The following is a brief introduction to each of our portfolio companies, with a description of why we believe they deserve a position in the Kingfish portfolio.
Auckland International Airport (AIA) owns and operates New Zealand’s major gateway as well as 1500 hectares of land surrounding the airport. AIA operates under a ‘dual till’ regulatory regime, meaning that the company’s aeronautical operations are subject to light-handed regulation, whereas the other non-aeronautical operations are unregulated. Over 50% of AIA’s revenue is derived from non-aeronautical operations, such as retail, parking, hotel accommodation and property rental.
AIA is well-positioned to benefit from New Zealand’s positive long-term tourism outlook. With aspirations for 40 million total passengers per annum by 2044, combined with a strengthening consumer business and leveraging its land bank, AIA’s non-aeronautical operations are expected to continue to deliver attractive returns on invested capital into the future.
Contact Energy is a large electricity generator, producing approximately 20-25% of New Zealand’s electricity in an average year. The vast majority of its electricity is from renewable hydro and geothermal resources.
Contact Energy has a balanced portfolio of quality renewable generation assets across both islands, and this is matched by demand from a strong electricity retailing business plus commercial and industrial customers. Its established business provides solid cash flows which underpin an attractive level of dividends. Contact has an attractive pipeline of generation projects from a variety of renewable sources including geothermal in the near term, plus wind and solar longer term.
Delegat Group produces and distributes super-premium wine internationally under the Oyster Bay and Barossa Valley Estate brands. Oyster Bay is the number one selling New Zealand wine brand in the UK, Australia and Canada, and is growing quickly in the USA.
Delegat has invested for continued growth by expanding its winery capacity and increasing vineyard plantings to meet its goal of continuous growth in case sales. A large part of the growth is likely to be driven by the US market, which remains relatively immature.
EBOS Group is Australasia’s largest diversified pharmaceutical and medical care products group, focusing primarily on wholesale logistics and distribution of pharmaceuticals, medical devices, and other products. The company typically has a leading market position in each market segment it operates in. EBOS also operates in the animal care sector as a veterinary wholesaler, distributor and retailer of animal healthcare products, pet accessories and premium foods across Australasia.
EBOS’ scale and market position mean that it is a low-cost operator, which it complements with a leading service proposition which has allowed it to take market share over time. The sector has a tailwind from the ageing population demographic and the increasing prevalence of chronic diseases. It has a strong track record of supplementing the growth in its core operations with moves into higher growth adjacencies and successful acquisitions.
Fisher & Paykel Healthcare is a leading designer, manufacturer and distributor of innovative medical devices for patients who require acute respiratory and obstructive sleep apnoea care. Over 95% of its products are sold outside New Zealand from dedicated manufacturing facilities in Auckland and Mexico.
We are attracted to the demand for Fisher & Paykel Healthcare’s innovative care products as the worldwide population ages and the incidence of chronic respiratory illness and other health issues rise. Through its own research and development, Fisher & Paykel Healthcare has continued to develop products that significantly expand its potential patient base, while maintaining high returns on invested capital.
Freightways operates a range of nationwide express delivery operations in New Zealand with brands including NZ Couriers, Post Haste and Big Chill, as well as Allied Express in Australia. The company has also developed ancillary business on both sides of the Tasman encompassing document storage, data services, secure destruction, and waste renewal.
Freightways is one of two dominant players in the New Zealand courier market and its information management business has a trans-Tasman footprint. The company has a track record of stable organic growth and value-accretive acquisitions that leverage off its existing infrastructure.
Infratil invests in a diverse range of infrastructure businesses, with a portfolio focused on data, communications and renewable energy, with smaller exposures to healthcare and airports. It is externally managed by an experienced management team.
We are attracted to Infratil’s portfolio of infrastructure assets that are not easily replicable and its strong track record since listing.
Mainfreight is a global supply chain logistics company. Its services primarily span domestic transport, managed warehousing, and international air and sea freight. Its operations span-New Zealand, Australia, the Americas, Europe, and Asia.
Mainfreight is a very well-run company with a special company culture that has delivered strong performance over time. It continues to open new trade lanes as it spreads its logistics footprint ever wider. Growth should come organically as it takes market share and works further towards its 100-year vision of becoming a leading global logistics provider.
Meridian Energy is New Zealand’s largest electricity generator, producing approximately 30% of the country’s electricity in an average year, sourced 100% from renewable hydro and wind resources. The company also has a retail business in New Zealand, operating under the Meridian and Powershop brands.
Meridian is a well-run company, with a portfolio of long-dated, quality renewable generation assets which provide Meridian with the advantage of being amongst the lowest cost marginal electricity producers.
Port of Tauranga is the natural gateway to and from international markets for many of New Zealand’s major businesses. It is close to many important exporters in the forestry, dairy, meat and fruit industries. Its investment in port facilities in Timaru and an inland port near Christchurch opens up the South Island for exports to be hubbed out of Tauranga.
Port of Tauranga continues to grow in importance as a leading shipping port in New Zealand for both exports and imports. It has many natural advantages, including excellent access for road and rail, large land holdings and a deep harbour for bigger ships to call. Port of Tauranga continues to increase container market share, supported by its investments in Metroport near Auckland, Primeport Timaru, its Ruakura hub, and a long-term strategic agreement with Kotahi (a joint venture between leading exporters).
Ryman Healthcare was formed in 1984 to develop, construct and operate retirement villages in New Zealand. It now has a portfolio of retirement villages around New Zealand and is replicating its model in Victoria, Australia. Ryman Healthcare is the largest owner and developer of retirement villages in New Zealand.
Ryman Healthcare has been the industry pioneer in retirement living. Industry dynamics are attractive, and Ryman Healthcare expects to lift its build rate of units and beds to meet latent demand from an ageing population. Victoria has a similar ageing demographic to New Zealand and represents an attractive area for future growth; Ryman’s continuum of care offering is popular but offered by few competitors currently.
Summerset is an integrated retirement village builder, owner and operator. The company has retirement villages spread around New Zealand and is a leading developer of retirement villages in New Zealand with a significant land bank. Summerset has entered Australia and is in the process of building out a portfolio of villages from its land bank there too.
Summerset successfully operates a continuum of care model with aged care integrated into its villages. It has developed a strong and consistent track record of growth in its build rate and earnings. With brand awareness converging on Ryman, proven development capability and a robust balance sheet, Summerset is well placed to meet the growing needs of ageing populations in New Zealand and Australia
The a2 Milk Company sells ‘a2’-branded fresh milk and infant milk formula internationally. As the name suggests, its products contain only A2 beta-casein protein, on the basis that it is more comfortably digested than normal milk (which contains a mix of both A1 and A2 proteins). In recent years, the company has grown sales and market share rapidly in Australia and China and is currently also focused on its growing business in the US.
The a2 Milk Company has a small but growing share of the very lucrative Chinese infant formula market. We expect its market share to continue growing across a range of distribution channels. In addition, there is potential for further upside from new products and geographies.
Vista Group is an innovative IT company primarily providing sophisticated software to cinema exhibitors. It has 35% worldwide market share with clients in over 100 countries. Its integrated software systems allow cinema exhibitors to run wide-ranging functions such as ticketing, food and beverage sales, staff and film scheduling, loyalty schemes, digital signage as well as external customer interfaces like websites, mobile apps and call centres. Vista Group also has a range of smaller group businesses that leverage its depth of data and cinema industry intellectual property.
We are attracted to Vista Group’s profitable core business which provides sophisticated software to cinema operators of all sizes. We believe that this business still has many years of growth ahead of it, plus will benefit from migrating customers to its cloud-based offering. Additionally, the company’s data analytics business (Movio) supplements this by providing valuable insights to exhibitors and studios.
Vulcan Steel is the leading steel distributor and value-add processing player in New Zealand and Australia. It has recently moved into aluminium by acquiring Ullrich Aluminium, the leading trans-Tasman player in this space. This increases the company’s growth opportunities moving forwards in a variety of ways.
We have been following Vulcan since its IPO in late 2021. Vulcan has grown to command the leading position in the New Zealand steel distribution market. Its growth journey in Australia is at an early stage and there is ample runway to take market share in the fragmented Australian market from a very low base using its proven strategy. It is an impressive business in an unexciting industry. The company has been building an emerging track record of performance as a listed company.