 30 September 2022
3 Months
3 Years
(annualised)
5 Years
(annualised)
Company Performance
Total Shareholder
Return
(6.2%)+15.9%+15.6%
Adjusted NAV Return +3.9%+7.2%+10.8%
Portfolio Performance
Gross Performance
Return
+3.9%+9.4%+13.4%
Benchmark Index¹+1.4%+3.6%+7.4%
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
http://barramundi.co.nz/about-barramundi/barramundi-policies/
Company% Holdings
Ansell2.5%
ANZ Banking Group2.5%
AUB Group5.0%
Audinate Group1.8%
Brambles4.0%
Carsales5.7%
Cochlear2.1%
Commonwealth Bank4.9%
Credit Corp3.7%
CSL10.4%
Domino's Pizza3.9%
Fineos Corporation Holdings1.6%
James Hardie Industries2.6%
Macquarie Group3.0%
Nanosonics2.2%
National Australia Bank3.5%
NEXTDC4.0%
Ooh! Media3.0%
PWR Holdings2.4%
REA Group4.4%
ResMed4.5%
SEEK4.3%
Westpac2.7%
WiseTech Global6.9%
Woolworths Group2.9%
Xero Limited4.3%
Equity Total98.8%
Australian cash0.6%
New Zealand cash1.7%
Total cash2.3%
Centrebet Rights0.0%
Forward foreign exchange contracts(1.1%)
Total 100.0%
PORTFOLIO HOLDINGS
SUMMARY
as at 30 September 2022
COMPANY NEWS
Dividend Paid 23 September 2022
A dividend of 1.36 cents per share was paid to Barramundi
shareholders on 23 September 2022, 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 | Fax: +64 9 489 7139
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: 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.
SIGNIFICANT RETURNS IMPACTING
THE PORTFOLIO DURING THE
QUARTER IN AUSTRALIAN DOLLARS
WISETECH
+37
%
PWR HOLDINGS
+33
%
ANSELL
+14
%
NEXTDC
-18
%
DOMINO’S
-23
%