DNR Capital Australian Emerging Coms (PIM4357AU) Report & Performance

What is the DNR Capital Australian Emerging Coms fund?

The DNR Capital Australian Emerging Companies Fund is designed for investors seeking a medium-to-longer term investment focused on achieving growth, with less focus on generating excess income. The investor is prepared to accept higher volatility in pursuit of higher growth.

  • Style neutral with a quality focus
  • The Fund’s investment objective is to invest in a portfolio of Australian emerging companies that aims to outperform the Benchmark (net of fees) over a rolling five -year period.
  • Maximum exposure to an individual security is 15% of Fund NAV.
    Minimum exposure of 60% of the Fund NAV to be invested in the S&P/ASX Small Ordinaries.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For DNR Capital Australian Emerging Coms

DNR Capital Australian Emerging Coms Fund Commentary September 30, 2023

The DNR Capital Australian Emerging Companies Fund decreased -5.14% (net of fees) in September, underperforming the S&P/ASX Small Ordinaries Total Return Index by -1.10%. Since inception, the Fund increased by 10.36% p.a., outperforming the Index by 8.83% p.a. (net of fees).

Equity markets declined through September, primarily due to the surge in global bond yields. Over the past few months, long-term bond yields have seen a significant rise, reaching new cycle highs. For instance, the 10-year government bond yield in Australia has now surpassed 4.5%, driven by the aggressive tightening of monetary policy by the major central banks. Persistent high inflation due to a robust economy and rising oil prices has also led central banks to signal that interest rates are likely to remain “higher for longer.” This scenario presents a more challenging environment for equity markets, with concerns surrounding the potential effects of elevated bond yields on global growth.

In September, rising bond yields posed challenges to market valuations, particularly affecting longer-duration growth stocks, which generally underperformed value sectors. This impacted the Fund’s holdings in the Consumer Discretionary sector, which contributed to the underperformance versus the index during the month. This included holdings like Tabcorp Holdings (TAH), Lovisa Holdings (LOV) and Breville Group (BRG), which saw share price declines of 10% or more during the month. Despite the uncertain earnings outlook in the short-term, we continue to see considerable long-term value in these opportunities, with valuations and earnings expectations having significantly rebased lower over the past year.

The Energy sector was one of the few sectors that outperformed the Index during the month, benefiting from higher oil prices driven by constrained supply and resilient demand. This saw the Fund’s holdings in Whitehaven Coal (WHC) and Beach Energy (BPT) outperform during the month, with both companies rebounding from depressed valuations. We continue to see attractive opportunities across the Energy sector, with the market too pessimistic on the outlook in our view. The transition towards renewable energy is likely to take many decades given the cost and technological constraints involved, with traditional energy still necessary during this transition period. Despite this resilient demand outlook, investment in new supply has been curtailed in recent years, resulting in tight markets for traditional energy commodities.

We believe that the Australian small-cap sector is currently offering compelling opportunities for longterm investors who are willing to look beyond the near-term uncertainty. Following the recent sell-off, this sector has underperformed large caps by nearly 20% over the past two years. Valuations have also declined, with many high-quality small-cap stocks now trading at significant discounts relative to comparable large-cap stocks, despite what we see as their superior medium to long-term growth potential. Earnings expectations have also adjusted downward, with the forward earnings per share (EPS) for the index now below pre-COVID-19 levels, following a recent 15% aggregate downgrade. This is a stark departure from the scenario of two years ago when valuations and earnings were at peak levels, often described as ‘priced for perfection’.

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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.
DNR Capital Australian Emerging ComsPIM4357AUManaged FundsDomestic EquityAustralian Small CapDomestic Equity - Small Cap IndexASX Index Small Ordinaries Index69.44 M1.15%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.
DNR Capital Australian Emerging Coms4.99%14.61%32.54%8.79%13.48%19.91%18.32%21.92%-9.56%-16.99%-27.01%

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.
DNR Capital Australian Emerging ComsDomestic Equity - Small Cap Index11.24%5.81%NA%NA%NA%1.6110.74%9.65%0.930.91

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
DNR Capital Australian Emerging ComsYes-https://dnrcapital.com.au/-

Product Due Diligence

What is DNR Capital Australian Emerging Coms

DNR Capital Australian Emerging Coms is an Managed Funds investment product that is benchmarked against ASX Index Small Ordinaries Index and sits inside the Domestic Equity - Small 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 DNR Capital Australian Emerging Coms has Assets Under Management of 69.44 M with a management fee of 1.15%, 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 DNR Capital Australian Emerging Coms has returned 4.99% in the last month. The previous three years have returned 8.79% annualised and 21.92% each year since inception, which is when the DNR Capital Australian Emerging Coms 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 DNR Capital Australian Emerging Coms first started, the Sharpe ratio is NA with an annualised volatility of 21.92%. The maximum drawdown of the investment product in the last 12 months is -9.56% and -27.01% 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 DNR Capital Australian Emerging Coms has a 12-month excess return when compared to the Domestic Equity - Small Cap Index of 11.24% and 5.81% 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. DNR Capital Australian Emerging Coms has produced Alpha over the Domestic Equity - Small Cap Index of NA% in the last 12 months and NA% since inception.

What are similar investment products?

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

What level of diversification will DNR Capital Australian Emerging Coms provide?

DNR Capital Australian Emerging Coms has a correlation coefficient of 0.91 and a beta of 1.61 when compared to the Domestic Equity - Small 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 DNR Capital Australian Emerging Coms and its peer investments, you can click here for the Peer Investment Report.

How do I compare the DNR Capital Australian Emerging Coms with the ASX Index Small Ordinaries Index?

For a full quantitative report on DNR Capital Australian Emerging Coms compared to the ASX Index Small Ordinaries Index, you can click here.

Can I sort and compare the DNR Capital Australian Emerging Coms to do my own analysis?

To sort and compare the DNR Capital Australian Emerging Coms financial metrics, please refer to the table above.

Has the DNR Capital Australian Emerging Coms 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 DNR Capital Australian Emerging Coms?

If you or your self managed super fund would like to invest in the DNR Capital Australian Emerging Coms please contact via phone or via email .

How do I get in contact with the DNR Capital Australian Emerging Coms?

If you would like to get in contact with the DNR Capital Australian Emerging Coms manager, please call .

Comments from SMSF Mates

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

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Historical Performance Commentary

Performance Commentary - August 31, 2023

The DNR Capital Australian Emerging Companies Fund decreased -3.24% (net of fees) in August, underperforming the S&P/ASX Small Ordinaries Total Return Index by -1.93%. Over the last 12 months, the Fund increased by 1.01%, outperforming the Index by 2.13% (net of fees).

Equity markets experienced a volatile month during the August reporting season, with outsized share price moves as investors reacted to a mixed set of earnings announcements. Contributing to this volatility was a market characterised by significant dispersion in valuations, earnings expectations, and sentiment, as investors continue to deal with a highly uncertain macro environment. It was surprising to see the extent of the outperformance of many growth-focused companies in the Index where the Fund is underweight, with valuations for a number of barely profitable companies reaching extremely elevated levels. The lack of valuation discipline creeping into some sectors of the market also seems at odds with the current higher interest rate environment.

Key positive contributors during the month came from holdings in the Consumer Discretionary sector including Breville Group (BRG), ARB Corporation (ARB), Lovisa Holdings (LOV) and Tabcorp Holdings (TAH). With many consumer companies selling off earlier in the year, and investors cautiously positioned, these companies recovered following better than feared earnings releases.

The main disappointment during the month was Iress (IRE), which explains all the Fund’s underperformance versus the Index. Its shares fell sharply following weaker earnings guidance, with the restructuring being undertaken by new management weighing on profitability more than we had anticipated in the short-term. We discuss IRE in further detail below.

Financials sector holdings like Credit Corp Group (CCP) and Pinnacle Investment Management Group (PNI) also detracted from the Fund’s performance, giving back some of the prior month’s strong gains.

Reviewing reporting season overall there were several key takeaways. Firstly, despite concerns around the outlook for the global economy, consumer exposed companies were some of the strongest performers during the month.

Demand has generally proven to be more resilient than feared, with results coming in ahead of conservative expectations. There are also signs of inflationary pressures starting to ease, with several companies highlighting the early signs of falling raw material costs and lower freight rates. In recent months, we have been highlighting the opportunities emerging in the Consumer Discretionary sector. Share prices have fallen significantly, valuations have de-rated, and earnings are being downgraded, offering compelling entry points for quality businesses with attractive long-term outlooks. The fact that inflationary pressures are easing is also positive, as this suggests that risks to margins have started to stabilise.

One such opportunity in the Fund is BRG. Despite uncertainties in the near-term environment, the FY23 results underscored the company’s ability to sustain margins while reinvesting back into the business.

Management’s focus on research and development is resulting in a healthy pipeline of new products, which will help to drive sales growth in the coming years. In the structurally growing coffee category, the company is building strong market leadership globally with a range of premium coffee machines. Geographical expansion is also firmly on the company’s agenda, with a particular focus on Asia, commencing with the South Korean market. We believe that BRG is a great example of a business building economies of scale, allowing it to further reinvest and strengthen its market position over time.

Some of the challenges facing the mining sector were evident during the recent reporting season. Mining is a sector we have become more cautious on in recent months, with the latest reporting season highlighting some of our concerns. This includes the challenges associated with delivering a significant pipeline of new projects at a time of labour shortages, capital cost inflation and falling revenue due to weaker commodity prices.

We expect this challenging outlook could continue. A significant amount of capital has come into the sector in recent years, especially in commodities exposed to decarbonisation like lithium. This is set to result in supply expanding materially in the coming years. We also believe that industry forecasts around decarbonisation may prove too optimistic in the short to medium-term, leading to lower demand forecasts.

IRE was the main disappointment for the Fund during reporting season, with its shares falling significantly after downgrading earnings guidance. Following mismanagement and suboptimal capital allocation decisions by the previous management team, the new management team is looking to turn the business around with a private equity style mindset. The new strategy is to reinvest in the core wealth management business which has been neglected, and to exit non-core assets which are diluting returns. Management has already sold MFA for $52m and is on-track to divest the platform business, with proceeds from both sales being used to de-lever the balance sheet. The company is also exploring other non-core asset sales such as mortgages and UK wealth.

The business generates over $600m in revenues yet has a cost base close to $500m. We believe there is ample opportunity to right-size the business and achieve similar margins and returns profile that align favourably with those of its publicly listed peers. Transformations are rarely linear, and we have used the share price weakness to add to the portfolios position. If management can execute on its strategy, we see material upside to the current share price, with the shares now trading on the lowest price to sales multiple since its IPO in 2001 (1.9x sales).

We continue to look for strong bottom-up investment opportunities, in quality companies trading at attractive valuations. Key positions are currently across the Consumer Discretionary, Financials, Industrials, Technology and Energy sectors. The short-term bias of many investors is resulting in a range of de-rated quality opportunities, especially in companies experiencing some uncertainty in the short-term, yet where the longterm outlook remains attractive. We believe that taking a longer-term view on these opportunities will be rewarded, especially once the uncertainty around the outlook for the economy and earnings improves.

Performance Commentary - July 31, 2023

The DNR Capital Australian Emerging Companies Fund increased 6.45% (net of fees) in July, outperforming the S&P/ ASX Small Ordinaries Total Return Index by 2.91%. Over the last 12 months, the Fund increased by 11.19%, outperforming the Index by 10.42% (net of fees).

Equities posted strong gains during July, despite ongoing uncertainty surrounding the outlook for the global economy. Falling inflation is providing optimism that the major central banks could be nearer the end of their tightening cycle, increasing the potential for a soft landing. Although risks around the lagged impact of tighter monetary policy remain, for now, this is being outweighed by a fairly resilient global economy. Unemployment remains low, with household budgets benefiting from higher wages and falling inflation. The positive surprise with falling inflation is that it hasn’t been accompanied by a substantial weakening in the labour market, raising hopes that the hard landing scenario expected by many investors over the past year could be avoided.

With elevated cash holdings and generally cautious investor positioning, this positive sentiment saw equity markets recover strongly through July. Small caps marginally outperformed relative to large caps, with the S&P / ASX Small Ordinaries Index increasing 3.5%, versus the ASX 100’s 2.8%.

We continue to see the opportunity for further mean reversion over time, especially as investor confidence progressively returns. Small caps have significantly underperformed over the past 18 months, with valuations falling to more attractive levels. However, we note that a selective approach is still required, with pockets of overvaluation persisting; this is especially the case in the defensive sectors and in the more speculative/unprofitable business models across sectors like Health Care, Information Technology, and mining exploration. Once again, this highlights the importance of focusing on quality business models at attractive valuation entry points.

During July, the more cyclical sectors like Financials, Consumer Discretionary, and Energy outperformed the ASX Small Ordinaries Index. In previous months, we have discussed the opportunities emerging in these sectors. Although the near-term outlook remains uncertain, our focus has been on identifying quality business models that have seen share prices and valuations fall to attractive levels. Although the outlook for earnings continues to be challenging in the nearterm, the opportunity for long-term focused investors is to identify where this is already being priced in.

During July, the Fund’s performance benefited from the recovery in several of these holdings bought earlier in the year; including Credit Corp Group (CCP) and Breville Group (BRG), two of the Fund’s largest positive contributors to performance during the month.

Performance Commentary - June 30, 2023

The DNR Capital Australian Emerging Companies Fund increased 2.85 % (net of fees) in June, outperforming the S&P/ ASX Small Ordinaries Total Return Index by 2.82%

For the 2023 financial year, the Fund returned 10.6% (net of fees), outperforming the benchmark’s return of 8.4%. Small caps continued to underperform relative to large caps, with the ASX100 returning 15.1% over the last 12 months. This underperformance reflects investor positioning and highlights the potential for mean reversion in small caps once investor confidence improves.

Equities posted strong gains in the face of continued economic uncertainty from higher interest rates and geopolitical tensions. Softer inflation prints, domestically and in the US, suggest we may be closer to a peak in interest rates. Additionally, despite the inverted yield curve signalling a potential recession, economic data continues to demonstrate resilience.

Key contributors to the Fund’s performance in June came from positions we have been rebuilding in the hardest hit sectors such as Financials. Credit Corp (CCP) rebounded as we believe shares were already pricing in a recession scenario, trading at its lowest historical valuation range. Pinnacle Investment Management (PNI) outperformed with its suite of active fund managers well positioned to attract flows as conditions improve. Key detractors came from the Consumer Discretionary sector, such as Lovisa Holdings (LOV).

This sector appears to be facing the most headwinds from continued cost of living pressures. However, it presents an opportunity for long term investors willing to look through near term volatility. Despite suffering substantial share price declines, the consumer space saw further downward pressure due to sell reports issued by brokerage firms. We maintain our view that the consumer space is starting to throw up attractive opportunities for long-term investors, and we continue to actively seek investments within the sector.

Performance Commentary - May 31, 2023

The DNR Capital Australian Emerging Companies Fund decreased 3.74% (net of fees) in May, underperforming the S&P/ASX Small Ordinaries Total Return Index by 0.48%. Over the last 12 months, the Fund decreased by 1.76%, outperforming the Index by 4.01% (net of fees).

Contributors

• Tabcorp (TAH): held its investor day during the month, reiterating its 2025 growth targets. The company is poised to gain significant advantages from regulatory changes, including increased corporate bookmakers taxes. These changes will effectively remove the structural disadvantage TAH faces, enabling them to compete on a level playing field.

• Allkem (AKE): announced a merger of equals with Livent, creating a leading global lithium chemicals producer. This strategic move combines diverse assets spanning various jurisdictions, thereby establishing a robust and vertically integrated business model.

Detractors

• Whitehaven Coal (WHC): recent decline can be attributed to the retracement of thermal coal prices back to their long-run average. WHC has over half its market capitalisation in cash, and the onmarket share buy-back continuing, with 18% of its outstanding shares to go.

Performance Commentary - April 30, 2023

The DNR Capital Australian Emerging Companies Fund increased 3.53% (net of fees) in April, outperforming the S&P/ASX Small Ordinaries Total Return Index by 0.75%. Over the last 12 months, the Fund decreased by 0.87%, outperforming the Index by 8.56% (net of fees).

Contributors
• IPH (IPH): the company updated the market about its recent cyber-breach, indicating minimal client impact and that no data from IPH’s document management system was compromised (where sensitive pre-filing patent information lies). Market sentiment lifted on the news of the minimal effects on client losses.

• Breville Group (BRG): reaffirmed guidance of EBIT for the full year of between $165m – $ 172m.

• Whitehaven Coal (WHC): ended 31 March 2023 in a net cash position of $2.7bn, representing nearly half of its market capitalisation. WHC will recommence the on-market share buy-back now that the required blackout period has ended.

Detractors
• Deterra Royalties (DRR): reported royalty receipts for the March quarter of $59.9m, 32% above the December quarter, due to higher realised prices over marginally lower sales volumes.

• PEXA Group (PXA): shares consolidated gains from the prior month. Whilst property listing volumes are currently subdued, we can expect them to improve as we move past the fourth quarter of 2023.

• Telix Pharmaceuticals (TLX, no holding): shares rose strongly for the month as its prostate imaging cancer drug, Illuccix, reported sales up 27% for the 1st quarter of 2023.

Performance Commentary - March 31, 2023

The DNR Capital Australian Emerging Companies Fund decreased by 0.28% (net of fees) in March, outperforming the S&P/ASX Small Ordinaries Total Return Index by 0.44%. Over the last 12 months, the Fund decreased by 6.38%, outperforming the Index by 6.81% (net of fees).

March was volatile for equity markets, with fears of another banking crisis breaking out after the runon deposits and subsequent collapse of Silicon Valley Bank (SVB) in the US. Fears quickly spread to the solvency of Credit Suisse, which led to a hastily arranged weekend merger with UBS. The focus on the fragility of the banking system certainly brought back memories of the Global Financial Crisis, with investors fearing the risk of contagion across the banking sector. The potential for tighter credit would be negative for growth, compounding investor concerns of a recession. These events saw the small cap sector selling-off sharply, with the benchmark falling over 5%. Government measures were then announced to stabilise the banking sector, including guarantees for SVB depositors, helping ease investor fears of a wider banking crisis. The market proceeded to recover nearly all the month’s earlier losses.

Performance Commentary - February 28, 2023

The DNR Capital Australian Emerging Companies Fund decreased 4.91% (net of fees) in February, underperforming the S&P/ASX Small Ordinaries Total Return Index by 1.21%. Over the last 12 months, the Fund increased by 0.14%, outperforming the Index by 8.11% (net of fees).

Equity markets gave back most of the strong start to the calendar year as attention turned to reporting season. Results came in below expectations with earnings misses outweighing earnings beats. Weaker results came from the Consumer Discretionary sector with soft trading updates reflecting a cautious consumer due to cost of living pressures. The more resilient results came from Consumer Staples as consumers traded down, as well as Information Technology companies with recurring revenues. A key theme coming out of reporting season was difficult operating conditions. While supply chain pressures have eased, wage price growth presents a key challenge. Wages are growing at the fastest pace since 2007 and presents a concern for the Reserve Bank of Australia (RBA) that the Australian economy remains overheated despite ten consecutive interest rates rises.

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