Mirrabooka Investments Limited (MIR) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Mirrabooka Half Year Financial Results briefing. [Operator Instructions] I would now like to hand the presentation over to Mr. Mark Freeman, Managing Director of Mirrabooka. Thank you. Please go ahead.

Well, good afternoon, everyone. I'm Mark Freeman, the CEO and Managing Director of Mirrabooka Investments Limited, and welcome to this half year results briefing. I'd like to begin by acknowledging the traditional owners and custodians from all the lands we are gathered on today, and pay my respects to the elders, both past, present and emerging. I have joining me today on the webinar, Kieran Kennedy, the Portfolio Manager for Mirrabooka; and Stuart Low, who works alongside in Kieran, managing the portfolio; Andrew Porter, our CFO; Matthew Rowe, our Company Secretary; and Geoff Driver, our General Manager of Business Development. Before we start the presentation, just a bit of housekeeping on the webinar. This briefing is based on the material available on the company's website. If you are using your computer to access the presentation via the webcast, the slides will change automatically. Finally, please note, following the presentation there will be time for questions and answers. You can ask a question via the webcast using the tab at the bottom of the screen. I'll now turn to Chart 2, which is a disclaimer, just to say we're here to talk about the company, we're not here to give any advice. Then moving on to Slide 4. Just reminding everyone about Mirrabooka. So we are a listed investment company, specialized in investing in small and medium-sized companies located on both the Australian and New Zealand stock exchanges. Our general definition of a small and medium-sized companies are those companies which fall outside the 50 Leaders Index. Although if we have a stock that does particularly well, they can move into the 50 Leaders and we may continue to hold that company for some time before we exit. We aim to provide medium- to long-term investment gain through holding core investments in selected small and medium-sized companies and provide attractive fully franked dividends to our investors. With that, I'll pass over to Andrew Porter, our CFO, to talk through the results.

Thank you, Mark, and good afternoon, ladies and gentlemen. So, having a look at Slide 6, which are the results for the half year, and I'll run quickly through these. The profit for the half year of $4.6 million was down from $5.7 million in 2022. That quite often happens with Mirrabooka, where the trading and the options are a big part, can be a big part of that profit. The dividends that we received from the companies that we invested in were actually up. So the major changes were last year, shareholders might recall, we had $1.1 million in trading profit from an investment in AMP, that worked rather well, and obviously we don't have that this year. This year, in trading, the unrealized gain is mainly from the investment in IPD Group. And also the option income was down $1.4 million. Part of that is a $1.6 million of current unrealized loss has been recorded. This is a temporary difference. We have to mark options to their market value as they move. And if the market goes down, the option, the loss you make on an option actually also increases because we have to account for it as if we have to buy it back. Without getting too technical, the higher the share price goes, the more unlikely it is that the amount will be recorded at that value in the P&L. So, as I said, that was temporary. The next box down, hopefully, shareholders would have seen that we've increased the dividend by $0.05 from $0.035 at the interim to $0.04. This year, the Board is conscious of the disparity between the interim and the full year ordinary dividends, and so they made a decision to increase that up by $0.05. The total portfolio return, including franking, and we'll come on to more detail the portfolio returns later on, 10.7%, which was above the index that we use for a comparison, which is the combined ASX Small Ord and Mid Cap 50. The shareholder return of 13.7%, that was above that portfolio return. So, as we'll see on the next slide, the discount actually narrowed over the 6 months. The management expense ratio, which is the cost of running the company, which is 0.56%. So that's $0.56 for every $100 that a shareholder has invested in the company, and that's essentially flat on the year. Portfolio, bottom right-hand box, $592 million. So that was up from $513 million in December 2022. If we look at the next slide, which is the premium discount, we believe it's really important for shareholders when they're looking at. Sorry, got my slides the wrong way around. If I have a look at the -- sorry, Matthew, if you go back to the other dividend, the other slide, which was the dividends. This, we showed at the AGM, which was that Mirrabooka has had a history of paying out special dividends which come from the realized gains that it makes on its portfolio. Mirra, as an LIC, has a relatively high level of turnover, and when I say relative, that's to some of the older, long standing ones. For the type of business that it is in the small and mid-cap sectors, it's still quite stable. Anyway, you can see over those last 10 years, $0.465 of franked dividend has been paid out to shareholders as a result of that. And that's always done with the final dividend if there are appropriate realized gains to be able to pay out. The Board is very conscious of the need to continue to maintain though that ordinary dividend year-on-year. If we go to that next slide, which is the premium discount. I pointed out the shareholder performance. The shareholder performance was above the portfolio performance, which is why the discount narrowed from 5.8% to 3.4% over the 6 months. A lot of LICs are trading at a discount at the moment, including some, like Mirrabooka, which have not normally traded at a discount. And we think it is important for shareholders, as I was saying earlier, to be conscious of premium and discounts so they know if they want to buy or sell shares, whether they are being able to buy or sell them at a premium or a discount to that underlying value. So with that, I will hand over to Kieran.

Thank you, Andrew, and good afternoon, everybody. So, for those following the slides, I'm on Slide 10, looking at the portfolio performance and the returns to the 31st of December 2023. So on this slide you'll see the Mirrabooka returns are presented in blue versus our combined mid and small cap benchmark in orange. We're pleased to be in a position to report healthy outperformance over all time frames. And you will note, looking at those slides, the very significant outperformance over shorter term time frames are 6-month and 1-year numbers, which we'll discuss the reasons for that on a subsequent slide. I guess, just in presenting these numbers, it's important to understand that these are including the benefit of franking. So effectively that's saying, this return number is for shareholders who can access the full value of franking credits and therefore, aren't tax paying, and for others, it's really a pretax number that they're looking at for both us and the benchmark. But importantly, in doing that, the way that Mirrabooka presents that is only on the franking credits that we've actually paid out to shareholders. So as Andrew mentioned, we do like to have a consistency in our dividends. We keep some franking credit in reserves to ensure that we can do that. We have around 3 years' worth of dividend coverage in the franking account at the moment, which has not been reflected in these returns as it's yet to be paid out. Moving over to Slide 11, looking at similar information, but taking the lens out to a longer term perspective, I find this slide quite fascinating. This is looking at the returns over 10, 15 and 20 years, remembering that Mirrabooka was formed in 1999. The fascinating part for me is, I guess, finance theory says that when you're investing in smaller companies, you're taking on greater risk because you'll get greater volatility in returns and the experience those companies give you. And in compensation for that, you should expect a higher return for that extra risk. And, I guess, the reason that return can come that high return, we think there's 2 factors behind it. One being the fact that this area of the market is less researched than the large companies. And the second being that if you find a good company in the small part of the market, you get to enjoy owning it for more years, where it's doing really outsized earnings growth before the company starts to mature. So that's the theory. But looking at the slide, it's interesting looking at the orange and the gray bars. So the orange bar is our mid and small cap benchmark, the gray bar being the ASX 200, which obviously a lot of money is invested in passively just tracking that index on the gray bar. So interestingly, it's pretty similar over 10 years, those 2 numbers. But if you look at 15 years, 9.7% return for our benchmark, 11% for the ASX 200 and over 20 years, 8.7% versus 10.3% for the benchmark. So you're really not getting that extra return that you should, in theory, be getting for going down to the smaller part of the market. And interestingly, if you just isolate those numbers and look at, say, 20 years, the Small Ordinaries Index. So not the Small and Mid, but the smalls alone is actually less than 6%. So really compared to 10% for the ASX 200, that is quite a lousy return. So we think the key message for this, for Mirrabooka is, we think the theory does hold. There is extra return available, but you need to have expertise and you need to understand the businesses that you're investing in. There's lots of ways to lose money in this area of the market, and that really does weigh down those benchmark returns. But if you can pick through the market, get to know management and have an investment approach that really focuses on those quality companies, understanding the value of those businesses and when to transact, you won't get all of it right. But we know Mirrabooka has demonstrated through its track record since it was formed that there is really good returns available. So we think that's an important message. I mean, obviously, the 1-, 3- and 5-year numbers can move around quite a bit, but we think there is that extra return available for the long term, which is why we're motivated to keep doing this in Mirrabooka. So moving over to Slide 12, we'll touch now on some of the reasons behind that really outsized performance through the 2023 calendar year. And for Slide 12, I'll hand over to Stuart to cover off on these 2 companies.

Thanks very much, Kieran, and good afternoon all. As Kieran mentioned, Slide 12, just pointing out 2 recently bought winners. These are 2 relatively new names to the portfolio purchased over the last couple of years and have been significant outperformers. So just thought I'd go into them in a little bit more detail. As you can see, Gentrack and IPD Group, as mentioned, they're quite different businesses. Gentrack produces software for the utilities industry. IPD Group is a leading distributor of electrical products. And even though they're quite different, what we did identify as a commonality of both was really strong management teams. Something that we also thought was consistent across both was, at the time we started looking at it, they were relatively unloved, recently undiscovered, and had a lack of broker coverage. Gentrack had been an underperformer for a couple of years. It had some industry issues and some management turnover. A new CEO, Gary Miles, came in and was really impressive and that really attracted us to invest in Gentrack. And it had a very undemanding valuation because of the previous issues that it had. IPD Group, a little bit different again, that came to market as an IPO in late 2021. It was sort of the height of the software little boom we had there, and I guess, it came with little fanfare to the market. Not too many people at that stage wanted a very low PE electrical distribution business. But once again, it had sort of 2 founders that had done a management buyout from Alston about a decade earlier, a really strong management team. And we were attracted to that once again on a very undermining valuation with little to no broker coverage. One thing that you'll notice on both boxes, our first purchase price in both of these is different to our average costs. So, as you can see, the average costs in both Gentrack and IPD Group are higher, indicating that we made subsequent purchases in both names as the stocks went higher. This is something that, I guess, when you're investing and you start to see the business work or the thesis play out, you are tempted to sell the name or take some gain. And it's something we've been trying to actively do more of is to actually go the other way and buy more shares. As, I guess, we think we're early to the story, and in many cases, these companies have a very long runway for growth. So when they start to deliver, we want to be actually buying more stock and getting larger positions. And in this case, this is why both companies are now quite high into our top 20 positions. I guess, the other point to mention is that, as mentioned, the stars of the slide, very different businesses, one being a software turnaround, the other being an IPO in 2021. I think probably Kieran or I would have picked either of these businesses to be our best performers in 2022 and then followed up again in 2023, which I guess just highlights the value of having a diversified portfolio. I think at any given stage, it's very hard for us to identify which of the particular businesses in the portfolio were performing in a given stage. And, I guess, Kieran's point before with the small awards has been not a great index over the last couple of years. It is very hard to try and pick the eyes out of it. Hence, we've gone for a portfolio approach. I'll now turn back to Kieran for more detailed comments of some of the outperformers.

Thank you, Stuart. So I'm now on Slide 13, and I guess, preparing this slide, I was thinking about the strong rebound in some core holdings that we experienced through 2023. We've certainly felt this. It's been a very volatile -- strangely volatile 2 or 3 years in the market. And a lot of these companies, you sort of do ride the ups and downs and the fortunes of them. But I must say, when we pulled together the slide and looked at the numbers, I had to double check to make sure the numbers were correct. It's quite extraordinary to think that these companies, the average return for the 2022 calendar year was negative 38%, and then the same company's calendar year return on average in the 23-year was 81%. So an extraordinary reversal of fortunes across quite a number of companies in very broad range of industries. And I was trying to, I guess, add some color to this and explain how it can be. And really it's just a demonstration of the extraordinary swings you see in market sentiment. Everyone's very focused on what's coming next in terms of the economy or the results that these companies are producing. But, I guess, the way I'd characterize this is, if our shareholders were in the position where they were on a fly on the wall in the meetings we're having with these management teams of these companies, and they listened in to the sorts of questions we were asking and the answers we were receiving about the way these businesses are being run and, I guess, the strategy and their long term objectives, you'd really be hard-pressed to sort of pick the different meetings and the share price that it attaches to them, because there's a lot of consistency in the way these businesses have been going about their business over that 2-year period, yet you see these incredible swings in the share price over the period that we've experienced. I guess, the follow on comment from this is, it does mean that for our portfolio, we probably did feel there was some latent value across companies, that key holdings in the portfolio, we felt were being harshly treated by the share market. It's really hard to be precise on valuation, but now looking at some of our larger holdings, it's harder to feel that obviously after the run some of these companies have had. We're still long term investors. We don't just take this money and move it on and try and find something else, because we find if you do that, you're diminishing the quality of what we own. But it does encourage us to just test them for extremes in valuation and to try and find some fresh ideas to find some future winners in the portfolio. So that segues quite neatly onto Slide 14, and looking at the portfolio outlook and how we've currently been investing. I guess, following on from those comments on the slide before, we've probably had an absence of money added to key holdings of late. Those companies are performing so well. It's hard to see real latent value. So we've been out on the hunt. We always are, but that's where the money has been skewed recently to find some relative value. The main focus we had when we're doing that is to make sure that we're not just trading away on quality. You can sort of think you see the appearance of value, but if you're buying inferior businesses, some might work, but on average they'll drag the returns of the portfolio down. So we're really focused on not doing that. Where we have found some value has been actually in some resource companies with strong growth prospects we've labeled there, Lynas Rare Earths and IGO. Lynas is the largest producer of rare earth materials outside of China. We think that's a really strategic position. Those rare earth materials have a lot of uses in, I guess, the energy transition the [ Globe ] is undertaking at the moment. So we think that outlook's strong. IGO is a part owner of the world's largest low-cost lithium mine at Greenbushes. We think that's obviously an attractive asset. Lithium has been very challenged of late, but we think, again, the demand growth is still strong there. We think supply and demand will recalibrate, and owning a position in an asset like that, we think has really good long term prospects. In both those cases, we have been a bit early to buying into those. So we are sitting on some unrealized loss at this point in time. But we think the important feature of both is, we're not invested because we just like the thematic or the story or that commodity. It's much more about the way we think these businesses have got a position to grow their production on a 5-year basis and beyond. And that really takes, I guess, the challenge away from just trying to pick a commodity price and say, that's what these companies are worth. We think the production growth will really win the day in the longer term. We've also found some value in the real estate sector. Region Group is a real estate investment trust. They sort of own neighborhood shopping centers that are sort of backed by anchor tenants in the supermarkets, Coles and Woolworths, very secure income stream, been knocked around by interest rates rising, which has meant their relative value hasn't looked as good for some people in the market. And also, some of the inflationary pressures they've seen sort of did impact their own corporate P&L through the period. We just looked at that and felt that was a really good chance to pick up some attractive income at a good point in the cycle. So that's been one to add to the portfolio. I'll come back to some new additions of some companies that might be less well-known with Stuart in a moment. But just rounding out this slide, we exited 2 positions, 2 meaningful positions in the portfolio. Santos was one we inherited from our longstanding oil search investment. That's a company that's now well and truly in the 50 Leaders. We held onto it for a little while, feeling that we weren't probably getting maximum value. But I think we've resigned ourselves to the fact that it's just challenging in these oil and gas companies to really ever get that. They always seem to -- particularly Santos always seems to look a bit cheap. So we just felt it was time to move that money back into our universe and find another opportunity. And Medibank was one, which was a really successful trade around their cyber incident going back around 18 months ago. Great company, well run, but it just doesn't really have good long term growth prospects for us. It's more of a mature business. So we felt once that trade had played out, it was time to move on. And then in terms of trimming, we've had a number of names. The logos you see on the slide here are just the most material of those. Again, just as these companies have performed so well, their percentage that they make up in the portfolio rises. We just feel from a risk basis, we're just managing down those positions slightly and looking to fund some of those new things we've been buying. So that's been the main thematic in the portfolio. And I'll hand to Stuart to describe those 2 new companies.

Thanks, Kieran. As mentioned, Telix and Lindsay are both new to the portfolio. They probably won't be as familiar to some listeners as some of our other positions, so I thought I might go through them in a little bit of detail. Telix is a radiopharmaceutical company. Its main product, Illuccix, is used in the imaging and diagnosis of prostate cancer, replacing what's pretty invasive biopsy and other diagnostic techniques. The pet imaging, which is what it does, has now become the standard of care in the U.S. Telix and another major player have the market between themselves at the moment, and it's pretty staggering to see that this business, from an IPO in 2017 to now doing probably $650 million of revenues this year, is quite staggering. And just goes to highlight how well management have executed there. We think currently the share price is probably underpinned by their prostate cancer product and we think they've got a good chance of bringing a similar product to market in imaging for kidney cancer. Beyond those imaging products, we think there's a range of therapeutics that look interesting. We don't attribute a lot of value to those at this stage, but they remain potential upside going forward. Look, I think given the nature of the industry, where you do have a lot of new products come to market, these new products always being superseded by new and better things, means it probably won't be a huge hold in the portfolio. But we think it does look interesting in and around where it's been for the last couple of months, hence why we add the position to the portfolio. Lindsay transport, very different. Again, this is a company that's been around for many years. We've caught up with them over probably the last 5 or 6 years. Always been one that we've liked to catch up with Kim Lindsay's built this business from nothing to a reasonable player in the logistics industry. What I guess drove us to invest was it was a change in the market structure. People may have seen Scott's was a large transport company that went into administration last year, probably had 10% market share and its exit from the industry has meant a lot more rational pricing, probably less trucks on the road and it's just made for a better structure. So on the back of Scott's exiting, we've seen Lindsay winning share. And at the same time, we've seen Kim step back. He's brought on a new CEO from a bigger business, which I think can drive forward another leg of growth. So we've added that to the portfolio, trades on a very low multiple, but we think it can continue to win market share. And I think probably this industry sort of trucking logistics hasn't always been a great industry, but I think we've got a lot better market structure now and -- I think it's -- since with stuff like Coles and Woolworths have been a large customer these days you really can't have bad trucks on the road anymore. There's a lot of ESG considerations and health and safety issues which have got rid of a lot of smaller competitors which once again has built into that better market structure. I'll now turn back to Kieran to go through some of the top 10 holdings.

Thanks, Stuart. So just moving on to Slide 15, longstanding shareholders will be familiar with this slide. We started producing this a few years ago to really just, I guess, back up the claim that we are a long-term investor. Lots of people call themselves that but we think this slide demonstrates really well that we do buy companies and look to compound the returns of the business for the long term rather than being active traders and looking to make money by, I guess, picking the valuation of companies. So you'll see from the slide we have some positions that are beyond 10, some beyond 15 years of continuous ownership. We think that gives a really good knowledge of these businesses. So when you deal with really difficult times and volatile times in markets and economies, it does provide some really good comfort to be able to look back at the portfolio and say, we're very familiar with the people, we understand the businesses really well and we think they've got good long term prospects to look through short term noise. I guess, another feature of the slide is just the way we run the portfolio. We tend to be quite spread in the way we allocate new capital to positions. We don't take aggressive initial stakes in companies thinking we found the latest, greatest new thing. The portfolio really -- the high end of the portfolio these large weightings, you really got to win your way there. It tends to be the compounding and the returns after the initial investment that sees those positions build to be the most material stakes. And we think that's a good discipline because it does sort of, I guess, diffuse the mistakes you make when you see some new things that don't play out as well as you'd like, and it makes sure the capital is more invested in the companies that we know better. Interestingly, in that vein, you'll see things like Gentrack has only been owned for 1.5 years at 3% of the portfolio and IPD Group at nearly 3% at 2 years. The companies that Stuart mentioned earlier, they've just won their way there very quickly, effectively with some really strong returns over the last few years. Final comment on the slide is, this can be a good place for shareholders who are listening in to go back and have a look at this slide if they're interested in asking some questions, because obviously there's around 60% of the portfolio represented by these top 20 companies. We are happy to answer questions about any other companies we own or any other companies in our universe as well. So just finishing with some outlook comments. So recent market gains have been quite pronounced through November, December and into January. That's come about because of a view that global inflation is now abating and we've seen the peak in interest rates. We think there is now more prospect that we do get quite a benign outcome, and the soft landing that people have been talking about looks more likely than it was. But we think if there's any deviation from that, there's 2 directions that could go in. One is that, inflation does hang around a bit more. It's obviously peaked and it's falling, but that last bit to get back down into the 2s is a bit harder for central banks to achieve. And if that's the case and interest rates remain a little bit higher, we think that's probably a headwind to where current markets are currently being priced. And the second way that things could be still a bit rosy is, if the economy and corporate earnings do take a bit of a dip as a lagged impact of all the interest rate hikes we've had. We're not trying to pick either of those things, but we do think the market is probably taking a bit of a glass half full approach at the moment and probably risks are to the downside rather than the upside, if there are any. Having said all of that, we do take a long term perspective and, I guess, we're far more interested with the meetings we're having with companies to talk about why they're winning market share in their industries and why they can continue to do so. And we're really encouraged with what we're seeing on that front from our portfolio at the moment. For the comments earlier around what we're doing with the portfolio, we are testing valuations and, I guess, not really adding to core positions because they've had a pretty strong run and just looking for good quality opportunities that might come along. But in doing that, we really want to make sure we do preserve the quality of the portfolio and make sure that we've got the best portfolio to navigate whatever comes our way next. And just finally, I just mentioned, we did have a meeting with one of the companies in the portfolio earlier today, Pinnacle Investments. I guess, they're a little bit closer to the fundraising in equity markets than we are. We're out investing or, I guess, allocating the capital that we have to positions in the market. Pinnacle are often in fundraising mode, and they were remarking that it's been sort of a 2-year drought in terms of retail equity flows into the market. So we do find that interesting given valuations are fairly full across the market. So if we do see some of that retail money chasing returns on, I guess, what they've seen over the last few months, it could create a bit of a headache for us and make the valuation equation even more challenging. But with that, we'll close there and throw the line open to some Q&A.

[Operator Instructions] So the first question is about providing an update on the investment in Beamtree Holdings. And does Beamtree pay a dividend? So I'll hand over to Stuart on that one.

Beamtree positioned the portfolio, just for listeners, this is very much a micro-cap company, one of the smallest in the portfolio. It provides software to the pathology and the hospital industries. This is really quite a high-growth company. It's sort of doing 25% to 30% revenue growth. So they are reinvesting quite a lot into their product and distribution. So it's only on the cusp of creating free cash flow and profits in next financial year. So it's not quite at the position that it would be paying a dividend, but given the nature and the size of the business, it's got a global opportunity. A lot of its software is used all around the world. We think and agree with management that the better use of the cash is to continue to reinvest and build their products out, build their distribution out, and I guess, capture what's a very large global opportunity. I do think in the next couple of years, as they've got a target of doing $60 million in recurring revenues, they are very sticky annuity revenues. If it can deliver that, it should be quite a profitable high-margin business. And then look, they'll have to make that decision what they do with that cash later on. But as yet, I guess, the growth opportunity means that there's probably better uses of the cash inside the company than paying a dividend.

Next question is about Domino's Pizza. Given the negative market update it provided, Domino's debt is worrying. How does Mirrabooka continue to think about this stock?

Yes, look, so as I mentioned earlier, we certainly don't get them all right. And this certainly fits in the category of one that's been really disappointing for us over the last few years. We do still hold a position, but we have reduced it before the latest downgrade. So at higher prices than we're seeing in the market at the moment. And really the reason for doing that does hit on the question, really, that point about the debt. We just felt that we don't think the debt position where it really puts a lot of risk on the future of this company in an outright sense. It's more to do with the fact that to sort of turn their fortunes around, we feel they need to reinvest some profit back in making the franchisees more healthy, and I guess, more willing to drive the business forward. And when you've got a corporate balance sheet that's quite full with debt, that makes that even harder. So that we felt was confounding us a bit and making it a riskier turnaround from where they are. So we've done that. We feel now, since the most recent update, I guess, the disappointing elements of that were France and Japan, which pretty meaningful regions for the company. They look like they're really struggling in those markets. Their competitive positions aren't as strong there and they're trying a lot of things to get better traction. But to date, they're not getting as good results in those markets. So that is a worry. But we do feel now we're at the point where there's a lot of bad news now. We think we look at the way the brokers cover the stock and the forecast they have for it. It felt like it was pretty optimistic all the way down. We feel now they're getting more realistic. So while we have a lot of concern, we're not allocating fresh capital to the position. We feel that if you were to sell it now, based on all the negatives we're seeing, you could well look back in 3 or 4 years and say that was the worst time to sell this company and it's now a more modest position. So we are hanging in there with it.

A question about what our plans to offer a share purchase plan?

Share purchase plans are always on the agenda. They're a great way to grow capital. The primary reason why we do that, because as we make the company bigger, it reduces the MER for shareholders, so it's good for shareholders. Although we are very conscious that there's always a risk of the company becoming too big because we want to be able to take positions and some of the companies are quite small, we invest in and if you're too large, it's very difficult to get a meaningful stake. So we need to always balance off the size of the company and our ability to create outperformance. Yet, we understand that making the company bigger reduces the MER. So with that, it's always on the agenda. We've probably got a neutral view on at the moment. We do like to do these when we see opportunities in the market, and as Kieran touched on earlier, we probably see valuations pretty full at this point. However, it's always something that's under the consideration of the Board.

So, Kieran, a question here about PEXA Holding.

Yes, look, so thanks, Geoff. This has been another one that's been disappointing for us in the last few years since we bought it at the IPO. We still have really good conviction in the quality of that Australian asset. If anything, we think the value of that for the long run has increased since the IPO because we just haven't seen the competitive threat really emerge at the rate that people worried it would. The U.K. growth market has taken longer to get traction than we and the market thought. That's not particularly surprising. These markets can be really hard to unlock. It's a different jurisdiction. There's lots of stakeholders to convince the merits, what they're doing over there. I think the thing that's added pressure to that, though, is it's been a far more capital intensive way to sort of unlock that market, not that they have yet, but to try and unlock that market than we foresaw. They've had to do some acquisitions to get the strategic position they feel they need, and they've been spending some money on some data assets in the Australian market which really haven't borne fruit yet. So all of that is weighing very heavily on that core Australian asset that we own. And so, we're patient with that Australian asset, but I guess, losing some patience with the way it's all coming together at the moment. So we'd really like to see those losses reined in a bit and some traction come from those investments that have already been made in those new growth areas. But we are holding on to our full position.

So, moving on to the better news, better stories within the portfolio, Gentrack and IDP Group. Do you view them as long term holdings? Or have you sold any?

The answer to that is probably in between. So, I guess, we probably go through 2 phases of realizing significant gains on positions. The first is where we sort of say to ourselves that the business is still going very well. We're trying to compound the returns, but we get to a point where we look at the percentage weighting we have in the portfolio and just ask ourselves, what do we think of that in the context of the robustness of the business? Are we going to allow that to keep appreciating if this company keeps going on a really good run? Or do we feel it's getting to a level we think that's a really full waiting for what the company is? We've just sort of entered that mode for both of them in recent times. And so, effectively what we're saying to ourselves is, we're not selling them down, but if they keep running, new people keep finding them and the shares keep re-rating, we'll just take a little bit off the top just to keep that weighting at around the same level, which is a bit of a risk management approach that we take. It means that in both cases, we've sold less than 10% of the shares we bought. It's in the signal digits. The next phase we look at is, companies sort of run and we start to see a few things change in the investment thesis. That's when we'd look to sell them down, but we certainly haven't seen any of that in either of these today.

A question about Nanosonics after their recent trading update, which was negative for the share price.

Yes. Look, it's interesting. This came the day after -- I think it was the day after or the day before the Domino's one. So it certainly meant the summer holiday had come to an end. That was clear signal of that and coming in, dealing with these 2. It's quite a contrast, though, to the Domino's one. Domino's got a lot going on in its business. It was difficult to get clarity of what the particular issues were. We think with Nanosonics it's far more straightforward in that the market's just wary of some maturity and slowing of growth. We think that's got more to do, actually, with this company having been grossly overpriced a number of years ago, but fairly fully valued for the last 7 or 8 years. And now we think expectations are far more realistic. So the answer to the other part of the question is, this is one that not heroically, not in an aggressive way, but this is one we did go in and buy a few shares after that downgrade, and we'll be very interested to catch up with them in February.

So, comment about Port of Tauranga. Given that, I think we bought some shares at around $6, it's way below that now.

Yes, look, this is a great asset in New Zealand. It's strategically positioned in terms of the vessels it can receive. We think it's something we can own in the portfolio for a very long period of time, but it's been overpriced as well. So we watched it for many years, thought we'd like to own it, couldn't get there on valuation. And we're now in the phase where that valuation has unwound. And we've been building up a position slowly. We think we could have a lot more for the quality of the asset, but we still think the value is more fair than compelling. So, yes, it's one we hope it actually falls perversely because we'll get the chance to buy some more.

A question about how about publishing NTA announcements weekly as opposed to.

Yes, look, that's come up a couple of times, but I must admit we don't get a lot of queries about this. I guess, one of the issues, it actually takes a lot of work for the team to produce an NTA, and we'd be taking on a fair bit of cost if we tried to move to a weekly or fortnight. The other thing is, we are a long term investor and we think once a month gives investors a pretty good feel for what the NTA is. And obviously, we publish our top stock, so it's not difficult to work out where the portfolio would sit in terms of its last published NTA. So putting all that together, we're pretty happy saying with the monthly at this point.

So comment about how comfortable are you still with IDP Education?

And IDP Education, just for all the listeners, is business produces high-stakes English language testing and the global leader in student placements. It's come back quite a bit over the last probably 12 months, a range of issues that were sort of outside the company's control, but just points to the nature of the industries they're in, where you had -- they had previously a monopoly on a range of Canadian students doing English language testing, that's now been opened up to a broader panel of providers that impacted the share price quite a bit, fell probably 30% after that news. And then more recently we've had, both in Australia and Canada, some tightening of policies in regards to student immigration, so sort of slowing those numbers in Canada, imposing some quotas. Once again, these are kind of industry issues as opposed to specific company issues. The company has continued to execute really well. We think it's probably the #1 player in its space. It has a huge global opportunity and very well managed. So we think we have to appreciate that it is prone to issues beyond its control, especially something reasonably political. But we think they're short term issues and over the next 5 to 10 years they'll continue to build market share. And we do think sort of the growth in English language testing and placing foreign students into Australia, Canada, U.K. and the U.S. is a really long term tailwind. So, yes, we think that will be a core holding for us for a while, despite some of these more recent issues.

So a broader question here about our thoughts about opportunities in the artificial intelligence thematic.

Yes. So this is an interesting one because I think if we'd been asked this last year, we probably would have said, or 6 months ago, we probably would have said, just beware of some of the hype around this. But, I guess, looking at some recent numbers coming out of these large companies in the U.S., you're just seeing the reality of the spend is happening. So, at the moment, we're not seeing a lot of little companies that are purely plays on artificial intelligence listed in the Australian market as an investment opportunity, but I'd expect we probably will. There'll be some IPOs. And I think this thematic will be something that will be behind some of those. But interestingly, there's always different ways to get exposure and we're in the fortunate position where we think we've got a great exposure in our largest position in the portfolio being Macquarie Technology. This is a bit of the picks and shovels approach, really, where I guess, all this artificial intelligence spend sees very significant lift in the computing power needed, which is all housed in data centers. And they've had a frustrating experience where they had significant delays on their Macquarie Park expansion. The company been tearing their hair out on that. But Stuart and I were just talking about this earlier today and saying, it might have actually been for the better. We think construction costs have coming down and the need for space in these data centers is probably greater than it's ever. So the pricing and the ability to fill that probably looks really good over the next few years.