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Share Price
$0.88
as at 18/07/2018
Warrant Price
$0.07
as at 18/07/2018
Latest NAV
$1.0315
as at 10/07/2018

Portfolio Holdings

The following is a brief introduction to each of your portfolio companies, with a description of why we believe they deserve a position in the Marlin portfolio.

Portfolio Holdings Summary as at 30 June 2018

What does it do?

Abbott Laboratories is a global healthcare company with leading market positions in medical devices, infant formula, adult nutrition, diagnostics and branded generic drugs.

Why do we own it?

Abbott Laboratories is well placed with market leading positions in a number of growing end markets driven by an aging population and emerging market growth. Abbott Laboratories has a long track record of profitable investment into fast growing healthcare segments and we expect them to continue to reinvest in the business to strengthen its competitive position and drive continued growth over the long term.

What does it do?

Adidas is the largest European and second largest global sportswear manufacturer.

Why do we own it?

Adidas is one of the world's leading brands and has a strong track record of growth and shareholder return. After going through a difficult period due to factors that are largely outside the company's control, management have turned the business around and are now growing revenues and earnings rapidly. They have started to take market shares in the lucrative US market, and we see many years of strong growth ahead.

What does it do?

Alibaba is the largest e-commerce player in China with an overall online shopping market share of over 70%.

Why do we own it?

Alibaba is the online marketplace leader in China and is over five times larger than its nearest competitor. It has sustainable competitive advantages through its extensive network and scale. Alibaba is also a major beneficiary of strong online shopping growth in China due to continued urbanisation, increasing incomes and a poor physical retail infrastructure in many Chinese cities. Alibaba is expected to grow in excess of 25% per annum over the next few years.

What does it do?

Alphabet is the holding company which owns the world's leading internet search provider, Google. Google is the world's most visited website and the largest global advertising platform by advertising revenue.

Why do we own it?

Alphabet has wide moats arising from its dominant position in online search, significant intellectual property and a strong brand. We believe Alphabet is well-positioned to grow strongly as global advertising budgets gradually shift away from television to digital formats.

What does it do?

Cerner is the world’s largest healthcare information technology provider with a range of solutions for all the software needs of healthcare organisations including electronic medical records, practice management and billing systems, as well as applications in the area of population health management (data analytics which predicts medical care requirements for patient populations).

Why do we own it?

Cerner’s software is critical to its clients operations. Switching costs are high and switching tendencies are very low. It has superior technology that has allowed it to continuously win market share as the industry consolidates. Cerner has a strong track record and attractive growth outlook as a result of increasing IT requirements in the healthcare sector.

What does it do?

Cognizant is a leading IT services company providing information technology, consulting and business services to a range of mainly larger global companies.

Why do we own it?

Cognizant is a wide moat company that is deeply ingrained with its customers as a partner in IT and wider business strategy. Cognizant has invested heavily to position itself to capture the significant move of IT towards digital (social, media, analytics and cloud) which should underpin long term growth. Furthermore, Cognizant has a strong management team and a great track record of growth and innovation.

What does it do?

Core Laboratories is a US based oil services company specialising in enhanced oil production and oil reservoir management with an ultimate goal of maximising the efficiency of hydrocarbon recovery by oil companies.

Why do we own it?

Core Laboratories is a rare wide moat company in the energy sector given its unique and difficult to replicate library of oilfield data that is used by their clients to increase the extraction and return from their oilfields. Core Laboratories offers a strong value proposition to their clients, allowing them to generate high returns through improved production efficiency at relatively low cost. The company has a track record of generating strong cash flow and returning this to their shareholder base.

What does it do?

Descartes is a logistics software business.

Why do we own it?

Descartes business moat is centred on its Global Logistics Network (GLN). The GLN connects supply chain participants, in real time, giving visibility and control of movement of goods across increasingly regulated and complex global supply chains.

What does it do?

eBay is the world's largest online marketplace that brings merchants and consumers together through online websites and mobile applications. eBay has over 160 million active users.

Why do we own it?

eBay has an enviable track record of value creation, generates strong cashflow and through new initiatives in data analysis and improving features on their website, is expected to accelerate revenue growth and grow earnings at double digit rates over the next three to five years.

What does it do?

Ecolab is market leader in providing cleaning and sanitising solutions for the foodservice, hospitality and healthcare industries. It also provides chemicals and technologies to the water treatment and oil production industries.

Why do we own it?

Ecolab offers a strong value proposition for its vast client base with their product innovations resulting in reduced energy and water usage, lower labour costs and reduced downtime. Ecolab is a high quality company that invests significantly more than its competitors into developing innovative products and this has resulted in continued market share gains. Ecolab has an excellent record of stable growth and strong growth prospects.

What does it do?

Edwards Lifesciences is the global market leader in the treatment of heart valve disease, which impacts millions of people worldwide and carries a poor prognosis if left untreated. Edward’s main product allows for the treatment of this disease without the need for risky open heart surgery.

Why do we own it?

Edwards Lifesciences continues to lead the industry in innovation, investing in the development of new products which both improve medical outcomes for patients and help doctors treat a wider range of previously untreated patients using a lower risk approach. With a dominant market share and continued investment in research and development, Edwards Lifesciences is well positioned for long term growth.

What does it do?

Essilor is the leading global manufacturer of corrective lenses, selling to optometrists and other eyewear retailers. More recently, Essilor has expanded into branded sunglasses and online retail, where it owns a number of leading eyewear ecommerce sites.

Why do we own it?

Essilor is the market leader and continues to drive innovation in corrective lenses. They are well positioned to take advantage of the structurally growing prescription eyewear market, driven by an aging population and increased adoption in emerging markets. Essilor’s proposed merger with Luxottica, the largest manufacturer and retailer of frames and sunglasses, will if approved by regulators, create a dominant industry player from manufacturing through to retail.

What does it do?

Expedia is the largest online travel agent in the US and is ranked in the top two in most markets globally. Expedia aims to provide the latest technology and the widest selection of top vacation destinations, cheap tickets, hotel deals, car rentals, cruise deals and in-destination activities.

Why do we own it?

Expedia has a strong long-term growth outlook coming from a combination of travel industry growth and an increasing tendency to book travel online. Additionally, the online travel agency industry has consolidated to two main players who now have considerable size and hotel network advantages, which act as a highly effective barrier to new entrants. We expect Expedia to grow earnings at mid-teen rates over the next few years.

What does it do?

Facebook owns four of the most dominant social networking and messaging platforms in the world – the Facebook App, Instagram, Messenger and WhatsApp. It monetises these platforms by selling advertising slots to millions of businesses globally.

Why do we own it?

The average US user spends over an hour a day on Facebook and Instagram combined. This high user engagement, combined with Facebook’s unparalleled ability to deliver an audience of over 2 billion users to advertisers, has created one of the most valuable advertising platforms in the world. We see significant growth ahead as Facebook captures a significant share of advertising dollars as media budgets move away from TV and towards digital platforms.

What does it do?

Fresenius is a market leader in the global dialysis industry, and is the only vertically integrated player – providing both products and services to the dialysis market.

Why do we own it?

Fresenius has strong growth prospects globally as kidney disease becomes more prevalent in an aging population. Fresenius’ depth of knowledge and data around dialysis should allow them to improve patient outcomes while reducing the overall cost of treatment for this growing global dialysis population.

What does it do?

Hexcel is the leading supplier of advanced composite materials (like carbon fibre) for aerospace and other uses including wind turbines and automobiles. Advanced composites are generally lighter and stronger than traditional materials such as aluminum, which has seen the composite content of aircraft and other industrial applications increase significantly over time.

Why do we own it?

The aerospace composite industry has high barriers to entry due to scale, the close integration of processes with its aerospace manufacturer clients, and the lengthy qualification processes required to be able to supply Airbus and Boeing’s aircraft programmes. Only a few manufacturers are qualified to supply composite parts and materials to these aerospace customers.

What does it do?

Known as a contract research organisation (CRO), Icon provides specialised services in clinical trial management for pharmaceutical and biotechnology companies.

Why do we own it?

The increasing complexity and regulatory requirements of clinical trial management are forcing pharmaceutical and biotechnology companies all over the world to seek the help of specialist CROs such as Icon. Icon’s global footprint and broad strengths in clinical management make it one of only a few companies qualified to provide these services. Growth is being driven by this increased shift to outsourcing, the increase in drugs being tested and larger trials required by regulatory bodies such as the FDA.

What does it do?

LKQ is the largest distributor of alternative replacement parts and components used to repair cars and trucks in the US and Europe.

Why do we own it?

The value proposition is strong, as these alternative parts cost 20%-50% less than new parts and have been growing in popularity with auto repair shops and insurers. LKQ is the only nationwide distributor of these parts in the US and is growing its footprint in Europe. We believe LKQ can grow strongly over the next few years with minimum impact from the economic cycle.

What does it do?

MasterCard is the second largest payment network in the world, operating in 210 countries and supporting more than 2 billion cards across its network.

Why do we own it?

MasterCard's growth outlook is underpinned by the secular shift to electronic payments and away from cash, particularly in emerging markets where MasterCard has significant presence. These structural growth drivers combined with increasing margins and high cash flow generation (allowing for substantial share buybacks) supports a strong growth outlook over the medium to long term.

What does it do?

While known mainly for its signature charm bracelets, Danish company Pandora has transformed itself into one of the leading jewellery brands globally, both in terms of brand recognition and sales. Pandora operates a fully integrated business model from production, wholesale and distribution through to retail, where it operates or franchises around 2,500 concept stores. Its two manufacturing facilities in Thailand employee over 11,000 people and produced 120m pieces of jewellery in 2017 – a scale unmatched by competitors.

Why do we own it?

There is increasing preference by consumers for branded jewellery, where Pandora is one of the most recognised names globally. We see a strong growth runway for Pandora underpinned by continued expansion of stores and online, increased focus on product innovation and continued push into more traditional jewellery categories. For example, new categories such as rings and earrings now make up around a quarter of Pandora’s sales and Pandora hopes to increase this to half in the next 5 years as the company looks to a capture greater share of the attractive affordable luxury jewellery segment. Pandora’s integrated business model and large scale allows it to provide hard to match quality jewellery at low cost, while still maintaining industry leading margins. This vertical integration also provides Pandora with the ability to bring products to market quickly. With a modern consumer that craves newness, this should allow for greater innovation and ability to get the right products in front of customers.

What does it do?

PayPal is a global leader in online payments.

Why do we own it?

We are attracted to PayPal due to its broad based and sustainable competitive advantages and strong growth prospects. PayPal has technology, scale and global network advantages which give it a considerable advantage over its competitors. Furthermore, PayPal benefits from continued growth in e-commerce.

What does it do?

Signature Bank is a specialist regional bank, lending largely to wealthy families and private businesses in and around New York. They have a sticky deposit base that comes from managing transactional business accounts for businesses like law firms, accounting firms, and property management companies, a long track record of profitable growth and a very strong history of credit control.

Why do we own it?

Signature Bank has an uncomplicated relationship driven business model and industry profitability. Its ability to attract and retain senior bankers from other firms through an attractive profit sharing compensation model has allowed them to grow loans and deposits at over 20% pa over the last 10 years. It is still a small bank in a very large market and we see many more years of growth ahead.


What does it do?

TJX Companies (TJX) is an off-price retailer in the US, which also has stores in Canada, Europe and Australia. The company sells branded clothing, such as Nike and Ralph Lauren, as well as some homeware at a 20%-60% discount to a full-price retailer (think Briscoe’s, but predominantly for apparel). TJX can sell inventory cheaper than other retailers as it sources stock from store closures, order cancellations and manufacturer overruns – allowing them to sell at a significantly lower price.

Why do we own it?

The company has a longstanding management team with a strong track record. TJX has a good growth runway for new stores openings and growing sales at existing stores. TJX should grow its earnings at close to 10% per annum, while paying a steady and increasing dividend. Despite having solid growth prospects, TJX’s valuation has been depressed given market concerns about the broader US retail sector, combined with a couple of company specific headwinds that we believe are transitory.

What does it do?

United Parcel Service (UPS) is the world’s largest package delivery company and operates in over 220 countries and territories with its fleet of 100,000 ground vehicles and 530 aircraft.

Why do we own it?

The market dynamics of the global freight industry are compelling, with high barriers to entry given the need for a large international network and delivery route density to be competitive. Despite the size of its business, we believe UPS is well-positioned for robust growth, supported by the growth in e-commerce activity and increasing cross-border trade volumes in Asia and Europe.

What does it do?

Zoetis a leader in the animal health space (both livestock and companion animal) – an industry with attractive attributes.

Why do we own it?

Zoetis has a wide moat built around intellectual property, brand and a large direct sales force giving it access to key decision makers (including veterinarians) and end-users. The growth runway is underpinned by a couple of secular growth drivers – increased global protein requirements and increased pet ownership and ‘humanisation’ of pets.