Marlin 30 June 2008 preliminary full year announcement
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Marlin Global Limited (MLN) | 4:05 pm, Tuesday 19 August 2008 | MLN | 0.550 |
 0.010 |
(+1.85%) |
Marlin Global Limited
Results for announcement to the market
Reporting Period 6 September 2007 to 30 June 2008
Previous Reporting Period N/A
The financial statements attached to this report have been audited by
PricewaterhouseCoopers and are not subject to a qualification. A copy of the
Auditors' Report applicable to the financial statements is attached to this
announcement.
Current period NZ$000, Up/(Down) , Previous corresponding
Period NZ$000
Revenue from ordinary activities (2,836), N/A N/A
(Loss) profit from ordinary activities after tax attributable to security
holder. (5,240), N/A N/A
Net (loss) profit attributable to security holders. (5,240), N/A N/A
Final Dividend
No dividend has been declared for the year ended 30 June 2008
Record Date N/A
Dividend Payment Date N/A
FROM THE CHAIRMAN:
Marlin Global Limited's Initial Public Offering ("IPO") successfully raised
$103 million and the company listed on the NZX on 1 November 2007. The
listing coincided with a deepening US credit crisis and difficult times for
worldwide equity markets. Although turmoil in global markets affected share
prices, it also presented attractive buying opportunities for our Manager.
Fisher Funds has been disciplined in building a portfolio of 28 international
stocks, taking advantage of weak stock prices where possible. This gradual
investment process enabled the Marlin portfolio to outperform international
market indices in the eight months to June 2008. Of the net funds raised in
the IPO 66% was invested by 30 June 2008, reflecting the cautious and
selective approach taken by the Manager. Your Board receives monthly reports
from the Manager as to the status of the portfolio and progress on the
portfolio companies' activities. Company news and earnings results have
remained consistently positive despite the negative market environment. All
companies continue to meet the Managers' investment selection criteria.
Financial Performance
Directors report a net deficit of $5.2m for the eight months of operations.
This deficit reflects the decrease in value of the Marlin portfolio and
includes $7.1m of net unrealised losses (or "paper losses") on investments.
In addition IPO costs of $2.8m, representing 2.7% of offer proceeds, have
been deducted from initial equity in accordance with international accounting
standards. We are pleased to note that these expenses were 14% lower than
costs per share anticipated in the offer document.
Operating expenses for the period of $1.3m represented 1.3% of total assets.
This was largely due to the Manager's base fee being calculated at the
minimum of 0.75% per annum of gross assets under management rather than 1.25%
which is only payable if performance meets the base benchmark return.
Share Price and Net Asset Value ("NAV") Discount
The extent of Marlin's share price discount to NAV has disappointed Directors
especially considering the significant cash funds held during the eight month
period to 30 June 2008. At that date the discount was 28% despite cash
reserves comprising 34% of total funds. The Manager will comment further on
the "disjoint" between share price and NAV in their report. Your Board has
considered implementing a share buy back programme but under the Companies
Act 1993 is unable to do so until 1 November 2008 by which time the shares
will have been issued for twelve months.
Dividend
Directors have not considered payment of a dividend at this early stage of
the Company's establishment.
Annual Shareholders Meeting
Marlin's inaugural Annual Shareholders Meeting will commence at 10.30 am on
Wednesday 22 October 2008 at the Ellerslie Event Centre in Auckland. We
encourage you to attend the meeting as it is an ideal opportunity to meet
your Board and Manager and to receive an overview of the company's first year
of operations . Representatives of the Manager, Fisher Funds, will also
provide insight into the companies selected for the portfolio and share their
strategy and outlook for the year ahead.
Conclusion
In spite of the share price performance since listing, your Board is pleased
with progress achieved in establishing the Marlin portfolio. The Manager is
now investing the remaining cash balance by building up stock positions in
favoured companies. Directors have confidence in Fisher Funds and commend
them for the manner in which they have operated in this challenging climate.
In accordance with Marlin's prospectus, the Manager's focus continues to be
on building a portfolio of small international companies that have the
ability to grow earnings in the future and provide sound, long term
investment prospects.
On behalf of the Board
Rob Challinor
Chairman
Marlin Global Limited
19 August 2008
FROM THE MANAGER:
Crisis : Weiji
The Chinese characters for "crisis" combine "danger" and "opportunity". Both
opportunity and risk are ever present in the life of an investor. The
challenge is to seize the opportunities having taken account of the risks
that are at times overstated and at others, understated.
The market environment that Marlin Global has experienced in its first eight
months has been a difficult one as the contagion of US credit problems has
led investors worldwide to focus on risk (real or perceived) and largely
ignore opportunity. Concerns surrounding the US economy and its housing
sector in particular, have created uncertainty that has resulted in shares
being sold around the world, irrespective of a company's sector, domicile,
performance or prospects. Investors everywhere have adopted a 'glass half
empty' mentality, and Marlin has found itself in the rather fortunate
position of having funds to invest in quality businesses that happen to be
offered for sale at cheap prices by nervous investors.
In managing the Marlin Global portfolio, we know that we are more likely to
be successful if we focus on individual companies and their prospects rather
than on the market and its mood. Our objective is to achieve long term
growth in capital and dividends by investing in a selection of international
growth companies. This objective is relatively straightforward, but aspects
of it require some emphasis. The focus on long term growth is important
since although we can be confident of positive returns from shares over a
number of years, short term performance is unpredictable and often reflects
market mood rather than business fundamentals. The Marlin portfolio is a
hand-picked selection of international companies, rather than a widely
diversified portfolio comprising familiar global brands in hundreds of
sectors. The adage about quality versus quantity is relevant for Marlin as
we believe that capital growth can be better achieved through a handful of
well-managed smaller growth companies than an assemblage of average
performers. Marlin's focus on growth companies is based on the fact that if
companies can grow their earnings over time, their share prices will
ultimately follow. History has shown that while share prices occasionally
disconnect from the fundamental value of a business, a company's profit
performance will always be reflected in its share price performance over
time.
Market review
The world economy has battled a "perfect storm" of a credit crunch, global
economic slowdown and high and rising energy and commodity prices. These
events have dragged down most financial assets around the world and stock
markets have not escaped this beating.
The good news is that the stock market knows about these events and at some
point will discount this into the price of stocks. Unfortunately no one
knows exactly when the market will again focus on the future rather than
being mesmerised by day to day news flow.
Against this background, the Marlin Net Asset Value has proven relatively
resilient, finishing the year down 4% as compared to the 17% fall in the MSCI
Global Small Cap Index. Our relatively good performance was driven by a
combination of two factors. First, a number of our portfolio companies have
rallied and achieved positive performances in spite of the difficult market
conditions. Second, we have maintained a disciplined approach to investing
Marlin's capital, with our patience rewarded through lower average entry
prices.
Given that Marlin is invested exclusively in companies outside of New
Zealand, any movement in the New Zealand Dollar impacts returns. When Marlin
listed on 1 November 2007, the NZ Dollar was at 0.7728 against the US Dollar.
While the NZ Dollar finished the year marginally lower at 0.7621 its trading
patterns have been particularly volatile. The currency reached a 25 year
peak against the US dollar of 0.8184 in March. We used this strength to move
the majority of Marlin's available cash offshore. It is our view that the
New Zealand dollar will weaken over the next year which will benefit overall
returns.
Portfolio review
Our investment team has been busy travelling each month to meet with the
management of prospective and existing portfolio companies. Many of the
Marlin portfolio companies are well known to the investment team, who have
owned and researched them for many years in previous roles. We have also
considered a number of new exciting growth companies in which to invest.
Since November last year we have met with more than 200 companies from 20
countries.
While much has been made of the difficult environment faced by US companies,
the Marlin portfolio contains a number of companies that are geared towards
the domestic demand in their own country rather than the US, and the fortunes
of many of our companies will be more influenced by China and India's
appetite for products than by US imports. The Marlin portfolio is truly an
international one, poised to take advantage of the broader theme of
globalisation as developing nations take their place on the world stage
alongside developed economies.
At 30 June 2008 the Marlin portfolio comprised 28 companies with 66% of the
IPO proceeds invested. While we have built initial stakes in most of our
preferred portfolio companies, we have maintained higher cash levels than
originally planned. We believe that a measured investment programme is the
most prudent course of action in the current market environment.
It is extremely difficult to consistently time the market and the investment
greats such as Warren Buffett, Jim Rogers and Bill Miller agree. Our area of
expertise is picking the right companies and buying the right amount of each
company within the portfolio. In order to balance capital protection and
capital appreciation we have gradually invested the Marlin IPO proceeds.
This has been a rewarding strategy over the past six months as markets have
vacillated between optimism and pessimism. At December 2007 we had 13%
invested, by the end of March 30%, and as of June 30 2008, 66% of the cash
proceeds were invested. In the months ahead we will continue to buy more
shares in our existing companies to bring them to target weights as well as
selectively add new companies.
We have ear-marked approximately 10% of the fund for potential investments in
India and Brazil, and have begun researching investment opportunities.
However before entering any new market, it is essential for us to understand
the environment in which these companies operate and also to develop
relationships with the chief executives. As part of due diligence our
investment team is scheduled to visit both countries before the end of the
year.
The Marlin portfolio is built on a company by company basis but there are
some overall trends and themes emerging:
1. The urbanisation in China driven by the emerging middle class:
Home Inns & Hotel Management, Hongguo International Holdings, Ports Design,
Raffles Education Corporation, Midas Holdings, Zhuzhou Times Electric,
Hyflux, O2Micro International.
2. Successful U.S businesses implementing global strategies:
Equinix, Hansen Natural, Micro Systems, Ebix, Advent Software.
3. Healthcare companies (generally not impacted by the economy):
Conceptus, Icon, Sciele Pharma, Applera Corporation - Celera Group, OSI
Pharmaceuticals, Stratec Biomedical Systems.
4. Leaders in market niches:
Roth & Rau, Jamba, The Ultimate Software Group, Wirecard, Gameloft, Jumbo,
Nokian Renkaat.
While the stock prices of many of our companies have been weak, the
underlying company earnings, for the most part, have continued to be strong.
At the time of writing, a number of our portfolio companies are releasing
profit results and providing shareholder updates. While the global
environment is certainly challenging, and few companies are prepared to give
profit guidance for the year ahead, all our companies have reiterated their
long-term profit growth targets and the strategies being employed to achieve
them. We are maintaining our time tested principles and continue our
research process in our quest to know our businesses better than anyone else.
Carmel Fisher Ken Applegate
Managing Director Senior Portfolio Manager
Fisher Funds Management Fisher Funds Management
19 August 2008 19 August 2008
For Enquiries, please contact Carmel Fisher, Director - Marlin Global
Limited, Director - Fisher Funds Management Limited on (09) 484 0342 or Rob
Challinor, Chairman - Marlin Global Limited on (09) 484 0365.
The Marlin Global website, www.marlin.co.nz contains up to date company
information, copies of Shareholder reports and recent NZX announcements. The
30 June 2008 Annual Report to shareholders will be sent in early September
2008 and will be available on the website at that time. Investors are
encouraged to register for regular email updates on the Marlin Global Limited
web site.
