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Kingfish share price understates fair value

27 October 2005


Kingfish share price understates fair value

The Directors of investment company Kingfish Limited are pleased to announce the results of its operations for the six months to 30 September 2005. The company achieved a $3m surplus after taxation and grew the Net Asset Value (NAV) of its investment portfolio in this period by 4.5% after adjusting for the effect of the 2005 financial year performance fee and annual dividend. The Kingfish NAV lifted 7.8% in the three months to 30 September 2005 to reach $1.3131.

“The result was pleasing given the uncertain market conditions experienced earlier in the half” said Kingfish Chairman, Rob Challinor. Mr. Challinor further noted that “the investment manager, Fisher Funds, was able to more than fully recover the value of the portfolio after the declines experienced in April and May.”

Mr. Challinor also said “In spite of the continued growth in NAV, Kingfish shares are trading at an 18% discount to current diluted NAV per share, a discount which has widened over the past few months. The Board considers that, notwithstanding current volatility in share markets worldwide, the share price neither reflects the underlying value of the company nor the positive long-term track record of Fisher Funds. The Board has accordingly decided to undertake a share buyback program of up to 5% of the original issued capital of Kingfish Limited.” The company’s NAV per share is disclosed to the NZX each week and posted on the company’s website

Fisher Funds Managing Director, Carmel Fisher, said “The Kingfish portfolio is in good shape. After market conditions deteriorated in April, we spent a lot of time with CEOs talking about their businesses, current operations and the outlook, reassuring ourselves of the investment case for each company – and we were certainly reassured. As a result, activity within the Kingfish portfolio was relatively light, as we did not think we needed to make any substantial changes to the investments. Further, the company profit results released during the period were generally positive, indeed supporting our assessment. Highlights included the Ryman Healthcare and Mainfreight profit increases of 28% and 126% respectively over the corresponding period and positive comments regarding the outlook from both companies.” The most significant contributors to the performance of the Kingfish portfolio in the six months to September 2005 were Ryman Healthcare whose shares lifted 31% and Mainfreight whose shares lifted 21%.

The core Kingfish holdings include Waste Management, Ryman Healthcare, Freightways, Michael Hill and Pumpkin Patch – companies selected because of their track record of growing earnings and sustainable competitive advantage. “We expect these companies will be part of the Kingfish portfolio for many years to come” said Carmel Fisher. Fisher Funds is constantly looking for new investment opportunities and is currently of the view that one or two might be introduced to the portfolio in the current half.

“After months of protracted negotiations between Cook and Todd interests, it now looks as if a takeover offer for Metlifecare will be made by year end. Kingfish and other Fisher Funds portfolios together hold in excess of 10% of Metlifecare. We will be carefully considering the imminent Retirement Villages New Zealand Limited (RVNZ) takeover offer, and in particular assessing the strategic direction the company is likely to take once it has a new cornerstone shareholder. Kingfish also holds a sizeable position in Ryman Healthcare and we continue to assess other opportunities in the sector.”


Fisher Funds is conscious of the cautionary comments that have accompanied some recent profit results. Many companies predict profit growth ahead, but a lower growth rate than they have experienced in recent years. Fisher comments that “it is often an environment such as this where negative sentiment is emerging that presents the best opportunity to buy quality businesses at attractive prices.” Fisher also notes that ”…in many instances, (Kingfish) companies have specific growth initiatives that will provide some insulation against a deteriorating environment. Whether it is international expansion in the case of Michael Hill and Pumpkin Patch, or positive demographic trends in the case of Ryman Healthcare, or price flexibility for Freightways and Waste Management, we expect many of our companies and their profits to display resilience.”

Kingfish will not pay an interim dividend for the six months to 30 September 2005. The company’s dividend policy is to distribute net income, excluding unrealised investment gains and a final dividend will be declared and paid following the full year result to 31 March 2006. The Board regards the payment of an annual dividend as a means of keeping associated dividend administration costs down.


As at 30 September 2005
Net Asset Value per share $1.3131
Diluted Net Asset Value per share $1.1581
Shares on issue 59, 645,509
Warrants on issue 58,500,000
Warrants are exercisable on any of 31 March 2006, 31 March 2007 or 31 March 2008

Kingfish Holdings Portfolio Stocks
Portfolio Weighting
Freightways 12%
Mainfreight 13%
Metlifecare 10%
Michael Hill 8%
Pumpkin Patch 11%
Ryman Healthcare 15%
Turners Auctions 4%
Waste Management 14%

Kingfish Nursery Portfolio Stocks Each below 3%
NZ Exchange
Cadmus Technology
Steel & Tube
Software of Excellence
Turners & Growers


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