Celeste Australian Small Companies (FAM0101AU) Report & Performance

What is the Celeste Australian Small Companies fund?

The Celeste Australian Small Companies Fund provides an actively managed exposure to ASX-listed shares that are outside of the ASX100. It typically invests in approximately 30-50 companies that we expect will outperform over the medium to long term.

  • High conviction fund: we apply our investment process to stock selection, resulting in a typical exposure to 30 to 50 of our best investment ideas
  • Scalable and repeatable process: our investment process has been proven and tested over the long term with strong annualised performance since the inception of the strategy
  • Specialist investment experience: we are a highly focussed boutique firm that only manages small companies funds, with a team that has more than 80 years of collective investment experience.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For Celeste Australian Small Companies

Celeste Australian Small Companies Fund Commentary September 30, 2023

The Fund fell 3.6%1 (net of fees) in September, with its benchmark, the S&P/ASX Small Ordinaries Accumulation Index, decreasing by 4.0%. Since inception (May 1998) the Fund’s return is 11.6%1 p.a. (net of all fees), against the Index’s 5.2% p.a.

Aussie Broadband(ABB) rose 15.1% in September, with the stock climbing higher as a resolution appears increasingly likely to the extended NBN Co SAU variation process. In August, management highlighted a renewed focus on potential acquisitions after the successful integration of Over The Wire and swiftly followed through with a non-binding indicative offer for Symbio Holdings (SYM) late in the month. ABB’s $3.15 per share cash and scrip bid secured 3 weeks exclusivity with competing bidder Superloop (SLC) confirming their Best and Final Offer has lapsed. The accretive acquisition would significantly boost ABB’s capability and scale in the voice space and add a number of large enterprise customers, furthering the company’s diversification away from core broadband into a complete telco offering.

Domain Holdings Australia (DHG) rose 3.9% in September. The stock drifted higher off the back of positive revisions to market expectations for FY24 new listings following positive recent data points from CoreLogic and PropTrack. The Australian property market experienced an unseasonably strong winter with YoY growth in national listings turning from -5% in July to +4% in August with further improvement likely in September. The market recovery has been led by Sydney and Melbourne which saw listings growth of +18% and +21% respectively in August, areas where DHG overindexes. The outlook remains positive into the key spring selling season with stability in interest rates likely to support strengthening consumer confidence.

Deterra Royalties (DRR) rose 7.6% and Champion Iron (CIA) 3.5%, as growing expectations of People’s Bank of China stimulus held up the iron ore price over the month. DRR continues to provide long-term exposure to long-term royalty cash flow out of BHP’s flagship Mining Area C, while also receiving one-off payments as production reaches nameplate capacity. CIA offers exposure to high-grade iron ore out of their Bloom Lake project that should be a substantial beneficiary of a decarbonisation of the steel industry.

Bellevue Gold (BGL) fell 18.1% upon a drop in the gold price. During the month, BGL provided a strong drilling update, also confirming they remain on track for first production in the upcoming December quarter. The update also noted the second campaign of toll treating is underway, which should alleviate any funding concerns. We remain positively disposed to the attractive economics of the project and its tier-1 location.

READ HISTORICAL PERFORMANCE COMMENTARIES

Product Snapshot

  • Product Overview
  • Performance Review
  • Peer Comparison
  • Product Details

Product Overview

Fund Name APIR Code
? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.
Structure
?
Asset Class
? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.
Asset Category
? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.
Peer Benchmark Name
? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.
Broad Market Index
? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.
FUM
? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
Management Fee
? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.
Performance Fee
? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Spread
? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
Celeste Australian Small CompaniesFAM0101AUManaged FundsDomestic EquityAustralian Mid CapDomestic Equity - Mid Cap IndexASX Index MidCap 50 Index79.00 M1.1%0.00%0.6%

Performance Review

Fund Name Last Month
? Returns after fees in the most recent (last) month).
3 Months Return
? Returns after fees in the most recent 3 months.
1 Year Return
? Trailing 12 month returns.
3 Years Average Return
? Average Annual returns from the last 3 years.
Since Inc. Average Return
? Average (annualised) returns since inception
1 Year Std. Dev. (Annual)
? The standard deviation (or annual volatility) of the last 12 months.
3 Years Std. Dev. (Annual)
? The average standard deviation (or annual volatility) from the last 3 years.
Since Inc. Std. Dev. (Annual)
? The average standard deviation (or annual volatility) since the fund inception.
1 Year Max Drawdown
? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
3 Year Max Drawdown
? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Since Inc. Max Drawdown
? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Celeste Australian Small Companies3.68%4.16%8.22%-0.11%9.06%13.46%16.51%17.02%-7.72%-25.88%-51.25%

Peer Comparison

Fund Name Peer Index Name
? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.
12 Months Excess Return
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
Excess Return Annualised Since Inception
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
12 Months Alpha
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
Alpha Annualised Since Inception
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
12 Months Beta
? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
Beta Annualised Since Inception
? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
12 Months Tracking Error
? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
Tracking Error Since Inception
? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
12 Months Correlation
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Correlation Since Inception
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Celeste Australian Small CompaniesDomestic Equity - Mid Cap Index0.32%-2.62%0.06%-0.18%-0.18%0.954.86%6.02%0.940.94

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
Celeste Australian Small CompaniesYesLevel 14, 15 Castlereagh St, Sydney NSW 2000+61 02 9216 1800https://www.celestefunds.com.au/contact@celestefunds.com.au

Product Due Diligence

What is Celeste Australian Small Companies

Celeste Australian Small Companies is an Managed Funds investment product that is benchmarked against ASX Index MidCap 50 Index and sits inside the Domestic Equity - Mid Cap Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Celeste Australian Small Companies has Assets Under Management of 79.00 M with a management fee of 1.1%, a performance fee of 0.00% and a buy/sell spread fee of 0.6%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the Celeste Australian Small Companies has returned 3.68% in the last month. The previous three years have returned -0.11% annualised and 17.02% each year since inception, which is when the Celeste Australian Small Companies first started.

How is risk measured in this investment product?

There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Celeste Australian Small Companies first started, the Sharpe ratio is 0.39 with an annualised volatility of 17.02%. The maximum drawdown of the investment product in the last 12 months is -7.72% and -51.25% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.

What is the relative performance of the investment product?

Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Celeste Australian Small Companies has a 12-month excess return when compared to the Domestic Equity - Mid Cap Index of 0.32% and -2.62% since inception.

Does the investment product produce Alpha over its Peers?

Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Celeste Australian Small Companies has produced Alpha over the Domestic Equity - Mid Cap Index of 0.06% in the last 12 months and -0.18% since inception.

What are similar investment products?

For a full list of investment products in the Domestic Equity - Mid Cap Index category, you can click here for the Peer Investment Report.

What level of diversification will Celeste Australian Small Companies provide?

Celeste Australian Small Companies has a correlation coefficient of 0.94 and a beta of 0.95 when compared to the Domestic Equity - Mid Cap Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.

How do I compare the investment product with its peers?

For a full quantitative report on Celeste Australian Small Companies and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Celeste Australian Small Companies with the ASX Index MidCap 50 Index?

For a full quantitative report on Celeste Australian Small Companies compared to the ASX Index MidCap 50 Index, you can click here.

Can I sort and compare the Celeste Australian Small Companies to do my own analysis?

To sort and compare the Celeste Australian Small Companies financial metrics, please refer to the table above.

Has the Celeste Australian Small Companies been independently verified by SMSF Mate?

This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.

How can I invest in Celeste Australian Small Companies?

If you or your self managed super fund would like to invest in the Celeste Australian Small Companies please contact Level 14, 15 Castlereagh St, Sydney NSW 2000 via phone +61 02 9216 1800 or via email contact@celestefunds.com.au.

How do I get in contact with the Celeste Australian Small Companies?

If you would like to get in contact with the Celeste Australian Small Companies manager, please call +61 02 9216 1800.

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Celeste Australian Small Companies. All data and commentary for this fund is provided free of charge for our readers general information.

Historical Performance Commentary

Performance Commentary - August 31, 2023

The Fund rose 0.4%1 (net of fees) in August, with its benchmark, the S&P/ASX Small Ordinaries Accumulation Index, decreasing by 1.3%. Since inception (May 1998) the Fund’s return is 11.8%1 p.a. (net of all fees), against the Index’s 5.4% p.a.

Aussie Broadband (ABB) rose 29.8% in August. The company reported $89.6m EBITDA (guidance: $85-90m), with their continuing growth trajectory supporting forward guidance for $100- 110m FY24 EBITDA. Management highlighted the high margin opportunity into FY24 from Enterprise & Government with $10m new unbilled revenue and a growing sales pipeline. During the month NBN Co also lodged their latest SAU variation which dictates their wholesale pricing. NBN Co selected ABB’s preferred “Option 2” pricing structure and received positive early feedback from the ACCC suggesting the SAU could be implemented before the end of 2023. This should provide cost certainty for retailers and specifically benefit ABB through reduced costs for higher speed plans.

Redox (RDX) rose 12.5% in August, with the share price performance driven by a pleasing maiden earnings report. The FY23 result was ahead of Prospectus forecasts on almost all lines of the income statement, resulting in underlying NPAT of $89.1m coming in 10% ahead of Prospectus of $81.3m. Moreover the strong FY23 result augurs well for another Prospectus beat in FY24. We remain attracted to Redox, as it is a family-founder led company, with a long track record of earnings growth, net cash balance sheet and trading at an undemanding valuation.

Nick Scali(NCK) rose 16.9% over the month of August on the back of a strong FY23 result that exceeded market expectations. Despite a deteriorating consumer backdrop, the result highlighted that management are doing a good job controlling the factors they can control – disciplined cost management, integration of Plush and tight management of inventory. NCK remains a high-quality retailer with a strong balance that we believe will continue to find ways to grow.

Judo Capital (JDO) closed the month down 32.6%. Despite meeting strong loan growth targets the stock saw an uptick in arrears and past due loans. Market concerns remain around how higher rates will translate into loan losses and impact future capital levels. The use of higher cost wholesale funding in the short term to repay the term funding facility (versus term deposits) will see FY24 net interest margins (NIM) decline below the targeted 300bp level. Ongoing securitisation issuance should see a more even balance of funding by FY25 and drive a NIM recovery to levels back above 300bp. JDO looks undervalued.

Performance Commentary - July 31, 2023

The Fund rose 4.9%1 (net of fees) in July, with its benchmark, the S&P/ASX Small Ordinaries Accumulation Index, increasing by 3.5%. Since inception (May 1998) the Fund’s return is 11.8%1 p.a. (net of all fees), against the Index’s 5.5% p.a.

Credit Corp (CCP) rose 19.2% during the month, with the strong performance driven by industry feedback that the pricing of new debt ledger purchasers in the US had begun to soften, boding well for CCP’s future earnings in that segment. The strong performance in July was somewhat offset at the beginning of August when CCP reported its FY23 result . While the FY23 result was solid, meeting market expectations, the outlook for FY24 was weaker than expected due to what we view as extremely conservative guidance.

Monadelphous Group (MND) rose 16.2% in July. The company announced a series of key contract wins with $150m awarded across new and extended contracts with FMG, BHP and RIO, followed by a $200m award by Albemarle for SMPEI work on the expansion of the Kemerton lithium hydroxide plant. We remain positive on the forward pipeline for MND supported by management commentary that the Albemarle contract is “the first in a new wave of major construction projects to come to market”. MND disclosed their intention to vigorously defend a $80m claim against them by UnityWater in relation to design and construction of an upgrade to the Kawana Sewerage Treatment Plant.

PSC Insurance (PSI) declined 14.5% in July on the back of an unusual +16.2% Junemove. Removing the financial year end noise it rose a more normalised 1% over the last 2 months. In early August, PSC announced $111m EBITDA for FY23, up a strong 19%. PSC also guided to $122-127m of EBITDA in FY24 excluding any acquisitions. The interesting element of the FY24 guidance is that it is consistent with the earnings anticipated when PSC believed they would complete the proposed acquisition of 50% of Tysers in the UK. Core business performance and ongoing acquisitions have filled the earnings gap post AUB reneging on the Tysers deal.

Judo Capital (JDO) rose 15.2% in July post announcing the company had hit $8.9bn in gross loans as at 30th June. This 46% growth over the last 12 months was driven by increased banker activity and ongoing market share growth. While current market conditions are likely to see loan losses increase for the system, we believe that Judo is well placed to navigate these headwinds and use the well capitalised balance sheet to fund future growth.

Performance Commentary - June 30, 2023

The Fund rose 3.5%1 (net of fees) in June, with its benchmark, the S&P/ASX Small Ordinaries Accumulation Index, flat for the month. Since inception (May 1998) the Fund’s return is 11.7%1 p.a. (net of all fees), against the Index’s 5.3% p.a.

FleetPartners Group (FPR) rallied 18.4% during June. The stock has benefited from positive sentiment around the EV transition across Aust & NZ. The Electric Car Discount policy, providing FBT exemption for EVs in company fleets and novated leases, has also had a halo effect on increased awareness of the advantages of novated leasing. The ongoing buy-back program continues to support the share price with $43m undertaken in 2H23.

Credit Corp (CCP) rose 16.2% over the month as sentiment around the stock improved. The US debt purchasing business is benefitting from macro tailwinds with Q123 US credit card and revolving balances 14% above pre-pandemic levels. Ongoing increases in delinquency rates are expected to result in higher charge-offs and increased purchased debt ledger supply. In Australia, Q123 Equifax data showed total unsecured credit applications +7.5% and credit card applications +20.9%.

NRW Holdings (NWH) rose 16.1% in June. NWH continued a run of new work award announcements with a letter of intent signed with Allkem to provide mining services work at the Mt Cattlin lithium mine in Western Australia. The contract has an estimated value of $332m over 36 months. This was well received by the market as investors gained increased comfort that the delays in new contract awards (highlighted by management at the 1H23 result in February) are now being resolved and the enormous pipeline of work across the industry can begin working towards being realised. We remain positive on NWH and expect further new contract wins to be announced over the months ahead.

Infomedia (IFM) rose 14.3% over the month of June. IFM announced the appointment of Chantell Revie as CFO (from deputy CFO). Former CFO Gareth Turner was appointed to the newly created role of Chief Commercial Officer to focus on pricing strategy, contract management and automated business systems.

Performance Commentary - May 31, 2023

The Fund fell 3.4%1 (net of fees) in May, with its benchmark, the S&P/ASX Small Ordinaries Accumulation Index, decreasing by 3.3% over the month. Since inception (May 1998) the Fund’s return is 11.5%1 p.a. (net of all fees), against the Index’s 5.4% p.a.

Omni Bridgeway (OBL) rose 17.5% following the release of their Q3 update and the announcement of a further secondary market sale. OBL’s estimated portfolio value was up 4.4% over the quarter with 72% of their FY23 commitments target having now been achieved. The US$38m secondary market sale highlights the ongoing process of OBL managing duration across their funds.

NIB Holdings (NHF) rallied 9.5% on the back of a strong operational update and further expansion into NDIS plan management. NHF upgraded FY23 Australian residents’ health insurance net policyholder growth to 4-5% (from 3-4%) and New Zealand net policyholder growth to 4-5% (from 3-5%). Travel and International businesses continue to be strong. In the month NHF acquired All Disability, a Port Macquarie-based NDIS plan manager.

Smartgroup Corporation (SIQ) rose 8.0% in May post a Q1 update noting positive momentum with growing electric vehicle demand. EVs accounted for +20% of total novated leasing quotes in Q1, up from 15% in 4Q22 and <1% a year earlier(both direct and corporate customers). the q1 npata run rate was in line with 2h22, particularly strong result given loss of major client det victoria last ongoing automotive supply constraints. lifestyle communities (lic) fell 11.4% may post revised settlement guidance down 40 to 355-365. weaker housing market sentiment causing customers hesitate listing their existing homes. despite this reduction fy23, lic reiterated for fy23-25 1,400-1,700 new home settlements implying significant ramp up over next two years. average cap rates preliminary portfolio valuation were essentially flat (-4bps 5.14%), reflecting resilience land lease sector. eagers (ape) 12.7% month, on back softer agm trading update. maintaining full-year $9.5b -$10b sales, pbt period april. compared consensus expectations 13% growth half, leading subsequent fy23 earnings downgrades. while company pointed challenges vehicle cost pressures across broader economy, we believe these will be transitory. remain view that an elevated orderbook ev jv byd support medium term.

Performance Commentary - April 30, 2023

The Fund rose 2.4%1 (net of fees) in April, with its benchmark, the S&P/ASX Small Ordinaries Accumulation Index, increasingby 2.8% over the month. Since inception (May 1998) the Fund’s return is 11.7%1 p.a. (net of all fees), against the Index’s 5.5% p.a.

MA Financial(MAF) rose 16.7% during April as investors’ concerns regarding the future of Significant Investment Visa (SIV) inflows eased. The review noted the relative strength of outcomes of the SIV program relative to the broader Business Innovation and Investment Program. MAF also announced the acquisition of the d’Albora marina portfolio for $225m as part of the launch of their new MA Marina Fund. The sellers, Balmain Corp. chose to remain invested via the new fund, underwriting the attractiveness of the proposal.

IPH (IPH) rose 9.7% in April following better than expected updates in late March and mid-April regarding the cyber incident discovered earlier in March. IPH’s investigation found downloaded data was limited to a small number of Spruson & Ferguson clients with most IPH member firms unaffected. Further to this, IPH was able to quickly return to normal operations with key system functionality restored on new network infrastructure. IPH quantified the impact of the cyber incident to date announcing a $4.4m March revenue shortfall and $2-2.5m estimated one-off costs in FY23. IPH also confirmed Smart & Biggar achieved the full earn-out payment of C$66m reflecting strong performance post-acquisition.

NIB Holdings (NHF) rallied 9.5% over the month following ongoing expansion into the NDIS that was announced in late March. NHF purchased Brisbane-based Connect Plan Management and entered into an agreement to purchase All Disability Plan Management. The company expects to be the plan manager of approximately 50,000 participants by FY25 under their nib Thrive banner. Given the increased scrutiny of the NDIS, NHF’s entry into the space should provide a welcome improvement in oversight, controls, and the overall quality of outcomes for participants.

United Malt Group (UMG) fell 7.4% in April following a downgrade of 1H23 underlying EBITDA guidance. Previous guidance of $58- 66m most recently reaffirmed at their February AGM was reduced to $51m primarily driven by lower volume partially offset by improved commercial terms (-$4m) and a 2-month delay to the new Inverness facility start up (-$3m). Despite this weakness, UMG reaffirmed FY23 underlying EBITDA guidance of $140-160m supported by improving volume and margin trends through 2Q23. Following the $5.00 per share bid by Malteries Soufflet last month we exited the majority of our position at higher levels

Performance Commentary - March 31, 2023

]The Fund fell 1.2%1 (net of fees) in March, with its benchmark, the S&P/ASX Small Ordinaries Accumulation Index, decreasing by 0.7% over the month. Since inception (May 1998) the Fund’s return is 11.7%1 p.a. (net of all fees), against the Index’s 5.4% p.a.

United Malt Group (UMG) rose 33.1% in March after receiving a conditional, non-binding and indicative proposal to acquire all ordinary shares for $5.00 cash (+45.3% to last close) from Malteries Soufflet, the second largest maltster globally. The bid was the fourth received by UMG over the last 4 months post a period of share price underperformance. It highlights the significant strategic value in UMG’s global asset footprint in a period of broader industry consolidation. Malteries Soufflet has been granted an exclusive 10- week due diligence period to assist it in providing a binding proposal.

Global financial sector instability saw the AUD gold price rally to record highs, resulting in domestic miners Silver Lake Resources (SLR) and Gold Road Resources (GOR) rising 16.4% and 16.0% respectively. Our focus remains on production growth out of SLR’s Deflector asset as well as the operational turnaround at the recently acquired Sugar Zone project. Additionally, GOR’s prospects are promising with improving grade at Gruyere and the investment in De Grey Mining (DEG) offering strong upside potential.

Monadelphous Group (MND) rose 6.6% in March. The company announced $125m of new contracts and contract extensions with work across the lithium, iron ore and LNG sectors in WA, bringing total contract wins in FY23 to approximately $1.1b. MND also announced the closure of Buildtek, their 90% owned Chilean construction and maintenance services business. The Chilean resources sector has been significantly impacted by COVID which impacted Buildtek’s financial performance and significantly increased its working capital requirements. Buildtek contributed 5% of total revenues in FY22 and thus the cessation of operations isn’t expected to have a material impact on net assets or FY23 earnings. MND reiterated their previous FY23 guidance provided at the 1H23 result.

NRW Holdings (NWH) fell 1.8% in March. During the month the company announced the acquisition of OFI Group, a specialist in electrical engineering services and integration for $4m. OFI Group has an established history working with NWH’s RCR business and should enhance the capabilities of the METS division with expected FY24 revenue contribution of $40m. Additionally, NWH announced 2 new contracts won by the METS division with Fortescue Metals Group (FMG) with a total value of $64m.

Performance Commentary - February 28, 2023

The Fund fell 4.8%1 (net of fees) in February, with its benchmark, the S&P/ASX Small Ordinaries Accumulation Index, decreasing by 3.7% over the month. Since inception (May 1998) the Fund’s return is 11.8%1 p.a. (net of all fees), against the Index’s 5.5% p.a.

Listed car dealers Eagers Automotive (APE) and Autosports Group (ASG) rose 19.9% & 0.5% respectively off the back of strong earnings results in February. APE delivered Profit Before Tax (PBT) (adj) of $405.2m, in-line with expectations and set a FY23 revenue target of $9.5 – $10b, underpinned by FY22 acquisitions, BYD Auto sales, and organic growth initiatives. ASG delivered PBT of $52m, 9.9% ahead of expectations. No quantified guidance was provided, but the company noted continued momentum in 2h23. We remain positively disposed to both stocks. We believe both companies will continue to benefit from an elevated orderbook that should provide high earnings visibility over the next 12 – 24m.

Infomedia (IFM) rose 26.7% over the month, with the 1h23 result pointing to sales re-acceleration, good progress on cost control and a healthy sales pipeline. IFM delivered sales growth across all regions (hoh) and made solid progress in reshaping the cost base. The company disclosed $15m of potential annualrecurring revenue opportunities, and while they still have to be won, it highlighted a refocus on client engagement by the new management team. The balance sheet is net cash and IFM should see ongoing improved performance.

Australian Clinical Labs (ACL) rallied 16.5% during the month following a 1h23 result that beat market expectations. Although Covid revenue was down (PCR testing volumes) the core business revenue grew 18%. Management demonstrated strong cost control and maintained an operating profit margin of 11%, in line with previous guidance. Looking ahead, 2h23 has started strongly with Jan 23 LFL revenue growth of 22%. ACL is an appealing exposure to a defensive industry and remains cheap versus listed peers.

Omni Bridgeway (OBL) fell 25.0% on a weak result and the announcement of the retirement of the long-term CEO.Completions in the half were significantly lower than expected and operating costs were materially higher. With $304m of commitments during the period OBL are on track to achieve their FY23 target of $550m. We think the result and completions remain a timing issue.

NRW Holdings (NWH) fell 16.8% in February post a slightly softer than expected earnings result impacted by weather, delay of new contract awards and investment in North America. Cash conversion was softer driven by projects working capital releases and requirements. NWH reiteratedFY23 guidance of$2.6-2.7b revenue and $162-172m EBITA with normalising cash flow. NWH’s group pipeline is a strong $19.3b with orderbook up +$0.9bn to $4.9b.

Kind words from Aussies managing
their own self funded futures

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    Tim B, Business Owner, SMSF Trustee