April, 2023
April saw local and global equity markets rally with the fund returning 4.08%, +1.31% against the benchmark, which posted a return of 2.78%. Our best performers were Cettire, Telix Pharmaceuticals and Strike Energy. Cettire (CTT, +33.56%) returned to favour after a few of months of underperformance. There was no company specific news, although we did note an increase in web traffic which should bode well for the company’s top line growth. Telix (TLX, +47.10%) rallied after releasing an impressive March quarterly result.
Total revenues were up 27% YoY, of which ILLUCIX sales were up 31.1% QoQ. As a result, the market rebased their expectations upwards for the remainder of CY23 and as such the company experienced a well-deserved re-rate. Strike Energy (STX, +26.67%) traded firmer after advising the market of its completion of initial engineering at South Erragulla for its modular plant.
This will provide an initial 40 TJ/d to support production from its existing reserves. The company also announced the successful refinancing of its $153 million debt facility with Macquarie Bank. Our worst performers were our small positions in Nova Minerals, AMA Group and Hartshead Resources.
File:March, 2023
March saw equity markets finish mixed with our local market softer. The fund returned -1.14% after fees, -0.42% against the benchmark which posted a return of -0.72%. Our best performers were Liontown, Westgold and Bellevue Gold. Liontown (LTR, +89.71%) increased substantially towards the end of March after the company announced it had received a non-binding indicative proposal from Albermarle (NYSE: ALB) to acquire the company at $2.50 per share (a 63.9% premium to last close). This followed prior proposed bids received in October 2022 and March 2023 at $2.20 and $2.35 respectively.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/2303-ASCF-Performance-Report.pdfFebruary, 2023
February saw local and global equity markets correct with the fund returning -3.87% after fees, -0.17% against the benchmark which posted a return of -3.70%. Our best performers were AUB, HUB24 and Ridley. AUB (AUB, +17.44%) performed strongly after releasing an 8.5% beat against market expectations for their 1H23 net profit result and upgrading full year guidance for a second time. The result was assisted by positive trading conditions and the company’s recent acquisition, Tysers, which performed ahead of expectations.
HUB24 (HUB, +11.33%) continued its upward trajectory reporting a strong 1H23 result. Whilst the result was broadly in line with consensus expectations, top line growth surprised to the upside driven by higher-thanexpected Funds Under Advice (FUA). The company continues to deliver on its stated goals, and we remain favourable on the long-term growth thematic for the platform division.
Ridley (RIC, +13.70%) traded positively after releasing its 1H23 result. All metrics were a beat to expectations with Revenue (+25& YoY), EBITDA (+13% YoY) and NPAT (+21% YoY). The outlook for the business was also firm with 2H23 EBITDA expected to improve on the prior period. Our worst performers were Westgold Resources, PWR and Global Lithium.
Westgold (WGX, -21.81%) traded weaker on no company specific news, however, gold, was softer (-5.58%) and compounding this was the weakness in the AUD against the USD (-4.66%). These moves were somewhat driven by higher cash rate expectations being priced in to curb persistent inflationary pressures.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/2302-ASCF-Performance-Report.pdfJanuary, 2023
January saw local and global equity markets rebound strongly with the fund returning +5.46% after fees, -1.09% against the benchmark which posted a return of +6.56%. Our best performers were Pro Medicus, De Grey Mining and Boss Energy. Pro Medicus (PME, +20.97%) outperformed considerably throughout the month signing two new deals worth $A37 million. These contracts reflect increasing organic sales momentum within the business and further validate our view that the company is one of the highest quality growth investments in our universe.
De Grey Mining (DEG, +15.95%) traded strongly benefiting from a higher gold price (+6.52%) and weaker US dollar (- 3.42%). The company also released its December quarterly report which showed the company is on track to complete its DFS in mid-2023. Boss Energy (BOE, +20.66%) bounced after being sold off heavily the previous month helped by a firmer uranium price (~+4.38%). The company also released its December quarterly which showed that the restart of the Honeymoon mine is on time and on budget with first production targeted in 4QCY23.
Our worst performers were Austal, OFX Group and Jervois.
Austal (ASB, -20.19%) sold off heavily after announcing a disappointing and unexpected downgrade to earnings. The reduction was on the back of increased costs in the construction of US T-ATS vessels. Whilst the company is engaging in cost recovery, the probability of this occurring is difficult to quantify, and additional business is maturing which may see margin risk. Given this we have since exited our position.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/2301-ASCF-Performance-Report.pdfDecember, 2022
December saw local and global equity markets (ex. Hong Kong) reverse November’s rally and end 2022 on a negative note. The fund returned -5.13% after fees, -1.40% against the benchmark which posted a return of - 3.73%. Our best performers were Chalice Mining, St Barbara and Red 5. St Barbara (SBM, +28.10%) and Red 5 (RED, +28.13%) both benefited as the U.S. Dollar Index continued to decline (- 2.53%) and the underlying gold price appreciated (+3.77%).
In corporate news, SBM announced the company will merge with Genesis Minerals (GMD). RED provided an incrementally positive update declaring commercial production at their King of the Hills (KOTH) operation and providing positive second half fiscal 2023 production guidance numbers. The company also announced high-grade drilling results at their Darlot mine. Chalice (CHN, +18.64%) continued to rally after announcing promising mineralisation at the company’s Hooley Prospect. Additionally, underlying commodity prices (Nickel +14.81%, Copper +2.31%, Platinum +3.37%) were all firmer. Our worst performers were Life360, Johns Lyng and Ioneer. Life360 (360, -22.24%) continued its poor share price performance selling off aggressively throughout the month. There was no company news to attribute the weakness, although, general risk off sentiment and marked increases in bond yields meant current loss-making companies such as Life360 suffered. John Lyng (JLG, -15.09%) was weaker following an unexpected management selldown which was taken poorly by the market.
Fundamentally, the company has reiterated earnings guidance, and by all accounts the business is still performing strongly. Ioneer (INR, -33.91%) sold off strongly primarily because of the correction in underlying lithium benchmark prices. The sentiment towards the sector continues to gyrate, the current negative sentiment historically has provided an attractive point to add to our holdings in those companies which are being indiscriminately sold.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/2212-2-ASCF-Performance-Report.pdfNovember, 2022
November saw local and global equity markets continue to rally. The fund returned +2.24% after fees, -2.69% against the benchmark which posted a return of +4.92%. Our best performers were Bellevue Gold, De Grey Mining and PWR.
Bellevue Gold (BGL, +48.65%) and De Grey Mining (DEG, +21.70%) benefited as the U.S. Dollar Index declined (- 4.96%) and the underlying gold price appreciated (+7.27%). Both companies also released positive news at their respective mining projects. BGL provided an update of its grade control drilling with a +17% increase in overall ounces and a +25% increase on overall grade. DEG reported significant positive results from drilling within the ‘Great Hemi Corridor’ in Western Australia. PWR Holdings (PWH, +16.52%) continued to perform strongly after announcing the appointment of Mr Kym Osley as a non-executive director. Mr Osley has deep experience in the defence industry, indicating PWH’s increased focus on the vertical. Additionally, the company also held its Annual General Meeting (AGM), although, no new information was released.
Our worst performers were Elders, Select Harvests and Life360. Elders (ELD, -20.62%) sold off aggressively after reporting a strong Fiscal Year 2022 result. The result was in line with expectations; however, the market was focused on the unexpected announcement that longstanding and very highly regarded CEO Mark Ellison will retire by November 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/2211-ASCF-Performance-Report.pdfOctober, 2022
October saw local and global equity markets (ex. HK/China) rebound following a weak September. The fund returned +5.28% after fees, -1.17% against the benchmark which posted a return of +6.46%. Our best performers were Life360, HUB24 and PWR Holdings. Life360 (360, +39.60%) traded positively throughout the month, particularly after announcing price increases on their premium monthly plans. Whilst the benefit is not expected this calendar year, demonstrating pricing power with limited churn is impressive in the current environment. HUB24 (HUB, +21.48%) reported strong numbers for their first quarter of fiscal year 2023. The company recorded $3.0bn of net flows, outperforming peers. The result was impressive given it was delivered during a volatile period for investment markets. Additionally, the company was able to negotiate better than expected terms with new cash deposit partner Bank of Queensland. PWR Holdings (PWH, +18.65%) recovered after being sold off late the previous month, ostensibly on currency volatility. The main perceived headwind was a depreciating British pound (GBP); however, this volatility has stabilised, and we note that the company hedges its exposure. The core business remains strong.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/2210-ASCF-Performance-Report.pdfSeptember, 2022
September saw risk off sentiment return to both global and local equity markets. The fund returned -8.31% after fees in September, +2.89% against the benchmark which posted a return of - 11.20%. Our best performers were Megaport, De Grey Mining and Select Harvests. Megaport (MP1, +7.3%) recovered after considerable underperformance last month. News flow was light, and the current share price movement suggests the market is waiting to digest the Q1 2023 update, which is scheduled for release towards the back end of October. De Grey Mining (DEG, +6.12%) performed strongly after releasing a better-than-expected Pre-Feasibility Study (PFS) for their Mallina Gold Project located in the Pilbara region of Western Australia. The PFS saw improvements over the original scoping study, particularly in the production profile. The company’s economics and size of resource are attractive which may entice an outside group to pay up for control of this asset. Select Harvests (SHV, +6.05%) traded positively after releasing a crop and pollination update. The company noted weaker crop production in both California and Spain have resulted in stronger market pricing for almonds and importantly the company has been able to optimise bee pollination of their orchards for their 2023 crop. Our worst performers were AUB, HUB24 and Johns Lyng.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/2209-ASCF-Performance-Report.pdfAugust, 2022
The fund returned +1.51% after fees in August, +0.93% against the benchmark. We were generally pleased with the quality of our holdings’ results. Lovisa (LOV, +29.6%) was the standout performer in reporting season, and one of our top holdings. We have admired this business for a long time and used the opportunity of the sell-off to accumulate a larger position.
Analysts have been way too pessimistic on terminal store numbers and compounded the error by being too conservative on the speed of rollout – the company beat market estimates on both. In addition, same-store sales growth improved, which very few had anticipated. We anticipate the new CEO will bring superior discipline and execution to the business. He has the opportunity to improve store economics and build a genuinely world-beating business in the next few years. We added to our lithium holdings throughout June and July. Again, this followed the sell-off, which was especially brutal in this space. Sayona and Liontown (SYA, LTR; +51.3% and +31.4% respectively) were strong contributors over the month. Other highlights included Ridley (RIC, +23.1%) which has executed well on its turnaround to date. The optimisation of this simple business by an able CEO makes it an ideal turnaround. GQG (GQG, +11.4%) is one of the best Fund Managers in the world, but trades at a sector multiple (i.e., on par with Magellan, Perpetual, and others) and a 7-8% yield. Our conviction has strengthened.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/190936707.pdfJuly, 2022
July saw a strong rebound in global and local equity markets. The fund returned 9.97% post fees in July, -1.46% against the benchmark, which added 11.43%.
Our best performers were Megaport, Lovisa and Johns Lyng Group. Megaport (MP1, +77.8%) experienced strong price appreciation after reporting an improved fourth quarter result. Momentum appears to be returning with the company reporting significantly increased recurring revenue. We have increased confidence in the directindirect strategy after doing our homework into the result.
Lovisa (LOV, +28.89%) rallied through the month on no company specific news. Though a retailer, LOV is more insulated than peers against a weakening consumer. Its unit economics are exceptional. We expect an acceleration in its store rollout, an aim of the new CEO.
Johns Lyng Group (JLG, +31.36%), a recent addition to our portfolio, outperformed following an earnings upgrade and the likelihood of further upward revisions given recent severe weather in NSW. Readthroughs from domestic insurers note the expectation of continued LaNina weather patterns; we expect improved understanding of the company’s US strategy will be a catalyst following its September investor day.
Our worst performers were Elders, Champion Iron and Ridley.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/189909770.pdfJune, 2022
June was a very tough month for global and local equity markets. The fund returned - 15.34% post fees in June, -2.25% against the benchmark, which declined -13.09%. Our best performers were IPH, Ridley and Beach Energy.
Beach Energy (BPT, unchanged) was a resilient performer as pricing in the oil and gas market continued to remain elevated. Although oil prices have corrected, WTI closed trading in June at US$105.76 per barrel, 44% higher YoY. Additionally, for any uncontracted gas production, Beach have been able to sell directly into the tight spot gas markets. These favourable price drivers combined with a depreciating domestic currency supported the stock in June. A recent addition, Ridley (RIC, +2.29%) outperformed throughout the month. The business provided an updated growth strategy spanning FY23-FY25. Several initiatives were pinpointed which included business efficiency improvements, market
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/189401344.pdfMay, 2022
The fund returned -8.02% post fees in May, returning -1.01% against the benchmark, which declined -7.01%. Our best performers were GQG Partners, Beach Energy and Veem. Despite increased volatility globally, GQG Partners’ (GQG, +14.83%) FUM has been notably stable in recent months, closing April at US$90.4 billion vs US$92.9b at 31 st March
2022. While equity market volatility is clearly a headwind for all funds managers seeking to grow their businesses, this is an excellent company with multiple significant growth opportunities. One is to take substantial market share in Australia, where peer global funds have faced substantial structural and performance headwinds over the last few years. We would expect GQG to crystallise multiple mandate and retail opportunities in coming years.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/189094385.pdfApril, 2022
The fund returned -4.15% post fees in April, down against benchmark, -1.50%. Our best performers this month tended to possess resilient earnings streams and operate in defensive sectors of the economy. Graincorp, Elders and Kelsian Group all contributed positively to performance. GrainCorp (GNC +18.62%) provided an upgrade to earnings guidance for FY22. La Nina conditions have led to a positive growing climate (ie, high Australian volumes), just as the invasion of Ukraine has led to a global shortage of grains (ie global supply reductions and rising prices). Signals out of the EU and US corporate travel markets in particular were positive and our travel names (FLT +15.8%; CTD +10.5%) appreciated as expectations for a global travel recovery were brought forward. Finally, the inflation-protected earnings streams and balance sheet capacity of KLS (+13.9%) make it an attractive mid-cap in the current low growth, inflationary environment. We added KLS back to our portfolio following a strong February result. A poor update from Megaport (MP1 -37.19%) resulted in a disappointing share price performance. Long term, there’s still a lot to like – the business makes accessing the cloud easier and less expensive via a unique asset base and clever set of products. Near term, however, the company’s out-sourced US sales strategy, which relies on sales teams of significant third parties such as Cisco, is proving harder to execute than expected. As such, sales growth has slowed. We have sold our position, but will be watching closely for progress on this issue.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/187437777.pdfMarch, 2022
The fund returned 2.37% post fees in March against the benchmark which was 5.26%. Our best performers this month were Uniti Group, Elders and Silver Lake Resources. Uniti Group (UWL; +43.33%) was our top performer in March. After releasing positive half year results in February, multiple takeover bids were launched. The successful bidder was Morrison & Co/ Brookfield consortium.
Elders (ELD; +14.08%) was a positive contributor to the fund after heavy rainfall generated a productive harvest. The company confirmed this by releasing a trading update outlining a major improvement in underlying EBIT. Their retail and wholesale segments have improved with high demand and increased turnover
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/186557096.pdfFebruary, 2022
The fund returned -4.31% post fees in February against the benchmark which was flat.
Our best performers this month were once again in resources with commodity prices rising considerably. Bellevue Gold (BGL; +22.73%) traded up after a solid result through reporting season. Drilling results through mid-February indicated further reserve growth. The company continues to make strong progress with Stage 1 of the underground works nearing completion.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/185576432.pdfJanuary, 2022
The fund returned -10.23% post fees in January against the benchmark which lost -9.00%. Since inception the fund as delivered net outperformance of +5.00% per annum.
Our best performers this month were in the resource and financial sectors. Iluka (ILU, +2.4%) rose after the release of its Q4 update which reflected solid performance and an increase in productivity. Credit Corp Group (CCP, +1.2%) was resilient into its 1H22 result, while Field Solutions Group (FSG, +0.0%) traded flat.
ILU ‘s momentum continues to build; Phase 1 of its Enneaba rare earth project, begins in the first half of calendar year 2022. More broadly, we like the business for its exposure to the undersupplied zircon market, one of the various commodities currently in a state of global under-supply.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/183911823.pdfDecember, 2021
The fund returned +0.18% post fees in December against the benchmark which gained +1.41%. The calendar year saw the fund gain +18.99% versus the benchmark’s +16.9%. Our best performers for the month were lithium producers. The underlying batterygrade lithium price rose strongly during December, and Pilbara (PLS) and Allkem (AKE) (formerly Orocobre) were both up 23%. Both these companies have migrated into the ASX 100 Index but we have chosen to hold them for the time being as the Electric Vehicle theme continues to play out.
MoneyMe (MME) +18.2% had a busy month. The acquisition of Society One sees the business nearly double the size of its book. There are both operational and cost synergies available to the company over time; we are excited about the growth potential that SocietyOne introduces in higher credit quality segments of the market. Later in the month the company announced a new debt facility
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/182652841.pdfNovember, 2021
The fund returned +1.44% post-fees in November, +1.75% against the index. Calendar year-to-date performance sits at +18.78% (net) +3.51% against the index. Chalice Mining (CHN) experienced a strong month +49.50% seeing the Maiden Resource Estimate released. It was well received confirming its potential to be commercially developed. The estimate included an open pit design incorporating 330mt of resource. The resource continues to grow and there are still over 100 assays yet to be received for both extensional and infill drill holes. The company also successfully demerged its gold mining exploration assets in Victoria into Falcon Mining
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/181995596.pdfSeptember, 2021
The fund returned -1.28% post-fees in September, +0.85% against the index. Quarterly performance was +5.07%, +1.64% relative. Calendar year-to-date performance sits at +15.60%.
In a choppy market, our best performers were Tamboran (TBN, +56.5%), Lifestyle Communities (LIC, +12.8%) and Cogstate (CGS, +26.4%). We spoke about TBN’s improved performance last month; at time of writing it has recovered to just below the issue price. We were able to add to our position near the bottom. LIC has continued to appreciate after its very strong result. The stock should benefit from a reopening. CGS is a new position for the fund. It is developing mobile (i.e testing in situ at the GP or home) application-based
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/179712925.pdfJuly, 2021
The Fund returned +2.71% net, slightly off the index at +3.08%. Return for the financial year 20-21 was +38.83% after fees, +5.60% ahead of the benchmark. Our best performers over the month were Pro Medicus (PME; +27.4%), City Chic (CCX; +17.1%) and Megaport (MP1; +23.0%).
PME announced a research collaboration with the Mayo Clinic as part of a plan to accelerate the commercialisation of the Visage Platform’s AI capability. This strong endorsement follows a string of contract announcements and the initiation of a share buyback scheme.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/175229519.pdfMay, 2021
The fund returned -0.35% net over the month, down -0.62% versus the benchmark return of +0.27%. These look like relatively benign outcomes however markets experienced substantial volatility in May. Our best performers were Chalice (CHN; +27.2%), Ramelius (RMS; +15.9%), and Corporate Travel (CTD; +12.7%).
CHN has been a very strong performer since we first bought stock for $1.01 in July 2020. Chalice has the potential to be a globally significant business based in Australia, and as successive drill results have validated our thesis, the market has bought the stock. Following a strong month in April, the run continued into May. Indeed, further positive results were announced again in early June. We expect a maiden resource to be announced later this year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/173757306.pdfMarch, 2021
The fund returned -0.52% net of fees in March against the index at +0.79%. Our best performing holdings were Digital Wine Ventures (DW8; +128.6%), Ramelius Resources (RMS; +16.6%), and Sealink (SLK; +8.1%).
DW8 is a new holding in the fund, but a story we’ve followed for a while. The business is in its early stages but has seen rapid appreciation in its share price after a series of material and positive announcements since the end of 2020. The core of the business is a logistics platform; wine vendors traditionally pay high shipment costs to transport from cellar door to consumer or wholesale purchasers
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/170994729.pdfNovember, 2020
The fund returned +7.51% net of fees in November, -2.76% behind its benchmark. In the Calendar Year to date, the fund has returned +15.67% net, +9.38% ahead of the index. Efficacy results of vaccines released by Pfizer, Moderna, and Oxford precipitated a violent rotation into stocks which had been “uninvestible” since the beginning of the pandemic. Advertising, travel, energy and some materials stocks rose very strongly; including many of those whose forward fundamental prospects had been worst impacted by Covid.
We had anticipated the rotation and had been rebalancing the portfolio towards our favoured cyclicals gradually over the previous months, and many of our top holdings did very well. However, we did not enter November overweight cyclicals, and as a result fell behind a market pouring money into “vaccine trades” irrespective of quality.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/163022722.pdfticker: FHT0012AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.8ip.com.au/australian-small-companies-fund-performance-reports/
ASCF PERFORMANCE REPORTS
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australian Small Cap
peer_benchmark: Domestic Equity - Small Cap Index
broad_market_index: ASX Index Small Ordinaries Index
structure: Managed Fund
fund_features:
8IP Australian Small Companies aims to outperform the S&P/ASX Small Ordinaries Accumulation Index over rolling 5 year periods. The Investment Manager will do so by seeking to invest primarily in companies with a multi-year competitive advantage, turnaround situations or under-researched companies.
- The Fund primarily invests in the ordinary shares of listed Australian companies with a focus on companies outside the Top 100 companies by market capitalization listed on the ASX.
- The Fund may also invest in Australian unlisted securities and will generally be fully invested, meaning that it will not normally hold significant levels of cash.
- Be aware that up to 10% of the Fund may consist of unlisted investments which are generally illiquid.
- Manager Address : Level 34, 1 Eagle Street, Brisbane, QLD 4000
- Phone : +61 7 3184 9118
- Website : https://www.8ip.com.au/
- Contact Email : enquiries@8ip.com.au
- Contact Page : https://www.8ip.com.au/contact-us/