September, 2023
• Positive contributors to performance for the month of September included Stanmore Resources, Coronado Resources, and Apollo Global Management.
• Detractors to monthly performance were Star Entertainment, ING Groep, and Challenger.
• No new positions were initiated during the month, however we took up our allocation in Star Entertainment’s rights issue and topped up our positions in Imdex and Westpac Bank.
• No equity positions were exited during the period however we trimmed our position in the listed Perpetual Credit Income Trust.
• The net invested position at month’s end closed at 79%, with a net equity position of 68% and further 11% held in credit securities. We continue to see long term value in our current portfolio and with a cash position of 21% are well positioned to take advantage of new opportunities as they arise.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-September-2023.pdfAugust, 2023
• Positive contributors to performance for the month of August included Apollo Asset Management, ING Group, Stanmore Resources, Perpetual Credit Income Trust and National Australia Bank.
• Detractors to monthly performance were Imdex, Frontier Digital Ventures, Fletcher Building, Siemens AG and BHP.
• There were no new positions initiated during the month.
• No equity positions were exited during the period however out of the money call options were sold on Apollo Asset Management reducing our effective position and providing an exit point in the event of a further increase in the share price.
• The net invested position at month’s end closed at 80%, with a net equity position of 70% and further 10% held in credit securities. We continue to see long term value in our current portfolio and with cash and liquid credit securities of 30%, are well positioned to take advantage of new opportunities as they arise.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-August-2023.pdfJuly, 2023
• Positive contributors to performance for the month of July included Stanmore Resources, ING Group, ANZ Group, Challenger and Woodside.
• Detractors to monthly performance were Star Entertainment, REA Group (short) and Seek Limited (short).
• There were no new positions initiated during the month however, positions in BHP Group and Stanmore Resources were increased. BHP Group and Stanmore were the two largest positions in the portfolio at month end.
• No equity positions were exited during the period.
• The net invested position at month’s end closed at 84%, with a net equity position of 74% and further 10% held in credit securities. We continue to see long term value in our current portfolio and with cash and liquid credit securities of 26%, are well positioned to take advantage of new opportunities as they arise.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-July-2023.pdfJune, 2023
• Positive contributors to performance over the month of June included Apollo Global Management, Coronado Global Resources, ING Group, BHP Group and Fletcher Building.
• Detractors to monthly performance included Lark Distillery, Stanmore Resources, Top Shelf International, Siemens and REA Group (short position).
• There were no new positions initiated during June. Positions in BHP Group, Imdex, ANZ, Stanmore Resources and Perpetual Credit Income Trust were increased.
• No equity positions were exited during the period. The Fund however did exit its position in Seek Limited’s June 2026 Subordinated Floating Rate Note after the company called the security in full.
• The net invested position at month’s end closed at 82%, with a net equity position of 72% and further 10% held in credit securities.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-June-2023.pdfMay, 2023
• Positive contributors to May monthly performance included Apollo Global Management, Fletcher Building, ING Group, Siemens AG and Challenger.
• Detractors to monthly performance included Pact Group, Stanmore Resources, Frontier Digital Ventures, Coronado Global Resources and Imdex.
• There were no new positions initiated during May. Positions in Stanmore Resources, Pact Group and Perpetual Credit Income Trust were increased.
• No positions were exited during the period.
• The net invested position at month’s end closed at 85%, with a net equity position of 71% and further 14% held in credit securities. Cash holdings stood at 14% leaving the Fund well positioned to take advantage of the current volatility being experienced in markets.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-May-2023.pdfApril, 2023
Frontier Digital Ventures completed an institutional placement and retail Share Purchase Plan during the month with proceeds used to settle deferred consideration liabilities relating to the acquisitions of InfoCasas and Encuentra24 in Latin America. While the quantum of the raising was small (6.1% current shares outstanding), the timing was poor with the share price coming under pressure in recent months as investors focused on portfolio company Zameen, given the difficult macro conditions in Pakistan.
In late April, Frontier provided a trading update which showed that despite softer revenues at Zameen, the overall portfolio was able to grow EBITDA in Q1. The result highlights the increased breadth of the business today versus 2-3 years ago when it was much more reliant on the Zameen business.
Northern Star Resources contributed positively to performance as the gold price rallied to near-record levels above US$2,000/oz. Increased investor attention on the ASX gold sector, following global gold-miner Newmont’s ongoing pursuit of ASX-listed Newcrest also acted as a tailwind. We used recent strength to exit our position with the current share price reflecting fair value.
File:March, 2023
The portfolio returned 4.6% over the quarter. Our positions in European industrials and gaming were positive contributors while our US financials holdings detracted from performance.
File:February, 2023
Fund participates in two capital raisings for Star Entertainment and Top Self International.
Star Entertainment announced $800m capital raising structured as a 3-for-5 entitlement and a $115m institutional placement. The Fund took up its entitlement in full. The capital raising follows the NSW government’s proposal to increase taxes on casino tables and EGMs. This announcement was unexpected and our view of tax certainty was off the mark. Our focus has been gaining clarity around the earnings power of Star Sydney in the event NSW tax proposal goes through as planned. At Star’s current share price, the market is heavily discounting the group’s earnings power given the elevated uncertainty. With the balance sheet now repaired the share price move feels overdone. Furthermore, with the focus squarely on NSW there is less focus on the launch of Queens Wharf Brisbane, which we think has potential to surprise positively over a medium term as the property ramps up.
Top Shelf Internationa l also announced $10m capital raising via an institutional placement to fund the development of its agave business. The Fund participated in the placement. While Top Shelf has achieved strong revenue traction in both whisky and vodka, the company now needs to make the transition to one which self-funds its growth ambitions. We think this will be aided by the launch of their agave brand in the second half of 2023 which to date has required material investment while not contributing to revenue
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-February-2023.pdfJanuary, 2023
Imdex Limited announced the acquisition of Norwegian based Devico for A$324m during the month. Devico is a global leader in the drill site technologies for the mining sector. The acquisition strengthens Imdex’s leading position in the drilling sensor market while also introducing another product line, directional drilling tools, to Imdex’s business. The acquisition was funded via a combination of debt and equity.
We view the multiple to be fair given the quality and growth outlook for the Devico business and we participated in the entitlement offer and institution placement. Steel-making coal miner Stanmore Resources advanced after reporting solid fourth quarter production volumes which showed only a modest impact from the adverse weather events in Queensland. Since taking ownership of the South Walker Creek and Poitrel mines from BHP mid last year, Stanmore has employed a leaner and more flexible operating model with less centralised decision making. We visited the mines in November and came away with the view that there remains further opportunities for longer term production efficiencies and growth, particularly at its largest mine, South Walker Creek.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-January-2023.pdfDecember, 2022
The portfolio returned 18.6% over the quarter. The main contributors to the performance were our positions in European banks and commodity companies.
We sold our position in Canadian copper miner, First Quantum, during the quarter (further detail below).
Global inflation and the resulting rate hikes have been the primary drivers of lower equity and bond markets in 2022. Global equity markets generally peaked in January 2022 when the upper bound of the FED base rate was 0.25%. At the time, US interest rates were expected to end 2022 around 1%. Fast forward 12 months, the FED’s policy rate sits at 4.5% and is expected to go higher. The S&P 500 and MSCI World were down close to 20%, the Nasdaq was down 33% and numerous TAM (total addressable market) stocks tumbled 90% plus in 2022.
The fastest rate hikes in history were the trigger but the underlying reason was over-valuation in many sectors of the market driven by cheap money. The bond market did not help investors either with a 16% drop in the Bloomberg global aggregate bond index. The strange thing about 2022 was that the most important event to happen (rising rates) was clearly visible in advance. The market currently believes we will see rate cuts in 2023 but heightened wage growth may lead to more stubborn service inflation and compel central banks to maintain higher rates for longer.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Quarterly-Report-31-December-2022-Managed-Funds.pdfNovember, 2022
Metallurgical coal miner Coronado Resources was a strong performer over the month. Management discontinued transaction discussions with Peabody, a positive from our perspective, and paid a roughly 10% quarterly dividend. Peer Stanmore Resources had a weaker month and we used this as an opportunity to incrementally add to our position. Lark Distillery rose after reports of merger talks with rival Tasmanian distillery, Sullivan’s Cove.
During the month the company also announced the appointment of a new CEO, Satya Sharma, who will come across from William Grant & Sons. Sharma brings a strong pedigree in Asia which is an important market for Lark as it embarks on its international expansion.
Northern Star contributed positively to performance with the gold sector benefitting from a weakening US Dollar on the prospect of slower rate hikes by the US Federal Reserve, pushing the physical gold price up ~8% over the month. Northern Star remains attractively priced in our opinion considering the production runway across tier-1 jurisdictions and low-cost expansion projects, supported by strong free cash flow generation which should lead to higher shareholder returns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-November-2022.pdfOctober, 2022
Top performers for the month included steelmaking-coal miner Stanmore Resources, up 33%. Stanmore reported solid third quarter production numbers and provided encouraging cost and volume guidance for the remainder of the year. With the benchmark hard coking coal price at over USD 300 per tonne, Stanmore continues to generate windfall profits and is rapidly deleveraging its balance sheet. Our other steelmaking-coal miner Coronado Resources recently confirmed discussions with American coal miner, Peabody, regarding a potential combination transaction. Peabody is roughly twice the size of Coronado but is primarily a thermal coal miner with an array of different mines. While a deal would make sense from Peabody’s perspective, we doubt that is also true from Coronado’s perspective. Given Coronado’s current valuation, absent receiving a material premium we would not be in favour of a deal. We re-initiated a position in Imdex Limited during the month. Imdex is a company we know well, owning up until November of 2021. With its share price declining close to 40% from its highs earlier this year, valuations again look attractive.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-October-2022.pdfSeptember, 2022
The New South Wales Independent Casino Commission released the final report in connection with Adam Bell SC’s review of The Star Sydney which found Star Entertainment presently unsuitable to operate a casino within the state. Given the failures disclosed during the review process this outcome was largely expected – Star’s share price has fallen 45% from its October 2021 high – and the Company has been working to remedy areas deemed deficient. Star Entertainment is a recent addition to the portfolio – we believe cancelling of the company’s license would be an unlikely and highly disruptive outcome. We also view there to be value in the company’s property assets protecting against material downside. Frontier Digital Ventures and Lark Distillery detracted from performance over the month. While there were no material announcements made by either company over the period, both are ex-ASX 300 companies with lower liquidity hence share price moves can be magnified during periods of heightened volatility. A sharp rise in interest rate expectations and heightened recessionary fears acted as a headwind for Apollo Global Management. While company fundamentals remain resilient, given the company’s exposure to credit markets investors have become increasingly cautious. Apollo is now trading at less than 8x 2023 earnings estimate, which we do not believe is reflective of the company’s change in business mix or growth outlook.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-September-2022.pdfAugust, 2022
The Fund performed strongly over the month of August with the main drivers being our holdings in OZ Minerals and our steelmaking coal holdings Coronado Resources and Stanmore Resources. In early August OZ Minerals received an unsolicited, conditional and non-binding proposal from BHP to acquire all shares in the company for a cash consideration of $25 per share. BHP’s offer represented a premium of 41% to OZ Minerals 30- day VWAP but a 16% discount to its 52 week high. While the transaction highlights the heightened appetite for copper assets and would make obvious sense from an operational standpoint, both with respects to the South Australian copper assets as well as the undeveloped West Musgrave Nickel project, the Fund liquidated its remaining holding at a premium to the BHP offer post announcement. The decision was based around valuation with levels back to where we reduced the position in November 2021. Our steelmaking coal holdings, Coronado Resources and Stanmore Resources, performed well on the back of a higher coal price and good quarterly results. Coronado declared and paid a roughly seven percent quarterly dividend, continuing its policy of returning the majority of free cash flow to shareholders.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-August-2022.pdfJuly, 2022
The anticipation of tempering inflation and interest rate expectations saw the portfolio, along with markets broadly, advance in July. Positive contributors included Fronter Digital Ventures, Star Entertainment and our domestic banking positions.
Frontier Digital Ventures released an encouraging Appendix 4C with growth continuing across its core markets despite the tougher macroeconomic environment and the business also achieving EBITDA breakeven. The result underscored the progress the company has made in its pursuit of their ‘Classified 2.0 Strategy’ which aims to embed the business at the centre of property and automotive transactions. We believe the economics of this model will be superior to the legacy classifieds business of collecting fees for providing a passive listing service.
The Fund participated in the ANZ capital raising announced in conjunction with its acquisition of Suncorp Bank for $4.9b. We view the downside in the Australian banks is relatively well protected at current levels. We expect ANZ to achieve mid-single digit earnings growth overtime and we are happy to collect the healthy fully franked dividend.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-July-2022.pdfJune, 2022
A challenging June quarter saw the Fund finish the Financial Year down -0.9% compared to the MSCI World (AUD) which was down -6.5% over the same period. Growing recession fears triggered a sharp selloff over the quarter, with the correction accelerating noticeably in the latter stages of June. Inflation data continues to come in above expectations, leading to a more aggressive policy response from central banks around the world. During the month of June alone, the Bank of England increased interest rates by 25bps, the Reserve Bank of Australia by 50bps, and the Federal Reserve by 75bps. With central bankers doubling down in their fight against inflation, interest rate increases are occurring at the same time that economic data and commentary from corporates suggest a broader slowdown is afoot.
Commodity positions were mixed, metals miners detracted from performance while oil and gas holdings outperformed the broader commodities universe and provided a positive contribution after dividends.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Quarterly-Report-30-June-2022-Managed-Funds.pdfMay, 2022
Metallurgical coal producers Coronado Global Resources and Stanmore Resources were standout contributors to performance in April. Coal prices have appreciated materially since the start of the Russia-Ukraine conflict leading to a period of supernormal profits for the coal sector. Prior to the RussiaUkraine conflict, valuations in the coal sector were very depressed meaning the elevated cash flows being generated by both Coronado and Stanmore each month has had a material impact on valuation.
While we expect coal price to normalize overtime, it looks increasingly likely that higher prices will be sustained for an extended period and this is a positive catalyst for our coal positions. Furthermore, we continue to view valuations as attractive based on our long term trend coal price assumptions. A position in Siemens AG was initiated during the month. Siemens owns a portfolio of world-class industrial businesses across Factory Automation, Healthcare, Rail transport, Infrastructure, and Energy. Siemens, despite its global reach and significant geographic diversity, has sold off in recent months with the wider European industrial sector as investors consider the impact of rising inflation and slowing economic growth on earnings. Siemens is a company we know well owning it in our global equity strategies. We believe the current FY22 earnings multiple of ~13x is not reflective of the long term structural growth outlook for the business.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-April-2022_0-1.pdfApril, 2022
Metallurgical coal producers Coronado Global Resources and Stanmore Resources were standout contributors to performance in April. Coal prices have appreciated materially since the start of the Russia-Ukraine conflict leading to a period of supernormal profits for the coal sector. Prior to the RussiaUkraine conflict, valuations in the coal sector were very depressed meaning the elevated cash flows being generated by both Coronado and Stanmore each month has had a material impact on valuation. While we expect coal price to normalise overtime, it looks increasingly likely that higher prices will be sustained for an extended period and this is a positive catalyst for our coal positions. Furthermore, we continue to view valuations as attractive based on our long term trend coal price assumptions. A position in Siemens AG was initiated during the month. Siemens owns a portfolio of world class industrial businesses across Factory Automation, Healthcare, Rail transport, Infrastructure and Energy. Siemens, despite its global reach and significant geographic diversity, has sold off in recent months with the wider European industrials sector as investors consider the impact of rising inflation and slowing economic growth on earnings. Siemens is a company we know well owning it in our global equity strategies. We believe the current FY22 earnings multiple of ~13x is not reflective of the long term structural growth outlook for the business
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-April-2022_0.pdfMarch, 2022
The portfolio returned a pleasingly 5.3% in a turbulent quarter compared to the market down 8.2%. Our strongest performers included our industrial commodity and energy companies with the main detractors being ING Groep, Apollo Global Management and Siemens AG.
Our industrial commodity holdings fared well during the quarter as commodity prices experienced a sharp spike as investors assessed the impact the escalating conflict between Russia and Ukraine will have on commodity markets. Most notable were the price moves in oil, coal, nickel and wheat given the importance Russia (and Ukraine) play in supplying those markets.
Our energy exposure also made significant gains over the quarter as security of supply became a prominent market concern. While Shell is our largest investment in the energy sector (up 31%), we would like to share our thesis on Woodside Petroleum which we initiated a position in during the quarter. What was interesting about Woodside, is that despite its own stock specific issues, in USD, the stock price charts of Shell and Woodside were identical, both significantly lagging the recovery in oil prices.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Quarterly-Report-31-March-2022-Managed-Funds_Final_0.pdfFebruary, 2022
Global commodity prices were well supported as investors evaluated the impact a conflict in Ukraine and subsequent sanctions on Russia will have on the supply of natural resources. The current market dynamic acted as a tailwind to performance, with Coronado, Woodside Petroleum and Freeport McMoRan material positive contributors. Coronado was a standout performer after it reported a strong full year result with the company benefiting from the significant rise in metallurgical coal prices. At current spot prices Coronado is generating ~25% market capitalisation in cash every quarter. Frontier Digital Ventures also detracted from performance over the month despite reporting a solid full year result. This underscored the progress the company has made in its pursuit of their ‘Classified 2.0 Strategy’ which aims to embed the business at the centre of property and automotive transactions. Frontier Digital Ventures’ performance mirrors that of other ASX listed online classified businesses REA Group and Seek Ltd. which have declined more than 20% from their 52-week highs. We hold short positions in both REA Group and Seek Ltd.
ING was down sharply late in the month as war broke out in Ukraine. The market correctly recognised ING has a small exposure to Russia, less than one percent of assets (albeit a greater share of equity capital), but the stock traded down disproportionately. We maintain our position in ING.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-February-2022.pdfJanuary, 2022
Woodside Petroleum and Beach Energy were key contributors to positive performance with both reacting favourably to a rebound in oil prices post the selloff in the December quarter around Omicron fears. Geopolitical tension between Russia and Ukraine was viewed as potentially another bullish event for oil in what is already a relatively tightly supplied marketplace. OZ Minerals sold off after a disappointing results announcement in late January. Management’s forward-looking guidance, both from production growth and costs perspectives, was weaker than anticipated leading to a downgrade of earnings estimates. With several capital projects on the horizon, we found comments around cost inflation the most relevant to our thesis. As referenced in the December quarterly, after a period very strong performance we had reduced our OZ Mineral position sighting reduced catalysts and reasonable valuation. BHP advanced as index investors position themselves for the unwinding of the company’s dual shareholding structure which was voted on by shareholders in January. Independent shareholders at iCar Asia approved the Carsome Scheme of Arrangements on 31st January. With proceeds to be received in February the portfolio’s cash position was effectively 19.6% at month end, adjusting for the iCar Asia position.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-January-2022-1.pdfDecember, 2021
The portfolio returned 4.1% over the quarter. The main positive contributors were our positions in the copper companies Freeport McMoRan and First Quantum Minerals in addition to our position in alternative asset manager Apollo Global Management.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Quarterly-Report-31-December-2021-Managed-Funds_0.pdfNovember, 2021
Crown received an improved takeover proposal from Blackstone, this time at $12.50 per share, a slight premium to its previous offers of $11.85 and $12.35. Blackstone’s continued interest in Crown despite the ongoing regulatory overhang highlights the value of the underlying property assets, something which has been central to our investment thesis. While Crown reacted positively, the offer remains conditional at this stage and would require the support from the Crown’s board. As a result the share price continues to trade at a discount to the proposed takeover price.
Commodities sold off into month end as investors reacted to the emergence of the Omicron Covid-19 variant. Most impacted amongst our holdings were Beach Energy and Woodside Petroleum with both reacting to the sharp selloff in the oil price as market participants positioned for softer demand in the short term. We continue to maintain our favourable medium to long term view on the oil and gas sector, where valuations remain depressed and the risk of a structural supply/ demand imbalance remains elevated.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-November-2021.pdfOctober, 2021
A rebound in industrial commodity prices, including copper which advanced 7%, provided a positive backdrop for the portfolio’s copper holdings, OZ Minerals being the largest. Earnings announcements from all three of our copper holdings were well received by investors and continue to underscore the positive operating leverage these companies have in the current commodity price environment. IMDEX provided a robust trading update at its AGM. Record revenues in the September quarter were comfortably above consensus estimates, triggering another round of earnings upgrades from analysts. While IMDEX is well positioned to benefit from increased exploration and development expenditure in the copper and gold sectors moving forward, after more than doubling since our initial purchase we now consider the current earnings expectations to be fully reflecting the current positive environment and valuation to be full.
Frontier Digital Ventures reacted positively to the release of its Appendix 4C quarterly filing which again emphasized the strong recovery experienced by its classified portfolio. Property classified businesses Zameen and Infocasas were again standouts as transaction linked revenues continue to drive rapid revenue growth. The consolidated business is also at cash flow breakeven and, if not for assets acquired over the last year, would be comfortably profitable
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-October-2021.pdfSeptember, 2021
A backdrop of higher oil and gas prices coupled with positive commentary during its investor day promotes strong performance from Beach Energy
• Alumina Limited benefits from recent spike in Alumina prices
Beach Energy outperformed its oil and gas peer group after commentary at its September investor day was well received by investors. Management’s revised production targets were particularly well received considering the issues the company has recently experienced at its Western Flank asset. The oil and gas sector more broadly continues to be supported by recent strength in oil and gas prices heading into the European winter. Industrial metals were weaker over the month as a looming debt default at property developer Evergrande and a mounting electricity supply crisis in China led to increased fears of a slowdown in China’s economic growth. Most notably were the declines in iron ore which is most closely tied to the Chinese property sector, however copper was also down over the month which flowed through to our holdings including OZ Minerals
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-September-2021.pdfAugust, 2021
IMDEX rose 13% after comfortably exceeding earnings expectations driven by record tools on hire. The strength being experienced in IMDEX’s tools business also led to record EBITDA margins and management expectations of sustainable margins ‘above 30%’ which was well ahead of current market consensus. IMDEXHUB-IQ continues to gain traction amongst customers driving an increase in IMDEX tools per rig overtime, which in turn drives structural growth for business above the broader cycle. OZ Minerals announced board approval for the expansion of its Prominent Hill mine.
The $600m project expands underground haulage capacity to 6mtpa (+23% from current levels) while also reducing operating costs by ~20%. The investment in haulage was always contingent on expansion of resource base and mine life extension, with reserve base increased by 38% at 1.2% Cu/ 0.7gt Au and mine life extended until 2036. BHP announced three major strategic initiatives (petroleum spinoff, approval Jansen potash project and collapsing of dual listing structure). BHP’s future prospects are overwhelming driven by the iron ore division which has benefited from elevated spot prices well in excess of the marginal cost of production. Given the strong share price performance and our medium to long term views for iron ore we exited our position near recent highs
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-August-2021.pdfJuly, 2021
iCar Asia received a takeover offer from Singapore based Carsome Group which values the company at A$243 million ($0.55 per share), superior to the previous non-binding offer from Autohome Inc.
While the offer is currently non-binding, we believe the likelihood of a formal deal being reached is highly probable given the proposal is effectively a joint bid with iCar Asia’s largest shareholder, Catcha Group. BHP released its full year results during the month which highlighted strong performance across all key divisions. Results were aided by record commodity prices as well as a recovery in production volumes compared to 2020, which was impacted by COVID-19. Speculation that the company may sell its oil and gas business was also well received by investors
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-July-2021_0.pdfJune, 2021
We used the stock price weakness over June to increase our position in Crown Resorts. The stock is now trading below the rejected Blackstone bid and substantially below the Star Entertainment Group proposal. While the company continues to be plagued by negative news headlines, we believe this increases the probability of corporate activity and new ownership of Crown. The takeover proposals highlight the strong property value in Crown.
Frontier Digital Ventures announced the acquisition of the outstanding minority interests in property portal Infocasas. Frontier acquired an initial stake in Infocasas back in September 2017 and subsequently increased its shareholding to controlling 51% in early 2020. We consider the deal to be well structured with a majority of the consideration consisting of earnout payments subject to profitability hurdles over the next two years
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-June-2021.pdfMay, 2021
Crown Resorts received a non-binding merger proposal from The Star Entertainment Group which the latter believes values the business at more than $14 per share after adjusting for potential synergies of between $150- 200m pa. Considering the receipt of superior offers, Crown Resort’s board also unanimously concluded that Blackstone’s revised $12.35 per share cash offer undervalued the business and was not in the best interests of shareholders.
Robust capital raising data from the junior gold and copper mining sector continues to act as a positive tailwind for IMDEX Limited. Junior miners account for a large percentage of the exploration spend within the copper and gold industries and capital raising activity historically has been a lead indicator of drilling activity which IMDEX is directly exposed to. We continue to believe we are in the early stages of the exportation cycle.
We substantially increased our position in ING over the month while simultaneously exiting Bank of America after its material share price re-rating in recent months. While we believe Bank of America is not expensive and has further to run, we believe there are better opportunities in the European banks.
The ECB is viewed as being much more cautious on allowing capital returns. We believe this will change as the European economy steps up a gear with lockdowns and travel restrictions slowly being lifted.
ING is perfectly positioned for this outcome having carefully navigated the pandemic and now holds circa 25% of its market cap in excess capital with a stated intention to return it to shareholders over the short to medium term.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-May-2021.pdfApril, 2021
Copper companies once again contributed positively to performance after the copper price extended above $10,000/t, a price level not achieved since February 2011. Given the elevated copper price observed during the first quarter all our holdings reported strong earnings results. Wells Fargo issued first quarter results in April which were well received by the market. In addition to releasing loan loss reserves, revenue appears to be stabilising which is key to the Company’s recovery story. Management also reiterated its net interest income outlook, after multiple quarters of missing and restating guidance.
Beach Energy had a negative impact on portfolio performance after a disappointing earnings release. Management withdrew its five-year production guidance and downgraded reserves at its Western Flank operations in South Australia. We continue to hold our position viewing the sell off as overdone.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-April-2021.pdfMarch, 2021
Conversely, the Fund’s commodity holdings which have been standout performers in recent months retraced some of the gains achieved. This was largely driven by the consolidation of commodity prices themselves as well as strength in the US Dollar which is typically inverse to that of commodity prices. Given the recent strength it is not unexpected to see share price volatility month-to-month and our investment theses remain unchanged.
Crown Resorts was the largest individual contributor to performance after receiving a A$11.85 unsolicited takeover offer from Blackstone Group. While the proposal is currently non-binding and subject to a long list of conditions including Blackstone receiving regulatory approvals, it highlights the value of the underlying assets held within Crown
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-March-2021.pdfDecember, 2020
The Fund’s commodity positions, particularly its copper positions, significantly added to its performance in December. OZ Minerals provided an update on its Prominent Hill project, which along with Carrapateena, are its two key assets. On top of the favourable copper price environment, increasing clarity around the expansion of both projects has acted as a positive catalyst for the share price over the last six months.
First Quantum Minerals continued its outperformance over the month of December, rising sharply as Q3 results showed it beating production targets in addition to registering lower than expected costs. Deleveraging has begun and growth in free cash flow should lead to further debt reductions over time.
BHP was one of the Fund’s top performers. Iron ore prices continued marching upwards on strong Chinese demand. The market is now considering that high iron ore prices may persist for longer than initially thought.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/Australian-Fund-December-2020.pdfticker: PMC0101AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.pmcapital.com.au/australian-companies-fund/reports
Bottom left -> Reports -> Monthly -> (Select the related month & year)
asset_class: Domestic Equity
asset_category: Australian Long Short
peer_benchmark: Domestic Equity - Long Short Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund
manager_contact_details: Array
fund_features:
PM Capital Australian Companies aims to provide long term capital growth and outperform the greater of the MSCI All Country Asia ex Japan Net Index (AUD) or RBA cash rate over rolling seven year periods.
- The Fund is not intended to replicate the index.
- Old fashioned stock pickers – fundamental, bottom-up research intensive.