September, 2023
After fees and expenses, the Portfolio declined by 3.76% during the month, outperforming its benchmark by 28 bps.
The largest contributors were Leo Lithium, Star Entertainment and Auckland Airport. Our underweight to Leo Lithium and Star Entertainment was a contributor to overperformance. Lithium company LLL underperformed during the month and went into a trading halt following correspondence from the Malian Junta government over a new mining code. Casino operator SGR underperformed following its announcement of a $750m capital raising at a 20% discount to de-lever the balance sheet following a $2.8b impairment, restrictions on operations and ~$600m in provision for regulatory compliance (including fines). Auckland Airport outperformed during the month despite no major company news.
The largest negative contributors were Paladin Energy, Pro Medicus and Healius. Our underweight to Paladin Energy was a source of underperformance as the uranium miner benefitted from a rising uranium price. Similarly, our underweight to Pro Medicus was another source of underperformance as the health imaging company outperformed during the month following an announcement of a 10-year $140m contract with Baylor Scott & White Heath. Healius continued to weaken following concerns raised by the ACCC over its potential merger with Australian Clinical Labs (ACL).
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-1-1.pdfAugust, 2023
After fees and expenses, the Portfolio decreased by 0.81% during the month, outperforming its benchmark by 50 bps.
The largest positive contributors were Megaport, G.U.D Holdings and Chalice Mining. The software technology company, MP1 was the top alpha contributor after reporting solid FY23 earnings from stronger-thanexpected pricing and cost reductions (EBITDA up by 25% and annual recurring revenue up by 39%). Similarly, the automotive parts company, GUD also outperformed as the market gained comfort around its margin sustainability and volume recovery. Our underweight position in Chalice Mining contributed positively after the company underperformed following the release of its scoping study for the Gonneville Nickel-Copper-PGE project.
The largest negative contributors were Judo, Imdex and Pinnacle Investments. Small business lender, Judo underperformed on concerns over margin headwinds following its FY23 results. Imdex also underperformed on the back of its results release (EBITDA and NPAT were down by 1.4% and 21.7% respectively). On a similar note, the fund management firm, Pinnacle Investments detracted during the month following its weak FY23 results.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-11.pdfJune, 2023
After fees and expenses, the Portfolio increased by 0.90% during the month, outperforming its benchmark by 87 bps.
The largest positive contributors were Collins Food, AUB Group and Pinnacle Investment Management. Restaurant operator Collins Food outperformed during the period after providing a stronger-than-expected result, in particular in Europe, and outlook commentary that indicated an improving outlook. Our positive view toward its Australian and European KFC businesses is supported by significant new store growth potential, defensive existing store sales growth and margin expansion from depressed levels as cost headwinds moderate. AUB continued to outperform due to upgrades to guidance, positive premium growth trends, and solid execution on the Tysers acquisition. The company also raised $150m during the period to retain its Tysers UK Retail business (which was to be sold) and increase capacity for M&A. We retain our positive view, with AUB remaining a key overweight. Pinnacle Investment Management outperformed during the period, in part supported by stronger than expected inflows of +$1.9bn during the first three months of 2023. Going forward, we believe revenue growth will accelerate, with material longer term growth potential as market conditions normalise from depressed levels, inflows re-accelerate across its diverse range of products and via international distribution, performance fees increase from near zero and new products mature.
The largest negative contributors were Gold Road Resources, TPG Telecom and Flight Centre. Our overweight position in gold producer Gold Roads Resources underperformed as gold prices declined 3% to close at US$1,908/oz at month-end. Additionally, the company downgraded full year production guidance due to flooding and mechanical issues at Gruyere mine during June. We continue to favour Gold Roads, with its Gruyere gold mine project (50% owned) a high-quality and lowcost operation, supported by a JV partner with deep operating expertise, while its 19.9% stake in fellow smallcap gold miner De Grey Mining offering significant strategic value and access to the very large Mallina gold mine development opportunity. TPG Telecom underperformed during the period, after the telecommunications company saw its proposed network sharing agreement (MOCN) rejected by the Australian Competition Tribunal. The decision leaves TPG without a partner for regional network access, resulting in network coverage that remains behind that of peers Telstra and Optus. Flight Centre underperformed during the period, partly reducing the level of outperformance over the last 12 months. While there were some expectations of an earnings upgrade at its June investor day (which did not materialize), it should be noted that earnings guidance was already upgraded at the start of May and, more importantly, the outlook remains positive as travel demand continues to increase.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-10.pdfMay, 2023
After fees and expenses, the Portfolio declined by 3.03% during the month, outperforming its benchmark by 23 bps.
The largest contributors were Kelsian Group (KLS), Pinnacle Investments (PNI), and Megaport (MP1). Kelsian outperformed during the period despite no material company specific news. We have a positive outlook for its three divisions spanning Australian buses, US buses and Australian tourism. Pinnacle Investments’ outperformance in May was partly encouraged by stronger than expected inflows during 1Q23 (+$1.9bn). Going forward, revenue growth, inflows, performance fees and international distribution are expected to reaccelerate. Megaport also outperformed following the release of stronger than expected March quarterly results, with forward guidance for FY24 materially ahead of consensus expectations at both revenue and margin level, leading to material earnings upgrades and an improved balance sheet position.
The largest negative contributors were oOh!Media (OML), 29Metals (29M), and Nanosonics (NAN). OML was an underperformer during May reflecting short-term cyclical headwinds to revenue and higher than anticipated costs on contract renewals. 29Metals was a detractor to the portfolio as copper prices declined by 5% to close at US$3.68/lb at month-end. Disinfection medical device company Nanosonics underperformed during the period following significant outperformance in prior months, despite no specific company news.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-9.pdfApril, 2023
After fees and expenses, the Portfolio increased by 3.53% during the month, outperforming its benchmark by 75 bps. The largest positive contributors were Megaport (MP1), Nanosonics (NAN) and Gold Road Resources (GOR). Software and services company Megaport outperformed during the period after announcing a stronger than expected March quarterly result and upgrade to full year guidance.
The overweight to infection prevention medical device company Nanosonics was a positive contributor during the period. While there was no specific news, investors continue to build conviction in the growth opportunity from their new product, Coris, which is expected to be delivered into market in late 2023. Our position in gold producer Gold Road Resources was a positive contributor, supported by gold prices rising 8.8% to US$1,988/oz at month end.
The largest negative contributors were Telix pharmaceuticals (TLX) (not held), Imdex (IMD) and EBOS (EBO). Radiopharmaceuticals company Telix outperformed after announcing a strong March quarter revenue result. Australian mining equipment and technology company Imdex underperformed on no material company-specific news. We continue to hold a positive view towards IMD given the continued long term market growth opportunity from critical metals demand growth (copper, nickel, lithium) and new resources becoming increasingly difficult to find.
The wholesaler and distributor of medical and pharmaceutical products, EBOS, underperformed despite no material news. We maintain a positive view towards the company, reflecting defensive earnings growth across both its health care and animal care divisions. Both divisions are in growth markets and are increasing market share and margins, leading to attractive earnings growth.
File:March, 2023
After fees and expenses, the Portfolio increased by 0.58% during the month, outperforming its benchmark by 130 bps. The largest contributors were Nanosonics, Gold Road Resources, and Liontown Resources. Nanosonics outperformed after upgrading the FY23 outlook. FY23 revenue growth guidance was increased to 35% (y/y) and margin guidance was increased given higher gross margins.
Gold miner Gold Road outperformed reflecting the rally in the gold price (+9%) across the month on macro uncertainty and an expected easing of interest rate rises globally. Lithium developer Liontown outperformed despite falling lithium prices, with the company subject to a takeover offer from US listed lithium producer Albermarle.
The largest negative contributors were Megaport, Pinnacle Investments and Neuren Pharmaceuticals. Megaport underperformed after announcing a weaker than expected December quarterly result across key volume metrics and management changes. Pinnacle underperformed during the period after reporting a 1H23 result below expectations, largely due to lower-than-expected revenues across both performance fees and management fees. Neuren surged to a $1bn valuation after receiving US healthcare regulatory approval.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-8.pdfFebruary, 2023
After fees and expenses, the Portfolio declined by 0.22% during the month, outperforming its benchmark by 348 bps.
The largest positive contributors were AUB Group, Infomedia and Flight Centre. AUB outperformed in the month due to a strong 1H22 update which included a guidance upgrade. The result confirmed substantial premium growth trends in the industry, which assisted organic growth. The company’s recent significant acquisition, Tysers, had a solid 1H22 performance which beat previous December guidance and the integration into AUB continues to perform well. Infomedia outperformed during the period after delivering a 1H23 result in-line with expectations, but more importantly an improving outlook. The improved outlook was supported by acceleration in the sales pipeline and improving cost outlook, with cost growth to be at least 3% below revenue growth. Flight Centre was a positive contributor during the period after a stronger than expected 1H23 result above prior guidance, positive outlook commentary and the attractive acquisition of premium leisure travel business, Scott Dunn.
The largest negative contributors were Pinnacle Investments, Regis Resources and Baby Bunting. Pinnacle Investments underperformed during the period after reporting a 1H23 result below expectations largely reflecting lower-thanexpected revenues across both performance fees and management fees. Regis Resources was a negative contributor, following the gold price lower in February, with gold declining 5% to US$1,817/oz at month end. Baby Bunting underperformed during the period after a weak 1H23 result and the announcement that the CEO is expected to depart later this year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-7.pdfJanuary, 2023
After fees and expenses, the Portfolio increased by 5.50% during the month, underperforming its benchmark by 106 bps.
The largest positive contributors were Pinnacle Investments (PNI), Sims (SGM) and Sandfire Resources (SFR). Pinnacle Investments outperformed during the period despite no material company news, although higher equity markets (supporting higher funds under management) were supportive to earnings during the period. Our position in scrap and metals recycling company Sims contributed positively during the period. Scrap steel margins are improving following a period of significant moderation from historical highs and are positioned to strengthen further, in our view. Sandfire Resources was a positive contributor, with copper prices increasing ~10% over the month to close at US$4.17/lb on expectations that the re-opening of China post COVID-zero would support copper demand.
The largest negative contributors were Infomedia (IFM), Megaport (MP1) and Gold Road (GOR). Infomedia underperformed during the period despite no material company news, although this is a part reversal of outperformance during December. Megaport underperformed after a weaker than expected December quarterly result across key volume metrics such as new customer numbers. We believe these volume trends will improve going forward as execution improves, new distribution channels mature and macroeconomic headwinds moderate. Our position in Gold Road was a negative contributor during January, despite the gold price rising 3% to US$1,928/oz at month end. The company reported weak production for the December quarter, however the driver was an extended shutdown at its Gruyere mill and in our view is not symptomatic of longer-term issues.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-6.pdfDecember, 2022
After fees and expenses, the Portfolio declined by 3.66% during the month, outperforming its benchmark by 6 bps. The largest contributors were EBOS, Sandfire Resources and Infomedia. EBOS outperformed during the period supported by a positive investor day, which day reiterated our positive view toward the company with defensive earnings growth across both health care and animal care divisions.
Sandfire Resources was a positive contributor to the portfolio during the period, with copper prices up 9% over the month to close at US$3.73/lb. We like copper as a commodity given its leverage to electrification as a key material in batteries and electric motors. Infomedia outperformed during the period, with a well-received investor day reiterating our positive view around revenue growth, productivity opportunities for the new management team to improve margins, and the ability to use the net cash balance sheet to make accretive acquisitions.
The largest negative contributors were 29Metals, Netwealth Group and Nanosonics. 29Metals declined during the month following a weak production update and disappointing 2023 guidance. While Netwealth underperformed on limited news flow, we view Netwealth as a very high-quality company that is well managed, highly cash generative and has strong long term earnings growth prospects. We view NWL’s current FY24 valuation multiple of 22.9 times EV/EBITDA as an attractive entry point for the stock. Nanosonics underperformed in the period despite no updates. The disinfection medical device company continues to rebound strongly as hospital access and activity improves, driving strong uptake of new devices, acceleration in the product upgrade cycle and higher utilisation of its high margin consumables.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-5.pdfNovember, 2022
After fees and expenses, the Portfolio increased by 6.15% during the month, outperforming its benchmark by 123 bps.
The largest positive contributors were Sandfire Resources, Gold Road Resources and 29Metals. Sandfire Resources undertook a $200m Entitlement Offer during the period, with the raising viewed as being an important de-risking event towards addressing its balance sheet concerns. Gold Road Resources also delivered positive performance in November, with the backdrop of the gold price rising 8% to US$1,768/oz at month end, and 29 Metals benefited from copper prices increasing 9% over the month to reach US$3.73/lb.
The largest negative contributors were Collins Food, Select Harvests and Infomedia. Collins Food underperformed during the month after delivering a 1H23 result in line with expectations but guided to higher-than-expected cost inflation which the company believes is likely to persist. Select Harvests also underperformed following a weaker than expected result and with the global almond price remaining stubbornly weak, reflecting the industry challenges in clearing excess inventory built through COVID. Infomedia released a downgrade to FY23 revenue guidance at their AGM reflecting implementation delays which we regard as temporary issues that are expected to normalise in the medium term. The growth outlook still remains positive for its global software product set, supplemented by productivity opportunities under the new management team and the ability to use its net cash balance sheet to make accretive acquisitions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-4.pdfOctober, 2022
After fees and expenses, the Portfolio increased by 2.52% during the month, underperforming its benchmark by 394 bps. The largest positive contributors were Nanosonics, NIB Holdings (not held) and Flight Centre. Nanosonics outperformed during the period as the business continues to perform well with consumables sales growth resuming, increasing penetration and strong double digit revenue growth. The NIB Holdings stock price came under pressure following its $315mn equity raising (at 8% discount to close price) to fund its entry into the Australia National Disability Insurance Scheme as a plan manager. Flight Centre outperformed as its Leisure division (40% of pre-COVID EBIT) continues to benefit from pent-up travel demand, with improved margins after a material reduction in the cost base. The largest negative contributors were Megaport, 29Metals and Cooper Energy. Megaport underperformed after a weaker than expected September quarterly result across customer volume metrics and higher than expected capex. 29Metals also underperformed after announcing a softer than expected September quarter production report. Cooper Energy declined following its recent equity raising to fund the acquisition of the Orbost gas plant from APA Group.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-3.pdfSeptember, 2022
After fees and expenses, the Portfolio declined by 8.23% during the month, outperforming its benchmark by 223 bps.
The largest contributors were Pilbara Minerals, AVZ Minerals (not held) and 29Metals. Pilbara outperformed during the period with continued lithium price strength ahead of consensus forecasts. The company is progressing a downstream lithium hydroxide strategy with partner POSCO and assessing the potential to produce a value-added lithium/salts product. AVZ Minerals contributed during the period following several months of suspension due to ongoing litigation surrounding the ownership of the company’s key asset, a pre-production lithium site in the DRC (Congo). 29Metals was an outperformer during the period as copper prices stabilized after a period of weakness.
The largest negative contributors were New Hope, Pinnacle Investment Management and Flight Centre Travel. New Hope was a key detractor for the portfolio during the period as coal prices continued to trade at significantly inflated levels. Despite delivering a FY22 result ahead of expectations, Pinnacle underperformed during the period largely due to lower equity markets. Flight Centre underperformed during the period given concerns that potential global economic headwinds could negatively impact the demand outlook, with the FY22 result in line with the upgraded guidance.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-2.pdfAugust, 2022
After fees and expenses, the Portfolio declined by 0.18% during the month, underperforming its benchmark by 40 bps.
The largest contributors were Pilbara Minerals, Monadelphous and Austbrokers. Pilbara outperformed with continued lithium price strength ahead of consensus forecasts. Monadelphous outperformed during the period after reporting a stronger than expected June quarter result across revenue and EBITDA growth. Austbrokers outperformed as the company guided to continued strong organic growth.
The largest detractors were Megaport, TPG Telecom and Nanosonics. Megaport underperformed reflecting a weaker technology sector, while TPG Telecom underperformed following a slightly disappointing result which missed market expectations at the EBITDA level. Nanosonics underperformed due to slightly higher FY23 cost guidance compared to consensus and following strong outperformance in the prior months.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies-1.pdfJuly, 2022
After fees and expenses, the Portfolio increased by 10.72% during the month, underperforming its benchmark by 72 bps.
The largest contributors were Megaport, Pinnacle Investment Management and Nanosonics. Megaport outperformed after reporting stronger than expected June quarter sales and, pleasingly, its first EBITDA positive quarter. Pinnacle rallied on the back of stronger equity markets and after reporting higher than expected performance fees. Nanosonics outperformed after delivering a positive update in relation to its transitioning of the GE distribution arrangement.
The largest negative contributors were Atlas Arteria, Infomedia and Cooper Energy. Atlas Arteria underperformed following an announcement from IFM that they were not in a position to make a bid at this time. IFM retains an approximately 15% stake in the company and has reserved the option to revisit a bid at a future stage. After strong outperformance in prior months, Infomedia held its value but did not participate in the broader market rally. Cooper Energy underperformed following an equity raising to fund the acquisition of the Orbost gas plant from APA, with the market remaining concerned around near-term production challenges.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/ubs_aust_small_companies.pdfMay, 2022
After fees and expenses, the Portfolio declined by 5.83% during the month, outperforming its benchmark by 118 bps. The largest contributors were Infomedia, Atlas Arteria and Monadelphous. Infomedia received competing takeover proposals during the period. Private equity firm TA Associates lobbed the first bid at $1.70 per share, a 33% premium to its last traded price, before Batter Ventures, another US-based private equity firm, subsequently proposed $1.75 per share for the company. Atlas Arteria and Monadelphous outperformed without any materially positive news during the period. The largest negative contributors were AUB Group,
Whitehaven Coal (not held) and Southern Cross Media. AUB announced the acquisition of London-based Tysers, a wholesale insurance broker, for up to $1,056mn. The deal is funded from a $350mn equity raising, a new $675mn debt facility and a $176mn placement to the vendor (with deferred consideration). Whitehaven outperformed in response to higher coal prices (thermal +31%). Southern Cross Media announced a disappointing trading update during the month, with management setting FY22 EBITDA guidance $85-90mn, below consensus for $100mn
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/188132434.pdfApril, 2022
After fees and expenses, the Portfolio declined by 0.99% during the month, outperforming its benchmark by 51 bps. The largest contributors were Select Harvests, Kelsian and Flight Centre Travel. Select Harvests outperformed as conditions for the current Californian almond crop deteriorated, signalling a positive outlook for prices. Kelsian was seen as a defensive hedge against inflation, with its bus contracts indexed to CPI, and as tourism conditions returned to normal across Australia. Flight Centre outperformed as remaining international COVID restrictions were removed, allowing travel conditions to normalise.
The largest negative contributors were Megaport, Whitehaven Coal (not held) and Netwealth. Megaport delivered a weakerthan-expected 3Q22 update. Revenue grew 5% to $27.9mn for the quarter sequentially, slower than analyst forecasts, following its strategy to increase emphasis on indirect sales. Whitehaven outperformed in response to higher coal prices (thermal +26%) as demand for the commodity increased in response to the ongoing global energy crisis. Netwealth announced a weaker-than-expected 3Q22 update. Management reported net inflows of $2.6bn for the period, weaker than analyst forecasts for $3.3bn.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/187296488.pdfMarch, 2022
After fees and expenses, the Portfolio increased by 3.11% during the month, underperforming its benchmark by 215 bps. The largest contributors were Pilbara Minerals, Nickel Mines (not held) and Zip Co (not held).
Pilbara Minerals outperformed amid higher lithium prices, with spodumene rising 4% to $US2,710/t. Nickel Mines declined over uncertainty about the ability of its largest shareholder, Tsingshan Holding Group, to cover a significant nickel short position following a price spike in the commodity. Zip announced an acquisition of peer Sezzle (SZL) at the end of the prior month, funded by scrip, and a capital raising to support growth of the combined business. The largest negative contributors were Uniti (not held), AVZ Minerals (not held) and Sandfire Resources. Uniti outperformed as two suitors, Macquarie Infrastructure and Real Assets (MIRA) and a joint venture comprising Morrison and Brookfield announced competing takeover offers for the business. AVZ Minerals outperformed amid higher lithium prices, with spodumene rising 4% to $US2,710/t. Sandfire Resources declined following its 1H22 result at the end of the prior month in which management gave disappointing cost guidance for the newly acquired MATSA project, in part due to higher energy prices in Spain
The S&P/ASX Small Ordinaries Accumulation Index increased by 5.3% during the month, taking its 12-month return to +9.7%. In comparison, the MSCI World Index and the S&P500 returned +3.2% and 3.7% respectively. The domestic market benefited from a much larger weighting to Resources: Metals & Mining and Energy comprise 26% of the benchmark versus the S&P500 at 4%
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/186398107-1.pdfFebruary, 2022
After fees and expenses, the Portfolio declined by 0.50% during the month, underperforming its benchmark by 49 bps. The largest positive contributors were Monadelphous, NRW Holdings and Gold Road Resources. Monadelphous exceeded low expectations with its 1H21 result as strong revenue growth (+12.3% y/y) more than offset cost pressures from the tight labour market in Western Australia. NRW met forecasts for 1H22 and upgraded full-year EBIT guidance from $145-50mn to $150-155mn, with the group set to benefit from its leverage to iron ore and infrastructure capex. Gold Road Resources outperformed alongside the gold price (+6% to US$1,910/oz), which more than offset a slightly weaker-than-expected 4Q21 result.
Geopolitical events and surging commodity prices have taken centre stage this month, shaking risk sentiment and challenging consensus’ optimistic forecast for global growth in 2022. From our perspective, although for the past six months our forecasts for global growth in 2022 have been below consensus, we believe a series of downgrades will soon be evident for global growth and earnings growth in most major markets. Surging commodity prices and ongoing supply shortages have resulted in further upside to the inflation outlook and risks forcing the hand of central banks in coming months in an attempt to contain rising inflation expectations. The reality for 2022 is that a world of higher inflation, slower growth and higher financing costs awaits
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/185583767.pdfJanuary, 2022
After fees and expenses, the Portfolio declined by 9.27% during the month, underperforming its benchmark by 28 bps.
The largest positive contributors were Virtus Health, Pilbara Minerals and TPG Telecom. Virtus Health outperformed after receiving a second takeover offer for the business from new suitor CapVest. The new bid was at $7.60 per share, 7% above BGH’s offer last month. Pilbara Minerals outperformed alongside the lithium price, with spodumene rising 6% to US$2,710/t. TPG Telecom maintained value during the period without any material news, outperforming the declining market.
The largest negative contributors were Megaport, Pinnacle Investment Management and Redbubble. Megaport gave a 2Q22 update which revealed higher costs as the business adjusts its operating model to focus on its indirect sales channel. While Pinnacle didn’t announce any material news, the investment manager declined alongside equity markets. Redbubble released a disappointing 2Q22 trading update with lower-than-expected margins due to higher customer acquisition costs, higher shipping costs and Apple’s IOS 14 changes to privacy settings.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/184034487.pdfDecember, 2021
After fees and expenses, the Portfolio declined by 1.32% during the month, underperforming its benchmark by 101 bps
We expect the Australian economy to continue to rebound in the short-term, following a better-thanexpected contraction in 1Q21 amid COVID-related lockdowns in Melbourne and Sydney. Notwithstanding the ongoing risk from new variants such as Omicron, we believe interruption to economic growth from renewed lockdowns will be an aberration within an improving trend. Indeed, the fundamentals that will drive the economic recovery remain in place. The recovery in labour market income has been sufficient to offset the gradual withdrawal of temporary fiscal support. Moreover, the accumulation of an estimated $185bn in excess household saving, in concert with strong asset price gains, leaves the consumer uniquely positioned to underpin economic growth in 2021- 2022. Dwelling investment is set to provide solid support for economic growth over the next six months as previously approved housing moves through the construction phase, and a broader-based lift in business investment expectations is an important step in ensuring a sustained economic recovery. We expect the global economy to expand 6% and the Australian economy to expand 4.5% in 2021. We expect another strong year of economic growth in 2022 of 4.0%
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/181859175.pdfOctober, 2021
After fees and expenses, the Portfolio rose by 0.16% during the month, underperforming its benchmark by 76 bps. The largest positive contributors were Imdex, Pinnacle Investment Management and IGO Limited. Imdex delivered a better-than-expected update at its AGM, announcing that revenue grew 41% to $86.8mn (y/y) in 1Q22 with growth across all regions. Pinnacle also held its AGM during the period, revealing FUM of $90.2bn in 1Q22 (+0.9% since FY21) that was largely driven by the higher-fee retail channel. IGO Limited outperformed as lithium prices continued to strengthen, with spodumene rising 2% to US$2,300/t, on top of the 92% rise in the prior month.
The largest negative contributors were SeaLink Travel, AUB Group and Select Harvests. SeaLink Travel missed out on a $2.3bn, 9.5-year contract with the Melbourne Metro Bus Franchise, which was instead awarded to Kinetic. AUB Group partially retraced strong outperformance from prior periods despite no material news. Select Harvests partially retraced strong outperformance. Significant rainfall is forecast for California – ending its current drought and bringing more almond supply to market
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/181179231.pdfSeptember, 2021
After fees and expenses, the Portfolio decreased by 1.02% during the month, outperforming its benchmark by 112 bps. The top positive contributors were Flight Centre Travel, TPG Telecom and Medical Developments International. Flight Centre outperformed as Australian vaccination rates accelerated, pulling forward the timeline for the resumption of domestic and international travel. TPG Telecom outperformed as a re-opening beneficiary in response to accelerating vaccination rates; tourists and migrants make up a large portion of its Mobile business. Medical Developments International provided its outlook in its annual report, anticipating strong sales growth for FY22 as its European expansion accelerates.
the Australian economy contract in 3Q21, albeit it has been notable how well both business surveys and employment indicators have held up in Q3, suggesting a modest contraction than might have been expected several months ago. We continue to believe the interruption to economic growth from renewed lockdowns will be an aberration within an improving trend. Indeed, the fundamentals that will drive the economic recovery remain in place. The recovery in labour market income has been sufficient to offset the gradual withdrawal of temporary fiscal support. Moreover, the accumulation of an estimated $185bn in excess household saving, in concert with strong asset price gains, leaves the consumer uniquely positioned to underpin economic growth in 2021- 2022. Dwelling investment is set to provide solid support for economic growth over the next 6 months as previously approved housing moves through the construction phase, and a broader-based lift in business investment expectations is an important step in ensuring a sustained economic recovery. We expect the global economy to expand 6% and the Australian economy to expand 4.5% in 2021, a downward revision from our pre-lockdown forecast of 6%. We expect another strong year of economic growth in 2022 of 4.0%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/180018290.pdfAugust, 2021
After fees and expenses, the Portfolio rose by 6.92% during the month, outperforming its benchmark by 194 bps.
The largest positive contributors were Pinnacle Investment Management, Nanosonics and Centuria Capital. Pinnacle delivered a stronger-than-expected FY21 result, with NPAT rising +108% (y/y) to $67mn, 6% ahead of consensus forecasts, supported by strong performances across its affiliates. Nanosonics also beat expectations as revenue growth of +3% renewed confidence in the market that the company was recovering from its COVID-related disruption. Centuria Capital delivered FY21 results at the midpoint of its guidance range and within consensus, however the market was focused on solid AUM growth (+71%) and the outlook for a more meaningful contribution from its Development income as its pipeline grows to $1.9bn.
The largest negative contributors were SeaLink Travel, Uniti (not held) and Integral Diagnostics. SeaLink Travel partially retraced prior outperformance despite EBITDA rising 85% (y/y) to $167.5mn, which was slightly below consensus forecasts. Uniti Group announced that FY21 underlying NPAT grew 8% to $53mn, as the performance of its Wholesale & Infrastructure (W&I) exceeded analyst expectations with ~16k connections in 2H21. Integral Diagnostics delivered disappointing FY21 results. EBITDA grew +24% to $94mn – below consensus for $97mn due to the repayment of JobKeeper – and lockdowns clouded the operating outlook for FY22.
The Australia economy completed 1H2021 with strong momentum, prompting the RBA and consensus to upgrade expectations for both 2021 and 2022 calendar year growth. Both the size of the economy and the number of people employed comfortably exceed prepandemic levels. Clear highlights were the unemployment rate declining from a peak of 7.5% in July 2020 to just 4.6% in July 2021 and June quarter GDP rising 0.7%, well ahead of expectations. Nevertheless, renewed COVIDrelated lockdowns in Melbourne and Sydney will sharply impact the data in 3Q21 and materially alter our growth forecasts for the remainder of 2021 and 2022.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/179145009.pdfJuly, 2021
After fees and expenses, the Portfolio increased by 0.78% during the month, outperforming its benchmark by 10 bps. Positive contributors included IGO Limited, Select Harvests and Pinnacle Investment Management.
IGO Limited announced the completion of its Greenbushes lithium acquisition late in the prior period and, secondly, a strong June quarter production report. While no guidance was outlined for Greenbushes, production and costs at Nova were well ahead of consensus estimates and FY22 guidance was broadly in line with forecasts.
Select Harvests rebounded as management gave a positive update, announcing that current market prices for almonds have increased 10% to A$6.75-7.25 since its last update in July.
Pinnacle Investment Management announced that its affiliates had generated $85.9mn of performance fees for FY21 – of which PNI’s share will be $19.5mn – with 80% of its strategies outperforming over the past five years. Negative contributors included Nanosonics, Megaport and Australian Finance Group. Nanosonics and Australian Finance Group both underperformed without any materially negative news. Megaport partially retraced strong outperformance from prior periods, even as the company gave a strong 4Q21 update during the period with sales accelerating and record quarterly adds in customers, ports and services.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/176282284.pdfJune, 2021
After fees and expenses, the Portfolio increased by 2.95% during the month, underperforming its benchmark by 13 bps.
Australian small caps shrugged off new COVID-19 outbreaks across the country to deliver strong returns in June. The S&P/ASX Small Ordinaries Accumulation Index increased by 3.1% in the month to 30 June 2021, taking its 12-month return to 33.2%. The benchmark was in line with the broader ASX300 for the period and outperformed global indices, with the MSCI World Index returning 2.4%, despite all major cities going into lockdown at one point during the month in response to COVID-19 cases
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/174806791.pdfMay, 2021
After fees and expenses, the Portfolio rose by 0.17% during the month, underperforming its benchmark by 10 bps. The largest positive contributors were Gold Road Resources, EML Payments (not held) and Collins Foods. Gold Road Resources outperformed alongside the gold price, with the commodity rising 7.5% to $US1,900/oz during the period.
EML Payments declined sharply after an Irish regulatory body raised concerns about its PFS Card Services business. The concerns relate to the business’s Anti-Money Laundering / Counter Terrorism Financing risk and control frameworks and governance. Collins Foods outperformed without any material news.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/173148292.pdfApril, 2021
After fees and expenses, the Portfolio increased by 5.61% during the month, outperforming its benchmark by +63 bps. The largest positive contributors were IGO Limited, Pinnacle Investment Management and Lynas Rare Earths (not held).
IGO announced the sale of its 30% stake in the Tropicana gold mine to Regis Resources (RRL) for $903mn and delivered a solid 3Q21 production result, with the Nova mine’s production and costs broadly in line with consensus estimates. Investors remained focused on its Greenbushes lithium acquisition, which is expected to finalized by May-end. Pinnacle reported March 2021 FUM of $76.8bn, up 9% in the last 3 months, and 3Q21 net inflows of $3.9bn. Lynas partially retraced strong outperformance from prior periods over a potentially higher supply outlook for one of its commodities, with a Chinese competitor planning to double output over the next three years
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/172013732.pdfNovember, 2020
After fees and expenses, the portfolio increased by 9.04% over the month, underperforming its benchmark by 123bps.
Positive contributors were Nanosonics, SeaLink Travel and Pinnacle Investment Management. Nanosonics’ trading update revealed that both the consumables and hardware sales rebounded FY21 to date versus the COVID-impacted months of FY20, up 25% and 16% respectively.
SeaLink Travel outperformed as easing restrictions domestically and positive vaccine news supported the outlook for its tourism division. Pinnacle Investment Management outperformed amid strong market returns and after providing an update late in the prior month. FUM increased +5% to $61.7bn and 90% of affiliates outperformed their benchmarks in the five years to 30 Sep 2020, indicating higher performance fees.
Negative contributors were Saracen Minerals, Elders and Select Harvests. Saracen Minerals underperformed as the gold price declined 6% to $US1,763 per ounce. Elders partially retraced strong recent outperformance despite delivering a better-than-expected FY20 result, with EBIT 8% ahead of consensus. Select Harvests underperformed as persistently weak almond prices overshadowed an FY20 result ahead of expectations, with NPAT falling 53% (y/y) to $25mn
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/162518909.pdfticker: UBS0004AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
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
manager_contact_details: Array
fund_features:
UBS Australian Small Companies Fund’s investment objective is to outperform (after management costs) the S&P/ASX Small Ordinaries Accumulation Index when measured over rolling five year periods. Since inception and through various market cycles the Fund has been consistently managed using a fundamental bottom up core investment style.