I'd now like to hand the presentations over to Mr. Mark Freeman, Managing Director of Mirrabooka. Thank you, please go ahead.
Good afternoon, everyone, and welcome to this half-year result briefing. I'd like to begin by acknowledging the traditional owners and custodians from all the lands we are gathered on today. Pay my respects to the elders past, present, and emerging. Joining me today on the webinar, we have Kieran Kennedy, the Portfolio Manager, Stuart Low, the Assistant Portfolio Manager, Andrew Porter, our CFO, Matthew Rowe, our Company Secretary, and Geoff Driver, our General Manager of Business Development. Before we start the presentation, just a bit of housekeeping on this webinar. This briefing is based on the material available on the company's website. If you are using your computer to access the presentation via the webcast, the slides will change automatically. Finally, please note, following the presentation, there'll be time for questions and answers.
You can ask a question via the webcast using the tab at the bottom of the screen. I'll now turn to chart two of the slide presentations, which is the disclaimer, just to say we're here to talk about what we're doing in the company. We're not giving any advice as such, so just moving on to slide four, talking about what Mirrabooka is, so Mirrabooka is a Listed Investment Company specializing in investing in small and medium-sized companies on the Australian and New Zealand stock markets. Our general definition of small and medium-sized companies is those that sit outside the 50 Leaders Index, noting that we can hold stocks that perform well, that move into the 50 Leaders Index, but we will eventually move them out of the portfolio.
Just our objectives, our aim is to provide medium- to long-term investment gains through holding core investments in selected small- and mid-cap stocks while paying out very attractive, fully-franked dividends, and with that, I'll pass over to Andrew Porter, our CFO, to talk through the result highlights.
Thank you, Mark, and good afternoon, ladies and gentlemen. So we're now on slide six for those of you following it on the screen, and the profit for the half-year, AUD 4.6 million. So that was in line with the same time last year. So slight mix of variable levers there. The dividends were slightly down and trading and option income slightly up. But the net result in line with 2023. As hopefully most of you are aware, the interim dividend was increased from AUD 0.04 to AUD 0.05. The earnings per share for the half-year, AUD 0.024. So as ever, we are paying out realized gains. We have to pay out some portion of realized gains. As most shareholders are aware, that's something that Mirrabooka does all the time.
We are conscious that these LIC gains that are paid out of realized gains have some real value for shareholders who do pay tax. So as a result, all of that $0.045 has come out of realized gains and has LIC gains attached to it. The management expense ratio, 0.56%, so that's 56 cents for every $100 invested. That's the ratio that we use for showing shareholders and interested parties what our cost ratio is, and that's consistent across the year, and the portfolio, as you'd expect when you see the return figures, up from just under $600 million in 2023 to just under $670 million in 2024. Having now a look at slide seven, you will see that for most of the year, most of the half-year, we've basically gone from either a small premium to a small discount.
That trades, I think, probably at the moment we're about par order at a slight premium. Most LICs in the sector are trading at discounts. Mirrabooka is very rare in not doing that and trading either at par or, as I said, slightly above. There are a number of different reasons for that, but they don't, as you can see, necessarily apply to Mirrabooka, although the premium, of course, has come down significantly in the last two years. Slide eight just gives a long-term view of what happened if you'd put in $10,000, and you can see that the Mirrabooka return over those 25 years essentially has been in advance of both the mid-cap and Small Ordinaries, which is what we measure ourselves against. Also, interestingly enough, above the ASX 200, which is above that small and mid-cap.
So normally you'd expect the small and mid-cap to be more variable and perhaps have slightly lower returns, but that's not been the case over the long term. And with that, obviously happy to answer any questions in the Q&A session, but I'll hand over to Kieran.
Thank you, Andrew, and good afternoon, everybody. So I've moved through to slide 10 for those following on screen. The first comment I was going to make with this presentation is we've deliberately kept our prepared remarks and content fairly brief. We found at this presentation in prior periods, we've had good engagement in terms of the questions coming through, so we'd really encourage those, particularly those to do with companies. Those who've listened in before will be well aware that Stuart and I are fairly passionate about what we do. I'm very interested in the companies and always happy to share our thinking on what we've been investing in and what we're looking at. So first, just starting with our performance, looking out over various time frames, we always encourage investors to look long-term as we do first. Obviously, the short-term numbers are also interesting.
One of the features of returns like this is that they're rolling periods, so the returns factor in how we've gone for a period of time, but it also the starting point matters in that. So if you look at the 10-year return, obviously healthy outperformance of 2.4% per annum, but that was coming through a period where we'd had strong numbers in the lead-up to that 10 years. So if you look back right back to inception, the outperformance versus our benchmark on average has been more like 4% per annum, which is obviously a number we're very encouraged by and working very hard to continue with the obvious caveat that past performance is no guarantee on the future. Looking shorter term, again, the three-year number, that is about the starting point. We had a very buoyant period leading into that three years.
It's encouraging now we've got our nose back in front of the index after we'd had very strong outperformance. And on the one-year performance, obviously very healthy numbers of 18.2% for this calendar year versus the benchmark at 11.1%. I would just say a couple of things on that that I think are worth noting. One is we've had a pretty decent tailwind in terms of market trends as part of that outperformance. We're long-term investors. We're trying to buy really good quality companies that we think can deliver earnings growth for the long term because that's what drives long-term share prices. Those sorts of companies have been well recognised in the market in the last calendar year. They've had valuation support. And on the flip side of that, cyclical companies, resource companies have lagged quite significantly, and we're well underweight in that space.
We internally do look at a peer set of other fund managers that we think go about things in a similar way to us. And in that cohort, our performance has been solid, sort of well in the middle of that pack, but there have been others with more spectacular numbers for that year. But I will point out our genuine performance numbers with no leakage of performance fees, management fees, and a better tax outcome than many others because we're long-term investors. Just moving on to recent activity in the portfolio on slide 11. So I guess following on from those comments I made about the valuation tailwind we've had with the performance of what we've owned, one of the challenges that brings is it makes it harder for us to find really good value to buy new things that are similar to what we own.
So what that's meant is our purchase activity for this period has been quieter than usual. Normally, we turn the portfolio over at around 20%-25% per annum, so average holding periods of four to five years. That's been similar from the selling side in this period, but on the buying side, it's been well below that as we've been patiently looking to find new ideas, but importantly, with good valuation support on a long-term basis. So the sort of companies we have added to the portfolio is a couple of new ones listed there: Cuscal, the recent IPO, and Channel Infrastructure out of New Zealand. Cuscal provides payments infrastructure for financial players that don't have the scale to do it themselves. So think about banks that aren't majors and fintech players that need that infrastructure from another company. A very solid business.
It doesn't have spectacular growth profile ahead, but the valuation was very reasonable, we thought. It's well-run. Management have been there a long time. Its reason to exist is not going to go away, and it has that solid market position. So we felt that stacked up quite well against the opportunity set at the time. Channel Infrastructure is now the key import terminal for fuels into the New Zealand market. Again, very solid asset. We think there's some strategic land around it. Not going to grow spectacularly, but again, understanding valuation, a very solid asset we think will generate good returns for the portfolio. And then we've been adding to existing holdings in things like Life360, EVT, Cobram Estate, where we found good value. Again, happy to take questions on any of those.
On the selling side, we have found a number of positions that have done really well for us, have sort of risen up to valuations that just make us question our long-term conviction from here to have such a big weighting in them. So if you look at that bottom right box of reduction in ongoing holding, these are the most material of those. There's a number below. Companies like Fisher & Paykel Healthcare, Netwealth, Gentrack, REA Group, and Pinnacle have all been really good reasons why we've generated good returns in the portfolio in recent times. But at the valuations they've gotten to, we just think it's prudent to reduce those positions somewhat, generate realised gains, which helps support our dividends, and just ensure we maintain a holding because they're still great companies, but just run with a little bit less.
In terms of what we exited, JB Hi-Fi, candidly, we sold this one a bit too early. We felt that the valuation's getting a bit ahead of its growth prospects. It's an outstanding company. It's one we'd happily own again if the opportunity presents, but we think it is a bit stretched at the moment. Domino's Pizza was disappointing for us, so we moved that one on. And PSC Insurance was a—excuse me a moment. Nearly got through the slide, but PSC Insurance was a very successful investment that was taken over through the period. With that, I'll hand over to Stuart.
Thanks very much, Kieran, and good afternoon all. Now moving to slide 12, which is a snapshot of our top 20 holdings. We really like this slide. I'd like to include it in every presentation. I think it illustrates a couple of things. One of them being that we do like to say that we're long-term, and I think this illustrates some of these holding periods that we really do try and invest in companies we think we can hold for many years and have them compound throughout the portfolio. And I think the other thing we talk about too is, and sort of referencing Kieran's comment a little bit earlier, when a new position comes into the portfolio, we tend to take modest starting positions, starting sizes, and then as we earn trust with the company and management, we watch them execute.
We then build that position up and then hope that it sort of earns its way into the top 20 stocks rather than buying really large positions straight away. In terms of the moves in and out of the top 20 over the last six months, as Kieran alluded to, PSC exited the top 20 through a successful takeover. REA Group and Fisher & Paykel were both companies that have just dipped outside the top 20 now. We trimmed some of those, as Kieran said, just found the valuations very stretched at these levels, so we haven't exited those positions. They're just sitting a little bit outside the top 20 after some profit taking. In terms of two others that have exited the top 20, but we still own relatively significant positions. One of those is IPD Group. It's an electrical distribution company.
We've talked about it in previous AGMs and other shareholder updates because it's been one of our real success stories over the last probably three years since we bought it at IPO. That had a very strong run, and over the last six to 12 months, we've taken the opportunity to just lighten our position, took some profit, and then we actually saw an update in November where they saw some weakness in their ongoing business. Nothing alarming, but just as we expect, business isn't linear, so it had a slight slowdown, which saw that one fall a little bit over the last six months and come outside of our top 20. The other one that's come out is PEXA. Once again, we still have a position there.
We really like the Australian business, that infrastructure-like asset, but we had seen the issues in their UK business just taking a little bit longer than what we previously envisaged when we took a position. So we have been doing a little bit of selling there, and that share price has probably underperformed the last six months, hence why it's come out of the top 20. I thought I might touch on some of the newer holdings in the top 20. If you look through the slide there, you can see Redox, Cobram Estate, and Vista all have an ownership period less than three years. So I'll touch on each of those individually. Redox was an IPO, a family-led company, chemical distributor that's been around for 30 plus years. We really liked a lot of its characteristics: net cash balance sheet, family ownership, a leader in its space.
It came to market with little fanfare and the share price underperformed, so we took the opportunity to increase our position over the last year and subsequently, as the company's continued to execute throughout the last two years since listing, it's getting a little bit more hearing with fund managers and its valuation has gone up. So that one's been quite successful, and I think the share price has gone up about 85% in the last 12 months, hence why it sort of earned its way into our top 20. Cobram Estate, we talked about them on the previous slide. Really liked that brand, the positioning. It's the major producer in Australia.
I guess the reason why it's sort of had a little bit of a run the last six months is that its U.S. business, which it started about a decade ago, has reached an inflection point, now profitable and really going strongly, so that one, once again, we've been buying over the last six months, and we've also seen some strong share price appreciation. Lastly, Vista Group, I'll just call that one out, is a business that we've owned previously. It produces software for the cinema industry. It has a sort of staggering 50% market share, which is unusual for small caps to have such a dominant market position. We owned it previously and sold it just in the onset of COVID, which in hindsight was a wise decision. Obviously, we didn't know what was going to happen over that two-year period, but we reflected upon that.
We really like its position. We added it back to the portfolio in 2022, and it's had a really strong run in the last six to 12 months on the back of them migrating a lot of their customer base to its cloud offering, and that business has now reached profitability and free cash and has seen the share price re-rate, I think probably close to 100% over the last year, so once again, another example where we took a modest starting position and then let it compound into the top 20. I'll now move back to Kieran for some closing remarks on the last couple of slides.
Thank you, Stuart, and hopefully, you've given me enough time to get my voice back after those earlier issues. Apologies for that, so we're now on slide 14, just looking at some Outlook comments. We've started with just a graphical representation of what we think has been a bit of a dislocation in the market. There's a bit of complexity in this chart, but I'll try and explain it in simple terms, so what this is representing is the relationship between valuations in the share market. This is U.S.-based, so in the blue line, this is the market multiple price-to-earnings ratio for all the companies in the market, in the equity market, and then the orange line is the real 10-year bond yield on U.S. government debt.
So essentially, what that's saying is U.S. government debt is assumed to be the lowest risk asset people can buy, and therefore, other assets around the world, the pricing is referenced back to the lowest risk asset you can buy, so what the chart's saying is taking inflation away, so a real return on U.S. 10-year debt, you can now get around 2-2.5%. It's been a long time since you've been able to do that. That's quite attractive compared to what it's been through that period. If that relationship were to hold, that was the risk-free asset that sets the returns for everything else, you would expect to be able to get a higher return from here on shares, and what hasn't happened is we haven't seen the share market sell off to reflect that relationship. That doesn't mean it's going to sell off tomorrow.
It doesn't mean a lot. It's just something we observe is an interesting dislocation we've observed over the last few years, and something in the back of our mind to sort of say, we need to make sure when we're buying shares today, we're thinking about the real fundamental cash earnings-backed return we're going to get from that company, rather than drifting into saying, if we buy this at this share price, it might do that in share price terms. We want to step away and really think about fundamental real-world cash flow earnings for those businesses, so on to some broader outlook comments. I guess on slide 15 in closing, just reiterating what we've been saying, really, which has been there's been a bit of a sweet spot in equity markets. There's been a view that inflation is abating, which is good for valuation. The economy's hanging in there.
Interest rates have peaked, so that's encouraged people that it's been a good time to be back in equity markets. Obviously, the earnings support needs to come through to keep that momentum going forward. We take a long-term perspective and are aware that we've had a pretty good tailwind recently in short-term terms, so that's meant we've been quite quiet in terms of what we've been adding to the portfolio. We're always a bit cautious. We think it pays to be, especially in this end of the market, because you can get some extreme volatility and you can get disappointment, but I think this valuation setting just leaves us a little bit more cautious than usual at the moment, but at the end of the day, what our job is to do is to provide shareholders who want to put money in small and mid-cap companies in the Australian market.
We want to find the best opportunity set within that that we really believe in, in a way that we can be low turnover, i.e., we can be long-term, stick with those companies, and we think the secret to Mirrabooka's success has been choosing companies that deliver really good returns in their own businesses over the long term and then being along for the ride with that, so we won't move away from that, notwithstanding this valuation caution at the moment, and with that, we'll close the formal presentation. I'll hand back to Geoff to cue some questions.
All right. Thank you, Kieran. And just to remind you, you can ask a question by using the box at the bottom of the webcast window. So I've got a question here about the half-year and final-year dividends. Are we planning to even those out? And how are we planning to equalize the incremental final dividend over time?
Yeah. Look, we understand that shareholders probably have a bias towards just seeing more even spread between dividends, but a big part of Mirrabooka's dividends has been sort of special dividends, and that component, it really comes from capital gains. We really don't know the outcome of that until the end of the year. So I think you will continue to see quite a split between the interim and final because of that. Thanks, Mark.
While we're on that, Andrew, the level of franking we have within Mirrabooka?
So last year, after allowing for the final dividend, we had essentially an upfranking for AUD 0.33 per share. And with the income that we've received, you'd expect to see an increase in that. So we're slightly more than AUD 0.33 per share, probably more so if you look at including the tax balance that we've got outstanding at the end of the year. We don't know what that is going to be, of course, yet, but overall, we're consistent on a consistent basis for the prior year, about AUD 0.36. So I would say that we are well adequately to our expectations.
That's really just covered basically.
Just on the ordinary, given that we didn't allow for any special dividends, which, of course, we've done in the past, of course.
Question here on Sigma. Does Mirrabooka own Sigma, which is different?
Yes. No, look, we do, thankfully. There was a pretty small window there where you had the chance to buy it at what we think was pretty good value. So just to explain to everyone, they did a quite clever transaction where the existing business, Sigma, was listed on the share market for a long period of time. It's a pharmacy distribution business. Rather than Chemist Warehouse IPOing and listing in their own right, they proposed a merger with Sigma. So that meant there was a period of time where Sigma's trading on the share market. You're hoping it becomes Chemist Warehouse, but you've got to get through the ACCC inquiries and other things to make sure the transaction's formalized. So we did quite a bit of work through that period and felt that Chemist Warehouse was one of Australia's best businesses in our view.
It's got growth ahead of it. It's an outstanding success story. It's something we definitely want to own. So we felt that it was worth taking that risk that they'd get knocked back by the ACCC to make sure we had a position in the portfolio, and we're thankful we did that. The stock has more than doubled since they've got the green light from the ACCC, and the merger's now about to happen. But interestingly now, because of the way the transaction was conducted, there's going to be a bit of a lot of people are going to want to own the stock. So there's going to be a bit of a squeeze of people trying to get onto the register, and we think that's pushed the share price now to levels that are fairly high, and therefore, it's hard to keep buying it at this price.
While we're on that, sort of, I guess, on that subject a little bit, the IPO market, how are you sort of seeing that over the next few months or six months?
Yeah. Look, it's interesting, Geoff. It's been quite dormant. It's been fairly quiet, which is a bit weird because in a lot of sectors of equity markets, you'd say it's a pretty bullish market at the moment. And normally, when you're in a bullish market, that's when it's a good time to list the new company and find a good audience and get away. But it feels like there's been a bit of a quiet period. A lot of investment banks are keen, obviously, to see them list because they get fees out of it. There'll be companies queued up to do it, but there just needs to be the confidence of a few going really well to see that that window's open. That's the way they describe it. We find all that a bit strange, to be honest.
At the end of the day, listing's only the start of your journey as a listed company. The IPO, it's just day one. So whether it's a great success in the first month or not doesn't really make a lot of difference to us. It's really whether we're getting access to good businesses, and it's really interesting. The last three that we've bought meaningfully have all been really poor initially, so we go back to Redox, IPD Group, and then Cuscal. They came on at a discount to what they were floated at. They traded under in both, well, in all three cases, we liked the business. We had no reason to change our view. We bought more, and then once they settle into their rhythm as a listed company, deliver some results, others catch on to whether they're a good business.
So we do view that window and that sort of the way to sort of treat investing in IPOs quite differently to others, we think.
Thanks, Kieran. Does Mirrabooka own Audinate? Any thoughts on the outlook?
Yeah. Thanks, Geoff. I'll take that one. Yes, we do have Audinate in the portfolio. For those on the call, Audinate provides digital networking software called Dante. A really interesting business, a little bit of a history. We bought it quite well in hindsight at probably AUD 2 a number of years ago, and they became very successful. I think it's sort of the market leader in its space. And then over the last couple of years, they had some really staggering revenue growth, 30%-50%, probably over the 18-month period through 2022 to 2024. It became, I guess, what we call a bit of a market darling, really well owned, and attracted very high valuation. So we fortunately trimmed quite a bit of it at sort of AUD 20-AUD 18 per share. And then, I guess, quite surprisingly, maybe only six months ago, they had quite a negative outlook.
Instead of growing 30%-50% like they had been, they were going to go backwards this year. And it looks as though we weren't smart enough to see that coming. We've just been trimming more on valuation. But it looks as though there was a bit of inventory build in the supply chain across the COVID period. It was quite hard to understand what the underlying demand was, but it looks as though they're in a period now where they have to work off a lot of different inventory across all the supply base. And when I say inventory, this is chips, cards, and modules that will be in speakers and other audio infrastructure. So the shares have fallen quite heavily. We haven't sold any for a while. And I think it's become a much more position in the portfolio.
I think we are still cautious right now to truly understand what the underlying demand is. So we're not doing anything at the moment. It is coming back to more interesting levels. We do think it's a market leader. It's got a net cash balance sheet. So we do like those attributes, still run by its founder. But we're just trying to understand what the underlying demand for the product is because we've had such a variability. I hope that helps, Geoff.
Thanks rGeoff, Stuart
Yeah. So I think the key observation is just to observe the difference. So one way to look at it is to say the equity market should be lower because that's where interest rates are. The other way to look at it is maybe the interest rates are wrong. It's just there's two different views in very big financial markets. So I guess the way we reflect on that is cash is a drag in what we do. So we don't like to have much cash long-term because equity markets do better than what you can get in the bank. But right at the moment, we do have a little bit of surplus cash.
And I must say, at the moment, when you can get 4% plus, and then you look at some of the multiples on the great companies on the Australian share market, and we think, well, the starting point in earnings yield on those companies is low because the multiples are very high. You've got to factor in a number of years' growth to get back to sort of getting a 4% return, which we can get in the bank is a certain number today. And then there's the obvious point that equity markets are volatile. So there's an extra return you should be getting for the volatility and the risk that comes from that. So we're just mindful of that. We're not smart enough to predict markets, but we just think it's an interesting observation to see the dislocation between those two markets at the moment.
Thanks, Kieran. So any thoughts on IDP Education?
Yeah. Thanks, Geoff. Yeah. Look, IDP Education, it's a business we've talked about in the past. It's a top 20 holding. It was at one stage an AUD 30 stock. It's come back a long way to probably AUD 12 now. And for those not familiar with the business, they're the leader in student placements globally and also English language testing. So they take a lot of students from international markets, place them into universities, other high-level tertiary education in Canada, U.K., Australia, and the U.S.A. And this is a business that had grown pretty consistently for a number of years. But I guess in the last 18 months, we've had a sort of confluence of events where post-COVID years, we had a lot of immigration, a lot of student inflows into each of these home destination markets.
And then since then, there's been a lot of media, which probably people are aware about, with potential changes in government occurring in Canada. We've got an election coming here in Australia shortly. The U.K. went through a period last year, and student numbers was a key topic. So we saw a lot of tightening of immigration and student numbers, which has directly flowed through to IDP's earnings. We still think it is the market leader. It's the high-quality provider in the space. A lot of the changes to regulations have centered around some of the lower-quality students potentially coming in on English second language courses and looking to just get work visas, whereas IDP targets a higher-end tertiary and post-tertiary students. So we think they will come through and weather this storm better than the others. We think it's really well run. It's the global leader.
But safe to say, we probably, on our buying, underappreciated the fact that all four of the destination markets having similar policy tightening at the same time would have a stronger impact to earnings than what we thought. So a lesson for us there, but we still think it's a really good business. And with a long-term horizon, we think it will remain the market leader and will come through with a much stronger industry position.
Thanks, Stuart. There's a question here about companies operating in the retail space. We obviously have Temple & Webster and AO, or less extreme AOB, within the top 20. The ASX has a number of retailers that have been strong performers over many years. I won't name all of them. But is management looking at companies such as Universal Store and Step One, who appear to be up-and-coming ASX retailers with strong fundamentals and management?
Thanks, Geoff. So I guess the way I'd sort of address that is to sort of step back to what builds an investment case in any company for us and then apply that to this sector. And as a long-term investor who buys things with the intention, hopefully, they don't have to sell them because they're going to win for a long period of time, the most important thing to look at is sort of competitive advantage. What sort of differentiation, what sort of moat is around that business that gives you the confidence in most economic environments they're going to win, and they're going to beat competitors, grow their earnings, and deliver returns for our shareholders? We think in the retail space, that's generally a bit harder to find. At the end of the day, most retailers operate in a pretty competitive environment.
They've got to have the lowest prices, the best service. They've got to do something different to say that they're going to pull ahead of the pack through most cycles for a long period of time. So that's why we've tended to be a bit underweight the sector. The best time to own most of them is when you find a good format in its early days where you think there might be 30 stores and you can see at the time when there's going to be 100. That's been the formula historically in the space to make good long-term returns through the cycle. We're always on the lookout for that. I mean, a company like Temple & Webster is really interesting because that's changed that dynamic. It's now not about having 30 stores and going to 100.
It's about being an online-only business where we think they have really good brand recognition, we think will grow further. And they've got some really compelling advantages if they pull ahead as the leader in that space because you don't have the rent, you don't have the wages that you have in offline retail. So yeah, we don't really have a set view around sectors. It's really just a bottom-up company-by-company analysis on who has competitive advantage and a reason why we think they're going to win for the long term.
Thanks, Kieran. Question here about how views on mining services companies.
Thanks, Kieran. Question here about how views on mining services companies.
Thank you, Stuart. Got a question here about a company called Acusensus. Kieran, do you want to?
Yeah. So I'll start. Stuart, jump in if you want to add anything. The question is, do we own it? We don't. We've seen it a few times. So it's an interesting little company. I guess I'd describe it as having technology around traffic monitoring. So things like they've got a camera set up for detecting when people are using their mobile phone when they're driving, which is interesting. So I guess we've seen it a few times and we've thought enough of it to say it's one we should keep seeing. But getting back to what I was just saying, we're just trying to determine, are they a market leader in what they do? There are others that win these contracts off governments around the world. What is their secret sauce that says that they'll be the best in their space?
We're still going through the process of really trying to uncover that. We think it's a credible founder running it and an interesting story with the technology. That's where we're sitting at the moment on that one.
Okay. Do we have any further?
No. No.
No. That's about time. Thank you. So if Mineral Resources dropping due to or share price dropping due to governance issues, is there an opportune time? Is this an opportune time to own?
Yeah. Look, it's interesting. It's something Kieran and I were probably talking about an hour ago when we were looking at sort of interesting ideas, and this is one that actually moved beyond our investable universe probably a couple of months ago. It was a business that over the last eight, 10 years, Kieran and I talked about it a lot. We saw it a lot, and there was a lot to like, and we sort of, I think we probably regretted not owning it for a number of those years. I guess now, as it's come back into our investable universe, we look at it again, but with the change of management, I think we find it very hard there at the moment. Sorry about that. Yeah. We just really struggle, a lot of our case has been the ability to back management, especially founders.
And in a company like this where Chris has been so important, I think we just wouldn't have the confidence right now to be investing in that one. I'd just add to that that we're very cognizant that we're running portfolio 60-plus stocks. We can't be experts on every company's business and every sector. And so there's a lot of trust you need to build with the people running those companies so that something like COVID happens and you don't know what's going to happen to all those businesses, but you really trust the people running them. We've built that up over a long period of time. So where there's any sort of questions around that, there's plenty of stocks to look at. So that's the sort of lens we look at with governance. It's not something we take lightly.
If we have weariness around that, yeah, there's lots of other stocks out there.
Yeah. Thanks, Kieran. Question here about why do we exit Domino's Pizza entirely? Is it a lack of faith in Domino's getting back on the growth trajectory or concerns with the overseas businesses?
I think those two things are linked. And I think that question's been put well, really. We think there's still a good business there, but we just found that it was sort of a death by a thousand cuts. They had a number of goes at trying to get the business back on course. And I think at the end of the day, with a business like that, you're serving a lot of masters. You've got listed shareholders, but you've also got the franchisees in the system that need to be doing well. And when the pressure comes on as it did, it's just really hard to get that reset to get it back on a good footing of growth where you can invest with confidence. We are watching it, though. They've got a new CEO in now. He'll have new ideas.
He hasn't really articulated those in a meaningful way to the market yet. But we think it'll be an interesting company to catch up with in the February reporting season. And it's one we've sold out of, but I wouldn't say it's one we've put a line through entirely forever.
Thanks, Kieran. So question here about PWR Holdings. Any thoughts on them and what's been a difficult year for them?
Yeah. Thanks, Geoff. PWR, really interesting business. Once again, another one we do know and we haven't owned in the portfolio, but have been on our watch list for a number of years. PWR's founder Kees Weel and provides radiators, cooling systems for a lot of high-end vehicles in terms of most of the Formula 1 cars will have a PWR cooling system inside it. They've also been doing lots of work with electric vehicles and other aerospace and interesting technologies. So it has ticked a lot of our boxes. Always had a good balance sheet. But I guess possibly the reason for the question, they had a bit of a hiccup this year where I guess they've had to sort of reassess how much they invest in the business, which makes sense.
I think when you're running a business, they have to reinvest and they go through periods where you don't sort of have linear earnings flow, but it's come to a time where they're slowing their top line a little bit, so it has impacted their margins quite significantly and will probably for the next shorter to medium term and has caused probably a 30% fall in the share price, so we think it looks really interesting. It does tick a lot of our boxes, but once again, we're just trying to ascertain the sort of underlying demand and the amount they have to reinvest in the business before we get a sort of a true sense of the value and whether it can grow off that base, so yeah, I'd say that's on our watch list at the moment.
Thanks, Stuart. All right. Is Trajan a business that meets your investment parameters?
Yeah. Look, so Trajan, we did quite a bit of work on this when they were listing. The IPO went and met them, did a site visit. I think the question there is to say management is sound. I'd agree with that. We respect any founder who's built a business themselves up from not much. That's been the case here. But when you get into the listed world, it gets back to what I was saying before, particularly as a small company. If you don't have a really strong competitive differentiation and therefore growth that comes from that, it can get challenging, and so we sort of think we haven't been seeing the company as closely recently. We're aware of their operations. It's been a bit mixed with their performance.
We need to see more evidence that they're sort of a winner in their sector for that one to come up our list in terms of allocating times at the moment.
Thanks, Kieran. So we've got a question about Ramsay Health Care. So clearly, with the share price fall, would it be within your investable universe now? Do we have any interest? And surely it's showing below replacement cost of the property assets. And the government needs to resolve issues associated with the healthcare sector, i.e., force private health insurers to pass on more of the premiums. It must be on the radar of private equity now.
It seems like our office must be bugged. It was interesting. We were going through this morning thinking about new year reporting season coming up. What are the sorts of things we should be looking at? And the answer to the question is yes, it's back in our investable universe from a market cap point of view. It's interesting just looking at it. I think the market cap's around seven billion. Think about a Medibank Private. The health insurer is about 10. So it's interesting that now the health insurer is much bigger than the hospital operator. This just goes back to the pressure this company's been under. It's been a perfect storm from two fronts. One is just margin pressure. We've had inflation, and it's been really hard for them to recover that on a case-by-case basis. But equally, there's been an overcapacity in the industry.
There's been a shift in the way people are treated, less overnight stays, more daycare, and therefore, the expansion the industry went through has left sort of empty capacity. And those two things together are just toxic for the return on capital in a high asset intensity business like this, so that explains why it's fallen as much as it has. It's hard in isolation to see how those trends change. It sort of feels like they're under a lot of pressure. What do they do to fix that internally? It's really, really tough, but to the question in the back of our mind is, well, they're still operating better than all the other private hospital operators out there in terms of their financial metrics, and theirs aren't flash. This is a sector that is completely necessary.
You can't have hospitals shutting down left, right, and center with an aging demographic. So what could happen to change the current earnings dynamic to make this back on a stable footing again? They're the thoughts we're starting to have. And yeah, if you think about it from replacement costs of the assets and the things that were in the question, it's an interesting angle. So it's a space we'll be watching. Keen to meet them in February. Think about how they're thinking about some of these aspects, but it's hard to see a quick fix at the moment.
Thanks, Kieran. Got a question here about the shape of the New Zealand economy, and I'll just throw in the fact that we've sort of been investigating more New Zealand companies more recently, perhaps if you'd link the two sort of comments.
Yeah. So the New Zealand economy has been and is struggling. They had a much more pronounced interest rate cycle than us. The way that their Reserve Bank dealt with inflation was far more aggressive than the Australian setting and probably far more aggressive than most countries around the world. So that caused significant economic pain in the short term. But what it's meant is they've been able to get on a rate-cutting cycle sooner than the Australian market. So we don't sort of say the New Zealand economy is about to pick up because rates are being cut. Let's go and find some New Zealand companies. We're meeting businesses all the time. And it so happens that several of those businesses we've met are from New Zealand, as they often are. And when you look at the valuation of them, they just look really interesting.
I think that goes to the fact that there's been a bit of pain, so because the earnings have been under a bit of pressure, the way we look at companies is on a medium to long-term view and sort of thinking about through the cycle what it'll look like when it's back to average conditions, and therefore they've stacked up better than Aussie companies, so we think there's a bit of value on the equity market, and we think they're further into their rate-cutting cycle than we are, so maybe the economy has a better chance to rebound a bit more than the Australian one does in the short term.
Thanks, Kieran. Got a question here about any interest in Southern Cross Electrical. I'll pass that across to Stuart.
Yeah. Thanks, Geoff. Look, it isn't one that we own or currently own. I know it's, from what I understand, quite well run. I think it's been attracting a little bit of attention in the market in terms of as a way to play electrification and more recently how well they're positioned in the data center space. And I guess I think some of those themes are absolutely true. But we just sort of come back to them being a contractor and the sort of variability of the work and the revenues and the margins makes it hard for us. So we just haven't played there in that space.
Thanks, Stuart. Well, thanks to everyone for the questions. Quite a number of them, and reliable questions, which we're grateful for. So I have no further questions here. So I'll pass back to Mark to close the meeting.
Okay. Well, thank you, everyone, for attending these briefings. They're really important because it gives shareholders the opportunity to ask questions of the team, which is an important part of our accountability. I think there's an opportunity coming up in March, the shareholder information meeting. So we'll be going around the country, most of the major cities. So if you want to come along those and meet the team and ask more questions, please do. And then we'll be doing our full year result webinar in the same format as this in July. So thank you for your attendance.
That does conclude today's webinar. Thank you for your participation. you me now at this disconnect.