Mirrabooka Investments Limited (MIR) Earnings Call Transcript & Summary

Welcome. My name is Geoff Driver, General Manager of Business Development and Investor Relations for Mirrabooka Investments. I have with me today Mark Freeman, who is the CEO and Managing Director; and Kieran Kennedy, who is the Portfolio Manager for Mirrabooka Investments. I will shortly hand over to Mark to talk about the results, and Kieran will then talk about the portfolio performance and the major changes through the year. So Mark, over to you.

Okay. Thanks, Geoff. So I'll talk to the result. So for the full year, profit was $7.9 million, down from $10.7 million in the corresponding period last year. There was a decline in the contribution from the trading portfolio, delivering $0.5 million this year versus the contribution of $1.3 million last year. The income contribution this year from the option portfolio remained healthy at $0.6 million, although well behind the extremely strong contribution last year of $2.5 million. As foreshadowed with the announcement of the recent rights issue, the final dividend was maintained at $0.065 per share fully franked. That brings total dividends for the year at $0.11 per share fully franked. Last year's total dividends were $0.13 per share, which included a $0.25 special dividend. The 12-month portfolio return for Mirrabooka, including franking, was 11.4%. Benchmark, which is a combined mid and small cap index returned over the corresponding period 15.2%. So Kieran will talk about this shortly. The management expense ratio remains low for this type of product at 0.54% with no additional cost or performance fees.

So Kieran, Mark touched on the portfolio performance for the year. Do you want to make any comments about what drove that performance, particularly? And and perhaps also talk about how you position the portfolio.

Yes, sure, Geoff. Look, so in their own right, those returns of 11.4% for Mirrabooka versus the 15.2% for the benchmark are obviously very attractive returns. That sort of neglect some of the volatility that went on beneath the surface through the year, both in terms of volatility within the year and market movement, but also divergent outcomes across stocks. So looking at our portfolio, we had some really strong performance through the year, stocks like Life360, Temple & Webster, HUB24. The sort of businesses doubled in share price for the year. On the other side, we had a few holdings that disappointed. IDP Education had a series of profit downgrades and fell quite significantly. And our largest stock, Macquarie Technology fell around 30% for the year, which really surprised us because we didn't really see much change in the fortunes of that business. In terms of the underperformance for the year, the other feature was a couple of stocks that we don't own that are large index weights that had particularly strong years. So Pro Medicus and Technology One, very successful companies, very large in the index, had another really strong year, again, essentially doubling in share price for the year. And then Evolution Mining, which was the largest gold miner in our sector, had a very, very strong year. But more broadly, gold was particularly strong across the board, and we don't have any gold stocks in the portfolio. So I guess that explains the underperformance for the year. Again, we're long-term investors and looking at those returns at 2 years and all periods beyond that, we're still comfortably outperforming our benchmarks. And that's how we continue to invest in the portfolio, and that's how we continue to look at our returns.

Thanks, Kieran. So in that sort of environment, what sort of were the major changes you sort of made within the portfolio through the year?

Yes. So I guess what we encountered through the year was a couple of periods where we felt markets were getting quite stretched, particularly for companies with the brightest growth prospects, real premium ratings being attached to that. So in the early half of the year, that saw us really look for value within quality, but things that perhaps don't have such a strong growth profile, we felt better relative value there. So that saw us buy into businesses like Region, the regional real estate trust with regional shopping centers. Channel Infrastructure, which owns some important fuel import infrastructure in the New Zealand market; Cuscal, which is a small payments infrastructure provider that IPO-ed through the period; and then GrainCorp, which owns some key infrastructure for grain exports in the Australian market. So that was in the early -- the first half of the year. We obviously then through the second half of the year, we saw all the gyrations come out of the White House with Trump's policies and all the second guessing of what that was going to mean. And that opened up a really good opportunity through sort of March and April that we were able to act on. And we went back to buying, I guess, all our favorite growth -- long-term growth stocks within the portfolio. We spread ourselves far and wide and we put significant capital back into the market. We then did the rights issue. And I guess we -- knowing that was coming, that enabled us to put some of that money into the market. And I guess you can never pick markets. Since then, we've had a very, very strong rebound in the market. So that's seen us go back to, again, looking for things that are relative value, but maybe don't have the same bright growth prospects because we're seeing that trend emerge again.

Thanks, Kieran. So Mark, outlook for the market for the next 12 months, particularly in the small and mid-cap sector. I might pass to Kieran as well, just get a few comments at the end as well.