Kingfish Portfolio Gains as Vista and Healthcare Holdings Lead August

• Adjusted NAV return of +1.2% in August
• Gross portfolio return of +1.5% versus +1.6% for the S&P/NZX 50
• Vista, Fisher & Paykel Healthcare and Delegat led monthly gains
• Freightways was the largest detractor at -5%
• Shares traded at $1.20 against a $1.30 NAV per share

August Gains Narrow the Performance Gap

Kingfish Limited (NZX:KFL) posted a 1.2% adjusted NAV return in August, with its portfolio’s gross return rising 1.5% against a 1.6% gain for the S&P/NZX 50. That keeps the monthly result close to the market, although the longer-term figures remain more uneven: adjusted NAV rose 5.7% over one year and 7.2% annualised over three years, while the company’s total shareholder return was down 2.6% over one year.

The gap between portfolio value and the traded share price remains visible. At 31 August, Kingfish shares were priced at $1.20 against an adjusted NAV of $1.30 per share, equivalent to a 7.5% discount. The fund had 363 million shares on issue, a market capitalisation of $435 million and no gearing, although its investment mandate permits gearing of up to 20% of gross asset value.

Vista and Healthcare Holdings Drive Returns

Vista Group was the standout contributor, gaining 11% during the month after reporting 12% revenue growth to $86.3 million in the first half and a 24% increase in core operating profit. The company lifted its full-year guidance as clients continued moving to its next-generation offerings.

Fisher & Paykel Healthcare rose 9% after pointing to strong hospital demand, product adoption and a better-than-expected start to its financial year. Its first-half guidance implies revenue growth of 14% and underlying net profit growth of 24%, excluding tariff refunds, while full-year guidance was upgraded. Delegat also gained 9% after reporting a $61.5 million profit, up 20% on the previous year, and issuing operating profit after tax guidance of $62 million to $66 million for the new year.

The fund’s largest position is Fisher & Paykel Healthcare at 19% of the portfolio, followed by Infratil at 17%, Mainfreight at 9%, Summerset at 7% and Auckland International Airport at 7%. Health care accounts for 31% of the portfolio, with industrials at 25% and financials at 17%; that concentration means a small group of large holdings remains important to the fund’s monthly outcome.

Freightways Falls as Conditions Stay Soft

Freightways was August’s largest detractor, falling 5% despite reporting earnings per share growth of 17% for the year to June. Management said higher fuel costs and softer customer demand weighed on the final quarter, and described trading conditions as challenging with another year of “softer for longer” conditions expected.

Elsewhere, the manager highlighted a series of portfolio-company changes that could influence future returns. Mercury held operating expenses to its $370 million target and plans to keep that figure flat for two years, while Contact Energy is considering a 250-megawatt data-centre campus with CDC Data Centres at Stratford. Summerset reduced its planned build rate, targeted annual cost savings of $30 million to $40 million and reset its dividend policy around cash flow from existing operations, changes expected to support cash generation and reduce net debt.

Bottom Line?

August was broadly in line with the market, but the 7.5% NAV discount and negative one-year shareholder return leave the next test with portfolio execution and the fund’s ability to convert asset value into shareholder returns.

Questions in the middle?

• Can the fund’s largest healthcare and infrastructure positions sustain their recent contribution to returns?
• Will the 7.5% discount to NAV narrow, widen or remain persistent as portfolio performance develops?
• How quickly will data-centre projects, Summerset’s cost measures and other portfolio initiatives translate into financial results?