CEO and CEO Mark Freeman and portfolio manager Kieran Kennedy discuss Mirrabooka Investments’ (ASX:MIR) FY24 annual results.
Geoff Driver: My call is Geoff Driver, Managing Director of Business Development and Investor Relations at Mirrabooka Investments (ASX: MIR). I have with me Mark Freeman, Managing Director and Managing Director, and Kieran Kennedy, Portfolio Manager at Mirabooka Investments.
So, Mark, you just announced our fiscal year 2023-24 effects. Maybe you can give us some of the highlights.
Mark Freeman: Yeah, I’ll do that then. I’ll cover the effects and then turn to Kieran to let him know about the portfolio activity.
Therefore, profit for the total year amounted to $10. 7 million, slightly below the $11. 3 million in the same period last year. There was a decline in contribution from the commercial portfolio, which generated $1. 3 million this year, compared to a strong contribution of $3. 4 million last year. This was offset to some extent by the strong cash contribution from the feature portfolio, which amounted to $2. 5 million compared to $1. 3 million last year. The final dividend remained at 6. 5 cents per percentage fully franked. A fully franked special dividend of 2. 5 cents was also declared consistent with the constant percentage following the strong capital gains made in this and previous years. This brings the overall dividends for the year to thirteen cents consistent with a fully franked percentage. Overall dividends last year were 14. 5 cents, consistent with the percentage, which included a special dividend of 4. 5 cents.
The return on Mirrabooka’s 12-month portfolio, adding postage as of June 30, was 17. 4 percent. Our benchmark, the combined S indices
Interestingly, Mirrabooka celebrated its 25th anniversary this year. The portfolio has outperformed benchmarks over the past 25 years and generated an annual return of 12. 4 percent when shipping benefits are included. The control expense ratio for the year remains low. for this type of product at 0. 56 percent without additional costs.
Geoff Driver: Thank you, Mark. Kieran, Mark talked about the functionality of the wallet, which was exceptional for the year. Perhaps you can tell us some of the key points of this functionality.
Kieran Kennedy: Absolutely, Geoff. Look, this is a year where a number of our largest holdings have performed very well together, which contributes noticeably to the overall functionality of the portfolio. One inventory that we’ve talked about in the last 3 briefings, which has only been in the portfolio for two years, but is going to be discussed again, is Gentrack (ASX:GTK), which is really up now. We bought it two years ago as a fairly small initial investment. In fact, this figure has increased by 500% in this biennium. It has now become one of our five largest inventories, and for the fiscal year, it is up approximately 160%. So amazing functionality in no time. That’s what excites us about this market segment: it’s possible. And above all, the customers of this company continue to look very good. We believe that there has been some recovery in valuation and now it is literally about the expansion that this company can generate for many years to come.
Other high-yield stocks were pillars of the portfolio. Those who follow us faithfully will know that those corporations have been in the portfolio for a long time. Companies such as monetary platform software providers HUB (ASX:HUB) and Netwealth (ASX: NWL) also did not have a very good year. Online classified ad corporations, REA (ASX:REA) and CAR Group (ASX:CAR), were strong again. Mettle
Geoff Driver: And I guess that’s the point, Kieran. A giant component of the functionality. . . So you talked about Gentrack, but a lot of the functionality comes from those stocks in the very long term, so we manage the portfolio through focusing on quality stocks.
Kieran Kennedy: Absolutely, Geoff, yes. And look, the other thing that helped us that year was. . . I guess what we had talked about in previous years that had hurt us was the strength of a number of commodity stocks that sometimes we are not. as exposed to. In particular, the lithium sector has remained strong for several years. And we have noticed that this situation has softened in the last 12 months. So I guess there is merit to both sides in terms of outperformance over this 12-month period.
Geoff Driver: Thanks, Kieran. So in the context of the market and what’s happened in terms of a strong market, what changes have you made to the portfolio for the year?
Kieran Kennedy: Yeah, look, I guess the context I just described has created an attractive dynamic in the way we’ve transacted this year. At our core, we are a long-term buy and hold investor. You know, we think the most important thing is to stick with literally large corporations and let their effects dictate our performance. But we are aware that the valuations of many of those companies especially increased that year. We don’t literally think their outlook has changed much in five years and more, which is what we’re looking for, but there has been popularity in the market. So we had a year where we reduced positions more than we normally would. This means there are still a maximum of 20 titles left. We haven’t sold any of those smart businesses. But just trimming those positions means that rather than just increasing them and letting the weightings increase again, we feel like, at those valuations, we trim them slightly and look to redeploy that cash to where we see a higher relative price in the middle. term. Matrix So that means that about $60 million net was taken out of the top 20 sensible investments last year, and that was redistributed to new opportunities that were somewhat spread out. We bought 14 new shares. We have nine more shares than we did 12 months ago. Again, we’re looking for some of those. . . Hopefully, we’ll locate some other Gentrack, but some of those early positions will turn into attractive opportunities down the road.
Geoff Driver: And Mark talked about the functionality of the feature book. I guess that component of the strategy as well.
Kieran Kennedy: Yes, that’s right. So features are everything we don’t use all the time in Mirrabooka. This is all that is at our disposal. Of course, one of our budget brothers at Djerriwarrh does this every day. I suppose we use them as a first mirror image of this sense of evaluation. So before we’re in a position to sell anything, we say, “If the value of the stock gets much further from here, we’d be happy to lose something at that value. So you’re actually selling that option to someone else who believe that the value of a security that we have is moving away continue to increase. When we do this, we generate profits and it helps supplement our source of profits that we can pay to our shareholders.
Geoff Driver: Thank you, Kieran. So, Mark, looking ahead, the outlook for the next six to 12 months, do you have any ideas?And I’ll also come back to Kieran when it comes to the small and mid-cap sector.
Mark Freeman: Yes. Well, we think the environment that Kieran is talking about is one in which the markets have performed quite well. Some of the metrics we analyze imply that the markets are quite crowded. We don’t expect to know where this is going, but we are seeing that valuations and some of our higher quality stocks have definitely moved up a bit, but the outlook remains good. And so in that sense, we’re a little more cautious and a little more selective about where we look for opportunities. And as Kieran pointed out, just spread out the portfolio a little bit and have a little bit of cash in perhaps a broader diversity of stocks than focusing a little bit more on stocks. the highest quality because, as he said, the valuations are pushing it up a little. But sometimes we must stand firm in the face of giant companies. You know, history shows that they may be overvalued, but it takes patience, but we can exploit other opportunities in the short term.
Geoff Driver: Sure. And Kieran, do you have any comments on this?
Kieran Kennedy: Yeah, look, I think that word that Mark discussed is key for us right now: “patience. ” So, I guess, given what we’ve done in the fiscal year we just saw. . . You know, nine new stocks take us to the mid-60s. We wouldn’t see ourselves doing that again. You know, you don’t need to go too far, because then you’d lose the genuine data you have on those corporations. So I guess after doing that last year, we still like the corporates that are now more valued and key parts of the portfolio. We don’t need to sell them too much. So now it’s just a matter of waiting to see what’s next in terms of volatility, what opportunities arise from that, and then picking the ones that are attractive and looking to take advantage of them in the portfolio in the future.
Geoff Driver: All right, Mark and Kieran, thank you so much for your time.
Kieran Kennedy: Thank you, Geoff.
Finish
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