Perpetual Wholesale Smaller Companies (PER0048AU) Report & Performance

What is the Perpetual Wholesale Smaller Companies fund?

Perpetual Wholesale Smaller Companies aims to provide long-term capital growth and income through investment in quality Australian industrial and resource shares which, when first acquired, do not rank in the S&P/ASX 50 Index.

  • To outperform the S&P/ASX Small Ordinaries Accumulation Index (before fees and taxes) over rolling three-year periods.
  • Perpetual researches companies of all sizes using consistent share selection criteria.
  • Perpetual’s priority is to select those companies that represent the best investment quality and are appropriately priced.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For Perpetual Wholesale Smaller Companies

Perpetual Wholesale Smaller Companies Fund Commentary September 30, 2023

The portfolio’s largest overweight positions include Pacific Current Group Ltd, Elanor Investors Group and PSC Insurance Group Ltd. Conversely, the Fund’s largest underweight positions include Pro Medicus Limited, Flight Centre Travel Group Limited and Paladin Energy Ltd, all of which are not held.

Stanmore Resources contributed to performance in September (+13.15%) as the price of coal rallied. Stanmore Resources owns and operates two major coal mines in Australia, the Isaac Plains Complex as well as South Walker Creek. South Walker Creek is one of the highest performing PC products given its high-quality. Stanmore also has multiple projects in the pipeline which look to provide future growth opportunities. The company has a track record of value accretive mergers and acquisitions with management demonstrating good price discipline.

Despite a decline in thermal coal prices after the massive surge in 2020-2022, the fund’s overweight to Whitehaven contributed to performance in September (+16.75%). The company rallied as Whitehaven confirmed it is in the running to acquire BHP’s major Daunia and Blackwater coal mines in Queensland. Whitehaven had traded in the $0.80 to $0.90 range in 2020 before reaching nearly $11 in 2022 as prices and demand for coal skyrocketed. Despite trading at artificially low multiples, the inevitable fade in the coal price would eventually normalise the P/E longer term. Meanwhile Whitehaven racked up billions in surplus cash during the boom, which management will need to decide how to deploy in the best interests of shareholders which could still buttress the share price against excessive falls if capital is managed well.

The overweight to Healius detracted from performance in September (-17.86%) as the market continued to speculate that the bid by smaller rival ACL could be blocked by the ACCC. Healius’ assets have attracted interest from private equity and there are activist investors on the register. With the combined value of Healius’ radiology and pathology businesses estimated to be around $2.6 billion this represents a substantial uplift from the current market capitalisation of $1.7 billion. We are encouraged with the progress Healius has made with improvements in their radiology business under new leadership. Pathology segment continues to track below what the business could achieve given in person GP visits are still around 20% below pre pandemic, which leads to lower pathology requests. We believe some of the co-pay introduction are deterring GP visits, consumers continue to defer and there are evidence that primary care screenings are being deferred. We believe GP visits and Pathology volumes will re-bound in the future and that we will start to see pathology segment margins improve from here.

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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.
Perpetual Wholesale Smaller CompaniesPER0048AUManaged FundsDomestic EquityAustralian Small CapDomestic Equity - Small Cap IndexASX Index Small Ordinaries Index630.79 M1.25%00.15%

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.
Perpetual Wholesale Smaller Companies2.63%3.22%9.05%4.42%11.69%9.91%14.77%15.61%-5.67%-15.87%-56.57%

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.
Perpetual Wholesale Smaller CompaniesDomestic Equity - Small Cap Index-9.7%0.93%NA%NA%NA%0.84.66%4.98%0.920.95

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
Perpetual Wholesale Smaller CompaniesYes-https://www.perpetual.com.au/-

Product Due Diligence

What is Perpetual Wholesale Smaller Companies

Perpetual Wholesale Smaller Companies 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 Perpetual Wholesale Smaller Companies has Assets Under Management of 630.79 M with a management fee of 1.25%, a performance fee of 0 and a buy/sell spread fee of 0.15%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the Perpetual Wholesale Smaller Companies has returned 2.63% in the last month. The previous three years have returned 4.42% annualised and 15.61% each year since inception, which is when the Perpetual Wholesale Smaller 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 Perpetual Wholesale Smaller Companies first started, the Sharpe ratio is NA with an annualised volatility of 15.61%. The maximum drawdown of the investment product in the last 12 months is -5.67% and -56.57% 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 Perpetual Wholesale Smaller Companies has a 12-month excess return when compared to the Domestic Equity - Small Cap Index of -9.7% and 0.93% 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. Perpetual Wholesale Smaller Companies 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 Perpetual Wholesale Smaller Companies provide?

Perpetual Wholesale Smaller Companies has a correlation coefficient of 0.95 and a beta of 0.8 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 Perpetual Wholesale Smaller Companies and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Perpetual Wholesale Smaller Companies with the ASX Index Small Ordinaries Index?

For a full quantitative report on Perpetual Wholesale Smaller Companies compared to the ASX Index Small Ordinaries Index, you can click here.

Can I sort and compare the Perpetual Wholesale Smaller Companies to do my own analysis?

To sort and compare the Perpetual Wholesale Smaller Companies financial metrics, please refer to the table above.

Has the Perpetual Wholesale Smaller 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 Perpetual Wholesale Smaller Companies?

If you or your self managed super fund would like to invest in the Perpetual Wholesale Smaller Companies please contact via phone or via email .

How do I get in contact with the Perpetual Wholesale Smaller Companies?

If you would like to get in contact with the Perpetual Wholesale Smaller Companies manager, please call .

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Perpetual Wholesale Smaller Companies. 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 Fund’s largest overweight positions include Pacific Current Group Ltd, Healius Limited and Elanor Investors Group. Conversely, the Fund’s largest underweight positions include Liontown Resources Limited, Pro Medicus Limited and Flight Centre Travel Group Limited.

Pacific Current Group contributed during August (8.61%) as fund managers Regal and GQG both competed to acquire the financial services business. We have owned Pacific current Group for a number of years. It is a well-established funds management boutique incubator which owns equity stakes in 15 asset managers. These boutiques include public equities, life settlements, real assets, and private equity. PAC has delivered solid earnings growth in recent years and is seeing strong net inflows across a number of its boutiques, in particular Victory Park and Aether. Prior to the bid PAC traded at a reasonable multiple of 12x next year’s earnings with a solid dividend yield of over 5%. The overweight position in gold exploration company Gold Road Resources Ltd (-16.0%) contributed to relative performance after receiving a boost from the rise in the spot price of gold over the month, particularly in AUD terms.

The overweight to Enero Group detracted to returns during August (-12.85%), which has come after a disappointing update in June and February. Despite the stock falling significantly this year the recent result exhibited a stabilisation in margins following significant cost out actions undertaken by management in recent months. Enero owns boutique media agencies in Australia, the UK and US that specialise in Creative, Public Relations and Data Analytics. Enero also owns a majority stake in OB Media, a programmatic advertising platform.

ARN detracted for the month of August as it reported weak results for H1 2023, with revenue down -2%, EBIT down-27% and earnings per share down -40%. The result reflected the cyclical headwinds currently facing traditional media companies, in combination with significant fixed cost leverage. Whilst there have long been concerns about structural decline it is worth noting that radio as a share of ad revenue has remained at 8% for a long time. ARN Radio itself has been the top performing network for a number of years and the business is highly cash generative, with minimal capital expenditure requirements.

Performance Commentary - July 31, 2023

The Fund’s largest overweight positions include Pacific Current Group Ltd, Whitehaven Coal Limited and Elanor Investors Group. Conversely, the Fund’s largest underweight positions include Liontown Resources Limited, Flight Centre Travel Group Limited, and Chorus Limited, all of which are not held in the Fund.

Pacific Current Group rose 37.9% over the month of July as fund managers Regal and GQG both competed to acquire the financial services business. We have owned Pacific current Group for a number of years. It is a well-established funds management boutique incubator which owns equity stakes in 15 asset managers. These boutiques include public equities, life settlements, real assets, and private equity. Earning growth has grown consistently in recent years, the company has no debt and $20m cash on its balance sheet. Prior to the bid PAC traded at a reasonable multiple of 12x next year’s earnings with a solid dividend yield of over 5%. Enero Group rose 22.6% during July, although this came after a disappointing trading update in June and poor February results. The stock subsequently fell significantly through the year and traded at exceptional value on a P/E ratio of 5x and with a dividend yield of 8.9% before its recent rally. Enero is an owner of boutique media agencies in Australia, the UK and US that specialise in Creative, PR and Data Analytics. The boutiques are highly regarded and have strong customer lists in high growth and resilient sectors including Healthcare, Tech and Consumer Staples.

The overweight position in online and offline clothing store operator Universal Store Holdings contributed to performance as the stock rose 20.1%. This is on the back of the business being sold off quite heavily in June primarily due to a trading update in May and the flow on effect of a sharp deterioration in the macroeconomic environment and the discretionary consumer. Universal Store Holdings remains a resilient and well-managed high-quality fashion retailer. Acquisitions like Cheap THRILLS Cycles (CTC) and the promising performance of the Worship brand further enhance its earnings growth potential. While near-term challenges exist, the company’s prudent strategy and growth prospects make it a compelling long-term portfolio addition.

PSC Insurance fell -14.6 % during July, reversing a strong run the month before. However it has more or less range traded around $5 for the past year. We have been owners of the stock for several years now. The company has been underpinned by solid 15% revenue growth from H12022 to H12023. Growth has come from both organic and acquisitive sources and has driven a rising Return on Equity and solid profit margins. We continue to believe that it trades at a reasonable price to earnings ratio given the earnings growth.

Healius fell -9.8% in July as the market speculated that the bid by smaller rival ACL could be blocked by the ACCC. Healius’ assets have attracted interest from private equity and there are activist investors on the register. With the combined value of Healius’ radiology and pathology businesses estimated to be around $2.6 billion this represents a substantial uplift from the current market capitalisation of $1.7 billion.

Performance Commentary - June 30, 2023

The Fund’s performance broadly kept pace with the market over the June quarter despite a resurgence in growth and momentum stocks for much of the period as markets became enraptured with all things AI. The Fund’s largest overweight positions include Pacific Current Group, Whitehaven Coal Limited & Healius Limited. Conversely, the Fund’s largest underweight positions include Liontown Resources Limited, Chorus Limited and Pro Medicus Limited, all of which are not held in the Fund.

Pacific Current is a well-established funds management boutique incubator which owns equity stakes in 15 asset managers. These boutiques include public equities, life settlements, real assets and private equity. Earning growth has grown consistently in recent years. The company has no debt and $20m cash on its balance sheet. Despite the strong quarter (+11.4%), PAC continues to trade at a reasonable multiple of 12x next years earnings a solid dividend yield of over 5%.

McMillan Shakespeare rallied strongly during the June quarter (+25.4%). We think the fleeting leasing company has a few tailwinds including supportive organic growth, a net cash balance sheet and a high payout ratio. In addition, the business will generate some supernormal profits from the unwinding of its order book. The announcement that Eager Automotive had acquired 5.7% of stock helped push the stock up mid-month. Universal Store Holdings the high quality fashion retailer detracted (-41.4%) during the June quarter with a trading update in May the main catalyst for the selloff. There does not appear to be any fundamental fault with management of execution of the business, but the company has been caught up in a sharp deterioration in the macroeconomic environment and the discretionary consumer. At 8x with a solid dividend, good balance sheet and conservative management, this remains a long term candidate for the portfolio.

Enero Group is an owner of boutique media agencies in Australia, the UK and US that specialise in Creative, PR and Data Analytics. The boutiques are highly regarded and have strong customer lists in high growth and resilient sectors including Healthcare, Tech and Consumer Staples. Despite this, the stock has fallen significantly over June quarter (-18.7%), although it now trades at exceptional value on a P/E ratio of 5x and with a dividend yield of 8.9%.

Performance Commentary - May 31, 2023

The Fund’s largest overweight positions include Pacific Current Group, NIB Holdings Ltd, and Healius Limited. Conversely, the Fund’s largest underweight positions include Liontown Resources Limited, Flight Centre Travel Group Limited, and Chorus Limited, all of which are not held in the Fund.

The overweight position in grain distributor GrainCorp (+12.2%) contributed to relative performance. Its H1 earnings report showed an 18% improvement in revenue compared to the same period last year, leading to a 5.3% stock increase. The stock continued to rise throughout the session, closing 10% higher on strong volume. Prior to the report, the stock had been stagnant for two months. Analysts saw the report as positive and noted strong EBITDA and NPAT beats. However, some expressed concern about potential weather patterns affecting future results. Overall, GNC outperformed both the ASX Agribusiness index and the ASX300 since the release.

The overweight position in private health insurer NIB Holdings (+9.5%) contributed to relative performance. The stock benefitted after reporting a predicted 4-5% net growth in policyholders for FY23, with ancillary claims returning to normal and hospital claims showing modest improvement. The company expects strong net margins and a gradual return to its 6-7% target over the long term. IIHI is on the road to recovery with improving margins, and student policyholders are rebounding. In New Zealand, net PHI policyholder growth of 4-5% is expected for FY23, with OrbitProtect’s student and worker policies driving growth.

The overweight position in healthcare technology solutions provider Healius (+5.7%) contributed to relative performance. During the month, the Healius Board has unanimously decided to recommend that Healius shareholders reject an unsolicited, all scrip takeover offer received from ACL on 20 March 2023 (the ACL Offer). The Healius Board believes that the ACL Offer is plainly inadequate, highly conditional and highly uncertain. The Healius Board reiterated that it is not opposed to engaging in discussions with ACL, or another party, in relation to a control transaction or merger proposal that is in the best interests of Healius shareholders.

The overweight position in online and offline clothing store operator Universal Store Holdings (-39.8%) detracted from relative performance. The retailer issued guidance for its Full Year revenue, predicting that it will be between A$258-261M. This is lower than the consensus of A$275.5M.

The company also provided a trading update, stating that the Universal Store business is set to achieve record sales. It added that the Perfect Stranger retail format is performing well, and recent acquisition Cheap THRILLS Cycles (CTC) will deliver record sales and solid earnings, with the emerging Worship brand showing particularly encouraging performance. However, the company has observed that trading conditions have tightened in April and May and expects the subdued environment to continue for the rest of FY23 and into FY24.

The overweight position in copper and zinc miner 29Metals (-40.5%) detracted from relative performance. A strategic update on the recovery of its Capricorn Copper business and a revised outlook for its Golden Grove business saw the stock fall sharply during the month. There were concerns around the need for additional capital to restart production and unlock growth, putting pressure on the stock. Several highlighted the risks of operational disruptions and the tight financial position of 29Metals, exerting caution until further clarity on a return to positive cash flow is provided. The uncertain timing of the restart and the success of the de-watering and recovery plan, remain as critical components for any re-rating of the stock.

The overweight position in out-of-home advertising solutions provider oOh!media (-25.8%) detracted from relative performance. The stock fell sharply following a trading update during the month, reporting a 3% increase in Q1 revenues over Q1 2022, despite a significant softening in March due to a decline in the macroeconomic environment in Australia and New Zealand. The decline was attributed to a decrease in short-term in-month bookings, especially in the government spend category. However, Road and Fly (roadside billboards and airport terminal advertising) categories continued to grow strongly year on year.

Performance Commentary - February 28, 2023

The Fund’s largest overweight positions include Pacific Current Group, Graincorp Limited Class A, and Whitehaven Coal Limited. Conversely, the Fund’s largest underweight positions include Technology One Limited, Pro Medicus Limited, and Chorus Limited, all of which are not held in the Fund.

The overweight position in Automotive IT solutions provider Infomedia Ltd. (+26.7%) contributed to relative performance. The stock price spiked on the release of a stronger-than-expected first-half result. Total revenue increased 6.7% year-on-year to $62.9m, while recurring revenue gained 9.8%. Underlying cash EBITDA fell 13.3% to $11.5m, however, NPAT increased by 38.5% to $4.8M and its EPS rose 38.7% to 1.29 cents per share. Management noted that the recurring revenue reflected its new strategy to move away from one-off revenue sources, which dropped by $0.6M over the half.

The overweight position in out-of-home advertising solutions provider oOh!media (+10.8%) contributed to relative performance. The stock price rose sharply following its first-half earnings announcement. The results exceeded market expectations with underlying NPAT $56.2M vs consensus $52.0M, revenue of $592.6M (vs consensus $597.6M), Adjusted EBITDA of $127.1M (vs consensus $125.4M), and a final dividend of 3 cents per share (vs 1 cent last year). Management further advised that its March-quarter revenue is on track for an 8% year-on-year increase.

The overweight position in motor vehicle equipment, parts, and servicing supplier Bapcor Ltd (+6.9%) contributed to relative performance. The company reported a first-half revenue of $1.00B (up 11% from $900.1M last year), pro-forma EBITDA of $146.3M (up 7% vs year-ago $137.2M), and it declared a 0.5c fully franked dividend. Pro-forma NPAT of $62.0M also increased +2% from a year-ago. Operationally, Bapcor expects a solid underlying performance in FY2023 with slight increases in trading in the second half compared to the first half, subject to market conditions.

The overweight position in integrated marketing and communication services provider Enero Group (-30.4%) detracted from relative performance. The stock price weakened on the back of a downbeat trading update, with management noting that its Creative Technology & Data segment continues to deliver strong financial performance, albeit with lower growth rates as it cycles year-on-year comparatives. The company reported that it remains focused on managing near-team margins and will continue to take appropriate steps to address current macroeconomic headwinds while positioning the business to capture client demand. The overweight position in copper and zinc miner 29Metals Ltd. (-18.4%) detracted from relative performance. The stock fell abruptly following a disappointing financial result. 29Metals reported a full-year NPAT loss of $47.2M (vs consensus loss of $11.5M) from revenue of $720.7M (vs consensus $720.7M).

The overweight position in healthcare technology solutions provider Healius (-14.3%) detracted from relative performance. The stock fell short of expectations after reporting a first-half revenue of $864.1M (vs preliminary report $889.3M), underlying EBIT of $40M (vs $373.1M from a year ago), and underlying NPAT of $8.1M (vs year-ago $244M). However, management noted that in late January/early February daily revenues began returning to pre-Christmas levels and expects BAU trading in second-half 2023 to be materially stronger than first-half 2023 as the recovery in BAU testing continues.

Performance Commentary - January 31, 2023

The Fund’s largest overweight positions include Pacific Current Group, Enero Group Limited, and Whitehaven Coal Limited. Conversely, the Fund’s largest underweight positions include Technology One Limited, Pro Medicus Limited, and Chorus Limited, all of which are not held in the Fund. The underweight position in coal miner New Hope Corporation Limited (-7.9%) contributed to relative performance. The stock fell on the back of a 28.5% decline in the price of coal over the month, hampered by declining sales volumes as winter demand in the northern hemisphere passes and Europe’s energy crisis eases. This followed reports that NSW Treasurer Matt Kean is looking to order thermal coal miners to reserve up to 10% of their output for NSW power station by the end of January to avoid a shortage of supply. The overweight position in Australia and New Zealand media and online publishing company HT&E Ltd (+16.1%) contributed to relative performance. The stock price received a significant boost after the company announced it had signed a binding share sale agreement to sell its ~25% interest in Soprano Design Limited to Potentia Capital, a leading Australian technology-focused private equity firm. Under the agreement, HT&E will receive ~$66.3M in cash as consideration for the sale. The transaction is conditional upon receiving FIRB approval. Not holding oil and gas miner Beach Energy Ltd (-5.3%) contributed to relative performance. Beach Energy reported a Q2 production of 4.8MMboe, which missed its 5.00MMboe consensus. Analysts attributed the weaker-than-expected production volumes to plant outages resulting from maintenance and lower demand rather than poor performance. Management also introduced a depreciation, depletion, and amortization guidance of $410-440M, a step up from $376M reported in FY2022. The overweight position in coal miner Whitehaven Coal Limited (-10.9%) detracted from relative performance. The stock was adversely impacted following the 28.5% decline in the price of coal over the month. This came as the miner reported its December-quarter Managed ROM coal production of 4.84Mt (vs consensus of 4.95Mt) and reiterated its FY2023 guidance with Managed ROM coal production of between 19.0-20.4Mt. The overweight position in gold exploration company Gold Road Resources Ltd (-2.7%) detracted from relative performance. The stock ended the month lower, with the market discouraged by the full-year report from its Gruyere gold mine joint venture, which posted gold production of 314,647 (vs guidance of 300-340koz). Later in the month, the management guided company-wide FY2023 production of 340-370Koz at an attributable all-in sustaining cost of $1540-1660/oz. Management noted that production had been reduced quarter-on-quarter due to lower process plant availability resulting in lower plant throughput and delays in accessing and processing higher-grade portions of its Stage 3 pit. The overweight position in gold miner Capricorn Metals Ltd (-1.5%) detracted from relative performance. The stock sold off following an underwhelming December-quarter trading update, reporting gold production of 29,310oz (vs quarter-ago 31,005oz) at an all-in sustaining cost of $1,105/oz (vs quarter-ago $1,166/oz). Management also maintained its full-year gold production guidance of 115-125Koz with an AISC of $1,160-1,260/oz.

Performance Commentary - December 31, 2022

The Fund’s largest overweight positions include Pacific Current Group, Enero Group Limited, and Whitehaven Coal Limited. Conversely, the Fund’s largest underweight positions include Technology One Limited, Perseus Mining Limited, and Chorus Limited, all of which are not held in the Fund.

The overweight position in gold miner Capricorn Metals (+53.3) contributed to relative performance. The company released a trading update during the quarter, reporting a 32% increase in its Mt Gibson Gold Project Mineral Resource Estimate (MRE) to 2,755,000 ounces from 2,083,000. Management stated, “the updated MRE includes 2,106,000 ounces in the Indicated category, providing a strong basis for the maiden Ore Reserve Estimate targeted later in the current quarter”. This came as the company advised that load and haul mining operations have resumed at the Karlawinda Gold Project (KGP) following a fatal incident on 13 October 2022.

The overweight position in laboratory testing services provider ALS Ltd (+22.9%) contributed to relative performance. The company provided an update on the successful completion of seven of its acquisitions year-to-date across Life Sciences and Commodities businesses, contributing ~ $78M of revenue on a full-year basis. The total cost of acquisitions was ~$165M, funded from its balance sheet. The acquisition pipeline for 2H2023 remains strong as the company continues to evaluate opportunities for continued growth.

The overweight position in gold exploration company Gold Road Resources Ltd (+32.0%) contributed to relative performance. The stock benefitted from rallying gold prices, gaining 9.5% across the quarter. This came as the company reiterated its CY2022 gold production guidance of 150-170Koz, at an All-In Sustaining Cost of $1,270-1,470/oz. Reports also emerged during the month speculating that the company has been eyeing gold mining company De Grey Mining Limited for a possible buyout.

The overweight position in copper and zinc miner 29Metals (-15.9%) detracted from relative performance. The stock price fell sharply following an FY2023 guidance update. Copper and zinc production is expected to be in the lower half of its guidance, while gold and silver production is expected to be at or above the top end of its guidance range. Total capital and site costs are expected to be in the top half of the guidance range. Management noted that its FY2023 guidance reflects updates to the mine plans at both of its sites and the impact of a reduction in milling rates at its Capricorn Copper site.

The overweight position in healthcare technology solutions provider Healius (-8.9%) detracted from relative performance. The stock fell following the release of a trading update, reporting total revenue for the four months to October 2022 of $617.5M (vs year-ago $903M) and generating EBITDA of $124.3M (vs year-ago $347.0M). Despite the weaker-than-expected result, management noted that business-as-usual revenues in Pathology are growing steadily and progressively, while Imaging revenues are also growing fast.

The overweight position in Australia and New Zealand media and online publishing company HT&E (-19.6%) detracted from relative performance. The stock price trended down over the quarter following speculation that HT&E and Seven West Media had held merger talks. Reports indicate that both sides are interested. However, there are multiple hurdles to a deal proceeding, including languishing share prices and that HT&E holders would want cash, while Seven West would be reluctant to accrue any more debt.

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