MIR - Mirrabooka Investments

Mirrabooka Investments Limited (MIR) is an investment company, specialising in investing in small and medium sized companies located with Australia and New Zealand.

http://www.mirra.com.au

Update

Breakout after Fridays action.

MIR reported on 13 Jan. Net operating profit up 3.1%, dividend maintained at 3.5c ff, DRP at a 10% discount.

Old thread. Nevertheless, MIR reported today. Net profit up 16.6% over pcp. Dividend of 6.5c ff plus 5c ff special. LIC capital gain of 13.6c.

For my purposes of consistent cash-flow, I'll reinvest the special dividend via partial participation in the DRP.

about, at 3.30pm Thurs to do a phone-in on how they run the portfolio. Slides on Website

as mentioned in Thought Bubble thread, Mirrabooka's investment style is to look at the formulation and execution of a company's business strategy; and address key financial indicators, including
- prospective price earnings relative to projected growth,
- sustainability of earnings and dividend yield (including franking) and
- balance sheet position including gearing, interest cover and cash flow.

Twice a year, in Jul and Jan, the Half Yearly Review comes out, then an Annual Report in August. There's a narrative of what companies have been bought and sold in the previous HY, and the Annual (pp 44-49) publishes a list of all Security Holdings, showing number held in the current and previous FYs. It is interesting what they buy AND sell, initiate AND exit; this reveals quite active position taking (for what some think of as a boring Buy & Hold outfit).

And for me, it has brought to my attention shares like AD8 (in and out, doubled my money), PKS (still holding). I missed APT and WSP but the confirmation of trimming Freedom Foods helped me sell mine.

Next Half Yearly in about 2 weeks time.

(Hold)

I hold MIR but don't take an avid interest in what the managers do. If I do take an interest it's occasionally looking at the accounts and cashflow. What it holds isn't of great importance to me.

The significance of the impact of the COVID-19 pandemic on society and businesses is without parallel in Mirrabooka’s 20-year history. The degree of uncertainty created by the pandemic saw equity markets fall dramatically from their significant high point in February to a low point in March. Since then, markets have rebounded as investors responded to significant monetary and fiscal stimulus globally.

 The 12-month portfolio return, including franking, was 7.1%; the combined Small and Mid Cap 50 benchmark return over the corresponding period, including franking, was negative 1.9%. This outperformance is a very pleasing result, and has further reinforced our investment approach, over what has been a very challenging period.

 Full Year Profit was $6.4 million compared with $8.9 million last year. The fall in profit was due primarily to a reduced contribution from investment income as companies reduced or suspended dividend payments. This fall was partially offset by an improved contribution from the Trading Portfolio.

 The final dividend was maintained at 6.5 cents per share fully franked. Total fully franked ordinary dividends for the year are 10 cents per share. No special dividend has been paid or declared for this financial year.

Strong contributors to Mirrabooka’s outperformance included Macquarie Telecom, Objective Corporation, Fisher & Paykel Healthcare, Breville Group and NEXTDC.

The extreme volatility and deteriorating economic outlook over the financial year saw Mirrabooka further consolidate its investment portfolio from 63 to 52 holdings. Tough calls were required on exiting some interesting early stage companies, as funds were required to buy higher quality companies that were also sold off heavily during the year and are better placed for the deteriorating economic outlook.

Much of our buying through the recent market correction came through discounted rights issues and placements, in total $20 million was invested in 13 share issues. Our largest participation was in raisings by Auckland International Airport, Atlas Arteria, InvoCare, Reece, NEXTDC, Oil Search and Qube Holdings. Other purchases in recent share price weakness included Netwealth, Realestate.com, Xero, Infomedia, Cleanaway Waste Management and Breville Group, all of which are quality businesses which have strong positions in their respective industries.

- battening down the hatches

Dona Ferentes said:

 The final dividend was maintained at 6.5 cents per share fully franked.

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All LIC Capital Gain too. MIR is not necessarily "buy and hold" as many assume. Saves me from selling shares to make an income.

Belli said:

All LIC Capital Gain too. MIR is not necessarily "buy and hold" as many assume..

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In fact, there has been major rotation, away from interesting early stage companies towards higher quality and better placed ones (that should withstand the deteriorating economic outlook).

Despite the lower-income, Mirrabooka has not followed the trend from companies in its portfolios and used the lower earnings to reduce or drop dividends. The company maintained the final dividend for the year subsidised by capital reserves.

The final was a steady 6.5 cents a share after a steady interim of 3.5 cents a share.

“We often build up reserves through capital gains and we can pay dividends out of that during these times that it becomes particularly valuable. Now is the time to keep using them,’’ managing director Mark Freeman explained in yesterday’s release

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It has a lot of companies that I would be pleased to have individually.
Also good that they participated in a lot of discounted capital raisings during Kung Flu as well as buying others on market during the price weakness.
They aren't carrying much cash though ($20m = 5% of p/f at June 30) - most of Wilson's LICs for example are at higher cash than that last I looked.
No gold exposure I can see and I assume no short positions. In normal times I wouldn't be concerned.

A key factor was Mirrabooka's ability to identify companies that benefit from a founder and owner at the helm. "We call them owner-driver businesses," Mr Freeman said. "It's where individuals usually the founder of the companies have large equity stakes and they run it like it's their own money, because it is."

That focus is a central factor behind Mirrabooka's top three shareholdings: Macquarie Telecom Group, New Zealand-listed Mainfreight and Objective Corporation. It is also the reason why Mr Freeman sees Macquarie Telecom as having an edge over NextDC in the booming datacentre business. "It's actually a great structural growth sector for the long term. And so we hold both NextDC and Macquarie Telco but Macquarie Telco had the added bonus of being also an owner-driver business," he explained.

The conviction is bourne out by the funds top investments. As at June 30 Macquarie Telecom was the fund's single largest holding and accounted for 5.5 per cent of the portfolio. NextDC was its ninth-largest holding at 3.1 per cent.

One of the exposures Mirrabooka sold out of in the year was TPG Telecom. "That has been an owner-driver business with David Teoh. But with the merger now, Vodafone have actually got 50.1 per cent I think. So they've got the dominant position. "I've still got a huge amount of respect for David Teoh, he's done an extraordinary job, but for what we're trying to do, it's just matured. And I just think it's going be more competitive now and his interest now has been watered down."

The fluid business and economic setting requires regular examination of portfolio companies, Mr Freeman said. "We have to constantly re-test and say, 'is this really a company that we think can be a strong business in this environment?' And if they're not, perhaps it's better not to hold them," he said.

https://www.afr.com/markets/equity-...n-cautions-on-elevated-prices-20200714-p55bul

(hold; lots)

Dona Ferentes said:

The final was a steady 6.5 cents a share after a steady interim of 3.5 cents a share.

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Thank you. I see the dividend is sourced from Capital Gains (if I read it correctly) and it has introduced a Dividend Share Substitution Plan. The DSSP is only of passing interest though as it isn't of much interest to me.

Ross Barker will retire as a Director of the Company, effective 31 January 2021. Mr Barker has been involved with the Company since its inception in December 1998 and was Managing Director from February 2001 to December 2017. Mr Barker transitioned to a Non-Executive Director in January 2018 and has been a member of the Audit Committee since June 2019.

- will be missed.

For some reason MIR as been on a tear this year, especially for the first half of 2020/2021 FY. I hold and will be looking forward to see what's the go on 14 January.

I know it held Afterpay at one stage but no longer. Probably because MIR being ex-50 (one reason I have it) so Afterpay had to be sold.

Belli said:

For some reason MIR as been on a tear this year, especially for the first half of 2020/2021 FY

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Most surprising to me. VSO comparison.

I posted a link in teh AFO thread to its DSSP ("Bonus Share Plan")

MIR being out of the same stable also has similar so for those who may be interested, here is the link. Again, scroll down to the DSSP Rules and the Class Ruling from the ATO.


Seek professional advice if necessary of course.

Two new Directors, to replace Ross Barker

Annette Kimmit, ex MinterEllison and EY, has been a Non-Executive Director and Chair of the Finance, Audit and Risk Committee of the Melbourne Business School since 2010.
Greg Richards, ex JBWere/ GSJBW, recently retired from the Board of JB Hi-Fi Limited after being a non-executive director for 12 years including 8 years as non-executive Chairman.

Neither has any MIR shares ... will wait and see.

Belli said:

For some reason MIR as been on a tear this year, especially for the first half of 2020/2021 FY.

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A curious comment. But there again, elsewhere, a music thread #6279, was this comment

Belli said: This 'fat" lazy bastard doesn't follow individual shares and does not have an interest in them. Sorry .

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MIR is not an index fund. It offers exposure to well-diversified portfolio of small to mid cap companies. It is on a tear because companies (shares) it holds have performed well. You can get a snapshot over the last year, through the monthly NTA announcements.

Top 20 Holdings are generally the same (4 new and 4 out, see below), and valuation of these holdings has contributed significantly to MIR doing so well:
end Dec 2019 ............ $218mill = 55% of total holdings
end Jun 2020 ............. $234mill = 63%
end Dec 2020 ............ $298mill = 59%

Some of the shares have streaked ahead. In the two six month periods, MAQ went from $10m to $20m to $24m, and Mainfreight (NZ listed) went from $20m to $18m to $32m. A year ago, only 12 holdings were > $10million, by end of 2020, the LIC held some 17 companies were larger than this amount

1 (1 last year) ..... MFT Mainfreight $32.4million ... 6.4% of total portfolio
2 (12) ......... MAQ Macquarie Telecom Group 24.6 ... 4.9%
3 (6) ............ ARB ARB Corporation 22.6 ... 4.5%
4 (7) ............ REH Reece 19.2 .... 3.8%
5 (new) ....... NWL Netwealth Group 15.6 ... 3.1%
6 (10) .......... BRG Breville Group 15.3 ... 3.0%
7 (3) ............ QUB Qube Holdings 14.7 ... 2.9%
8 (new) ....... NXT NextDC 14.4 ... 2.9%
9 (5) ........... SEK Seek 14.1 ... 2.8%
10 (11) ........ CAR CarsalesCom 13.1 ... 2.6%
11 (20) ........ XRO Xero 13.0 ... 2.6%
12 (2) .......... JHX James Hardie Industries 13.0 ... 2.6%
13 (9) .......... IRE IRESS 12.4 ... 2.5%
14 (new) ..... IVC Invocare 11.7 ... 2.3%
15 (4) .......... OCL Objective Corporation 11.4 ... 2.3%
16 (8) .......... EQT EQT Holdings 11.3 ... 2.2%
17 (19) ........ AUB AUB Group 11.0 ... 2.2%
18 (new) ..... RMD Resmed Inc 9.8 ... 1.9%
19 (16) ........ ALQ ALS 9.6 ... 1.9%
20 (13) ........ AIA Auckland International Airport 9.3 ... 1.8%

Dropped out are the following four. As the portfolio is actively managed, the displacement may have been by selling part or all, buying or adding to the new arrivals or just relative underperfomance.,
(14) RWC Reliance Worldwide Corp;
(15) COE Cooper Energy;
(17) WEB Webjet;
(18) BKW Brickworks

You've put it on my radar from past posts. Some good stock picking from them. I would likely favour MIR over the Wilson stable if buying another LIC in depressed times. Not sure, but that's the current vibe.