HUB24 outperformed during the month as the company reported revenue and EBITDA marginally ahead of expectations, with net profit coming in even further ahead. The company also announced an on-market share buyback program. The share price responded positively as the result reaffirmed the strong fundamentals of the business and the market shrugged off some of the concerns it harboured earlier in the year regarding flow momentum, which the company flagged has re-accelerated in the new financial year. With attractive margins and operating leverage incrementally flowing through, the outlook remains compelling for HUB24.
MP1 outperformed as the company upgraded FY24 EBITDA at the result, following an upgrade of the FY23 EBITDA figures in the 4Q result the month prior. The result provided confidence to the market that recent changes to their go-tomarket strategy are gaining traction, unlocking operating leverage in the process.
JDO underperformed as the company met loan growth expectations however disappointed on NIM guidance. The market was not expecting the degree of decline in the NIM, driven primarily by a more expensive funding mix as the TFF is refinanced. Judo is growing its loan book quickly and its customer value proposition remains compelling. While there is some risk around achieving its metrics at scale, we remain positive on its competitive position in the market, its ability to take market share and its asset quality.
What is ECP Growth Companies ECP Growth Companies is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Growth 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 ECP Growth Companies has Assets Under Management of 9.62 M with a management fee of 0.9%, 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 ECP Growth Companies has returned 7.66% in the last month. The previous three years have returned 4.37% annualised and 21.65% each year since inception, which is when the ECP Growth 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 ECP Growth Companies first started, the Sharpe ratio is 0.29 with an annualised volatility of 21.65%. The maximum drawdown of the investment product in the last 12 months is -12.7% and -26.85% 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 ECP Growth Companies has a 12-month excess return when compared to the Domestic Equity - Large Growth Index of 11.04% and -0.38% 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. ECP Growth Companies has produced Alpha over the Domestic Equity - Large Growth Index of 0.44% in the last 12 months and -0.07% since inception.
What are similar investment products?
For a full list of investment products in the Domestic Equity - Large Growth Index category, you can click here for the Peer Investment Report.
What level of diversification will ECP Growth Companies provide?
ECP Growth Companies has a correlation coefficient of 0.93 and a beta of 1.55 when compared to the Domestic Equity - Large Growth 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 ECP Growth Companies and its peer investments, you can click here for the Peer Investment Report.
How do I compare the ECP Growth Companies with the ASX Index 200 Index?
For a full quantitative report on ECP Growth Companies compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the ECP Growth Companies to do my own analysis?
To sort and compare the ECP Growth Companies financial metrics, please refer to the table above.
Has the ECP Growth 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 ECP Growth Companies?
How do I get in contact with the ECP Growth Companies?
Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the ECP Growth Companies. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - July 31, 2023 Megaport Ltd outperformed following an upgrade to guidance and their 4Q result. The company upgraded normalised EBITDA, saying they expect FY24 EBITDA to be higher than the previously guided range of A$41-46m. Interestingly, this expectation is in the face of increased sales headcount and capital expenditure being put in to capitalise on the opportunity they see ahead of them.
GQG Partners Inc outperformed in July following its quarterly update which saw continued inflow momentum with US$1.2bn for 2Q23, and a further US$8.4bn added from strong performance over the quarter. We continue to see GQG as a leading franchise in the growth phase of its lifecycle at an attractive valuation.
Nuix Ltd outperformed after pre-reporting their FY23 results during the month. The result showed positive ACV, revenue and EBITDA growth, which was taken positively by the market. Reading into the results, Multi Year Deals as a percentage of revenue has declined, while other activity such as new deals, renewals, consumption increased. This is a positive sign for the company in our view.
Performance Commentary - June 30, 2023 FINEOS Corporation (FCL) outperformed during June following a landmark deal signed with Guardian Life – a major US life insurer – to adopt the full-suite of Fineos software modules (Policy Admin, Billing, and Claims) across a portion of its Group business. While a material deal in itself, it validates Fineos’ end-to-end platform solutions is ready for market. We expect a successful implementation will increase its chances of winning similar major deals across the North American life insurance market, as enterprise peers traditionally follow ‘safe bets’ when making major systems changes.
Corporate Travel Management (CTD) underperformed during June on the back of concerns around global corporate travel volumes. On a positive note, the company recently announced they had been successful in winning a large UK Government contract and that they also retained the Whole of Australian Government (WoAG), a contract that came to them with the HLO Corporate acquisition. In our view, the strategy to focus on SMEs in North America while retaining and growing the existing franchises in Australia and the European market is working well. With guidance for FY23 reaffirmed and FY24 still achievable, we think CTD offers a good medium to longer-term growth story. The focus now is all about execution and driving overall margins as more business moves online.
Performance Commentary - May 31, 2023 Megaport Ltd (MP1) outperformed on no news flow following the release of its 3Q results the month prior. Monthly Recurring Revenue accelerated in 3Q, growing 14% QoQ. This was driven by higher yield primarily, due to Cloud VXC repricing implemented in March. MP1 issued guidance for the first time, expecting EBITDA of A$16m-$18m in FY23 vs. consensus of A$9m, and A$41m-$46m in FY24 vs. consensus of $30m, driven by cost-cutting initiatives.
IDP Education (IEL) underperformed as the Canadian government opened up its SDS immigration visa requirements to 4 new English language tests, increasing competition for IDP’s IELTS business. It is uncertain how much market share IELTS could lose over the next few years, however market estimates point to a 8-15% EPS impact. While this is a negative development, IELTS remains a business with high barriers to entry that are not just regulatory in nature. There is a large ecosystem of referral partners and test preparation providers surrounding the IELTS test that we think will ultimately limit the impact. We are also positive on the company’s competitive position with the recent launch of One skill retake as well as the favourable equivalency ratings of the IELTS test.
Performance Commentary - April 30, 2023 Megaport (MP1) outperformed after reporting its 3Q results at the end of April 2023. Monthly Recurring Revenue accelerated in 3Q, growing 14% QoQ. This was driven by higher yield primarily, due to Cloud VXC repricing implemented in March. MP1 issued guidance for the first time, expecting EBITDA of A$16m- $18m in FY23 vs. consensus of A$9m, and A$41m-$46m in FY24 vs. consensus of $30m, driven by cost-cutting initiatives.
Corporate Travel Management (CTD) performed strongly as investors gained confidence in FY23 and FY24 guidance. The company announced a major multiyear UK Government contract that will drive large TTV outcomes. This contract will deliver both near term and longer term revenues, which given the cost leverage story, should result in substantial profit contributions. CTD has been successful in building a reputation in the Government solutions market and we would expect to see further contract wins over the next few years.
Block Inc (SQ2) underperformed in April despite no newsflow, which we attribute to investor concerns with respect to tougher economic conditions. Aside from Square’s processing volumes that has an exposure to consumer discretionary spend, we believe the businesses structural growth drivers (i.e., new customer additions to both Square and Cash App as well as increasing monetisation of users) make it largely acyclical.
Performance Commentary - March 31, 2023 Rea Group (REA) outperformed during March following a positive first half result released in the month prior. Despite Australian residential listings falling by 9% YoY revenue rose by 5.2% on-year to A$617.3 million. Group operating costs had risen by 15% at the same time, driven by factors including higher salaries and continued investment in its India unit. Despite these pressures, REA’s ability to grow revenues in a lower volume environment highlighted to the market the strength of their competitive position.
GQG Partners (GQG) was a key detractor during the month, notwithstanding strong business momentum. It reported material one-off cost growth in 2022 as it stepped up its global distribution and infrastructure investment to capture the significant interest in its funds. Given the solid fund track records, greater distribution footprint and large funds capacity, we expect meaningful revenue growth in future years.
Megaport (MP1) detracted during the month. The company announced the departure of its CEO, however Bevan Slattery, the founder and Executive Chairman stepped in as an interim CEO and announced the outgoing CEO’s successor. Operationally, underlying port growth, a leading indicator for services, grew 30% QoQ though net port adds only grew 2% as some customers consolidated port usage and migrated to larger ports. Positively, the company has maintained their EBITDA positive run rate and expects to maintain this for the full year.
Performance Commentary - February 28, 2023 Hub24 (HUB) outperformed during February. The share price has been volatile as short-term investor sentiment has remained focused on the cadence o in-flows to wealth platforms with advisors regaining client consolidation momentum as markets have stabilised. To this end, HUB reported a strong start to net flows in 3Q FY23 and reiterated guidance for FY24 FUA. With stable revenue margins and operating leverage incrementally flowing through, the outlook remains compelling for HUB.
Nuix (NXL) outperformed during February as the company successfully defended the application made by the former CEO Mr Kevin Sheehy. The share price rallied significantly on the back of this, as the market was discounting around $60m of market capitalisation from the company, expecting the company to lose the case. At the time of writing, Mr Sheehy has appealed the decision. Nuix has already been awarded costs in the matter, and will defend the appeal.
Domino’s Pizza Enterprises (DMP) was a key detractor this month, driven by a misstep in their execution of pricing, which saw volumes decline toward the end of the year. The inflationary environment has been challenging, particularly in Europe and Asia. Going forward, the company has introduced their Flexible Voucher, which has proven to have some early success and will be key to improving its operating performance in 2H.
Performance Commentary - January 31, 2023 Block Inc (SQ2) outperformed during January as volatility continues for US consumer and technology orientated companies. We await the upcoming quarterly release in February where we expect to see more quantitative guidance around lower cost growth budgeting for 2023. The business continues to execute in line with our growth expectations across all key value drivers.
Corporate Travel Management (CTD) reversed recent price weakness to outperform during January. While there is still uncertainty related to the outlook for US and European travel volumes, the market in Australia and to a lesser extend Asia is still growing strongly, with domestic travel volumes leading the way. CTD remains one of the highest quality travel companies in the world and is well positioned to benefit from a continued recovery in underlying travel volumes and expansion into new markets and regions.
Megaport (MP1) underperformed in January following a mixed quarterly result. Underlying port growth, a leading indicator for services, grew 30% quarter on quarter, though net ports only grew 2%. Customers have started consolidating ports to larger ports (10GB to 100GB), giving them the ability to add more services to less ports. While likely to be a headwind in the short run, we believe this will be net positive in the long run. The company has maintained their EBITDA positive run rate and expects this to extend to the full year. Price increases and reduced costs also brings forward FCF positivity in our estimation.
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