Monash Absolute Investment Fund

Lonsec

Fund Strategy

The Monash Absolute Investment Fund ARSN 606 855 501 (Fund) seeks to implement the investment strategy by investing in a diversified portfolio of predominantly Australian equities (long and short), with overseas assets expected to average no more than 5% over time.

The investment strategy is Benchmark Unaware and there is no predetermined asset allocation; rather, the Fund only invests when suitable opportunities are identified. As such, asset exposures may vary significantly over time and without notice.

The Fund seeks to only invest in compelling opportunities. To identify these investment ideas, Monash Investors primarily employs fundamental, bottom-up company research and the judgement of its experienced portfolio managers.

Monthly Performance Report: April 2018

Monthly Update

The portfolio decreased 4.24% (after fees) for the month of April, during which the S&P/ASX200 rose 3.91% and the Small Ords rose 2.75%.

In April there was a lot of news flow for stocks in the portfolio, in contrast to March, which was quiet. And unlike March, where the portfolio beat the market indices, in April the portfolio went the other way

While the number of positive news announcements for stocks in the portfolio was equal in number to the negative announcements, the negative surprises had a greater effect on the stock share prices. Despite the disappointing result this month, the portfolio is up 7.21% after fees this financial year

In this month’s update we will review both the good, the bad, and the mixed.

 

Monthly Portfolio Metrics

Outlook Stocks (Long)15 Position: 59%
Outlook Stocks (Short)2 Positions: -5%
Event, Pair and Group (Long)3 Positions: 14%
Event, Pair and Group (Short)1 Positions: -1%
Cash33%
Gross Exposure80%
Net Exposure67%
Beta0.47

Return Summary Since Inception1(after all fees)

Since Inception (p.a.)9.05%
1 Month-4.24%
3 Months-8.01%
6 Months3.00%
FYTD7.21%
1 Year8.45%
3 Years2.74%
5 Years6.91%
Cumulative65.64%

1Inception date of Fund is 2 July 2012.

Portfolio Analytics Since Inception

Sharpe Ratio0.73
Sortino Ratio1.40
Standard Deviation (p.a.)9.27%
Positive Months63%
Maximum Drawdown-15.21%
Avg Gross Exposure88.30%
Avg Net Exposure76.50%
Avg Beta0.57
Avg VAR1.20%

 

The Good

Netcomm Wireless (ASX: NTC) +16%: Netcomm surprised the market by signing a product purchase agreement with Bell Canada for the supply Fixed Wireless broadband devices, similar to the Netcomm units that NBN and AT&T are rolling out to urban fringe and rural customers. This is only the third such contract of its type in the world; Netcomm invented the product and is the only successful tenderer so far.

Leigh Creek (ASX: LCK) +100%: While this is a big jump in the share price it is only a small holding for the portfolio, given the event driven nature of our investment and the size of the company. LCK is developing a coal gasification project in South Australia, and received environmental approval mid-April. The next catalyst for the stock price will be successful flaring, after which the resource should be upgraded from contingent to proven. It amounts to around 4% of Australia’s gas reserves.

NextDC (ASX: NXT) +5%: During the month NXT undertook a capital raising to fund the purchase of land for the next generation of data centres.  What surprised us and the market was the scale of these new centres.  NXT total available capacity was 129 megawatts (MW) and this has been increased to 306MW.  The original S1 facility was 16MW, the under construction S2 is 40MW, and the newly announced S3 will be 80MW.  While it will be some time before this new capacity is required, it clearly demonstrates management’s confidence in the outlook for the business.

MicroX (ASX:MX1) +3%: MicroX signed a contract with the UK Ministry of Defence to undertake the first phase of Research and Development into a lightweight x-ray imaging system for detecting explosives hidden in consumer electronic devices. This is part of a program with the Department of Transport to improve aviation safety.

The Bad

Experience Co (ASX: EXP) -18%: EXP downgraded its FY18 EBITDA guidance by 15% due to unseasonably bad weather during the March and April peak periods in North Queensland for key operations.  In the past, EXP’s business has bounced back promptly from rain interruptions and we see no reason why it will not do so again.  The business continues to grow strongly notwithstanding this setback, and the EPS will be up 13% in FY18.

AirXpanders (ASX: AXP) -54% based on our average exit price: In a shock announcement AXP disclosed flat sales in 3Q vs 2Q. Prior to this, all company announcements stated growing adoption as measured by the signing on of new hospitals and the growing usage per month on average by each surgeon. It was such a shock to the AXP Board that they immediately sacked the CEO. We immediately exited the stock, as it was a violation of the investment thesis. The stock fell another 26% after we exited.

G8 Education (ASX: GEM) -14%: At its AGM management noted that continuing tough industry conditions (both supply and demand) had reduced their occupancy rates by 2.5-3% so far this year compared to the February estimate of 1-1.5%. This led to high single digit earnings downgrades by analysts. However, industry conditions will improve significantly following the implementation of the new government childcare subsidy on 1 July and will improve GEM outlook.At the time of writing, the stock has bounced back 7.5%.

The Mixed

Impedimed (ASX: IPD) -25%: The positive news for Impedimed in April was the long awaited interim results of its Lymphedema trial, which showed a 67% improvement in outcomes using its product, versus the traditional approach.  There is still a number of years for the trial to continue. However, it is on track to show a large and statistically significant benefit that will lead to its widespread adoption. The negative news for Impedimed was its quarterly report that showed in the absence of this adoption its sales continue to be slow and it is burning cash.There is a great deal of upside in this stock contingent on the roll out to come, so we continue to hold it at a modest weight.

Lovisa (ASX: LOV) -2%: The positive news for Lovisa was that like for like sales growth to the end of Q3 FY 2018 was 7.6%, which is very strong, and has been achieved at a time when they have been reporting strong margins. Due to the addition of new stores that they have been rolling out in the UK, France, Spain and the USA, we estimate that they will do about a 20% increase in sales overall this year. The negative news was the resignation of the CEO who has been in that position for only 1.5 years, and a total of 2.5 years at the company “to pursue other interests”. However, founder and MD, Shane Fallscheer (previously CEO), will continue to lead the company and step back into the CEO role (at least for the time being).  We have maintained our weight in this stock.

Alexium (ASX: AJX) -41%: The positive news for Alexium was that (i) analytical testing showed pillows treated with Alexicool deliver over 500% greater cooling capacity compared to other commercially available pillows. This means manufacturers can buy far less Alexicool in order to achieve the same effect than other products, making Alexicool much more cost effective than alternatives. In addition (ii) they are making excellent progress in three of their verticals, and success in any of these should result in material sales growth this calendar year. The negative was the disclosure in a letter to shareholders that in the March quarter that they were prompted to develop this new industry accepted test for cooling because, in the absence of this evidence, there had been pricing pressure on their cooling chemicals currently supplied to the bedding industry for mattresses. We continue to hold a modest weight in this stock.

Key Fund Information

FUM$42m
Minimum Investment$20,000
Management Fee1.53% p.a.
Performance Fee20.5% above the RBA Cash Rate with High Water Mark
Pricing FrequencyDaily
Distributions Annually
APIR CodeMON0001AU
Morningstar CategoryAlternatives Strategies

For all business development enquiries, please contact

SA,WA,NT: Andrew Fairweather
Winston Capital partners (Acting on behalf of Monash Investors)

P. +61 401 716 043
E. Andrew@winstoncapital.com.au

VIC, TAS: Stephen Robertson
Winston Capital partners (Acting on behalf of Monash Investors)

P. +61 418 387 427
E. stephen@winstoncapital.com.au

NSW,ACT,QLD: Rory MacIntyre
Winston Capital partners (Acting on behalf of Monash Investors)

P. +61 434 669 524
E. rory@winstoncapital.com.au

For all investor enquiries, please contact

Link Fund Solutions Pty Ltd (Acting on behalf of the Fund)

P. +61 2 9547 4311
E. LFS_registry@linkgroup.com

Monash Absolute Investment Fund Unitholder Services, GPO Box 5482, Sydney NSW 2001

For all other enquiries

E. contactus@monashinvestors.com

Cumulative Return Since Inception

Gross/Net Exposure Since Inception

Invest with us

We would welcome you as a co-investor in the Fund.

Important Information

This document is issued by Monash Investors Pty Limited ABN 67 153 180 333, AFSL 417 201 (“Monash Investors”) as authorised representatives of Winston Capital Partners Pty Ltd ABN 29 159 382 813, AFSL 469 556 (“Winston Capital”) for the provision of general financial product advice in relation to the Monash Absolute Investment Fund ARSN 606 855 501 (“Fund”). Monash Investors is the investment manager of the Fund. The Trust Company (RE Services) Limited ABN 45 003 278 831, AFSL 235 150 (“Perpetual”) is responsible entity of, and issuer of units in, the Fund. The inception date of the Fund is 2nd July 2012.
The information provided in this document is general information only and does not constitute investment or other advice. The content of this document does not constitute an offer or solicitation to subscribe for units in the Fund or an offer to buy or sell any financial product. Accordingly, reliance should not be placed on this document as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation. Monash Investors, Winston Capital and Perpetual do not accept liability for any inaccurate, incomplete or omitted information of any kind or any losses caused by using this information. Any investment decision in connection with the Fund should only be made based on the information contained in the disclosure document for the Fund. A product disclosure statement (“PDS”) issued by Perpetual dated 12 September 2017 is available for the Fund. You should obtain and consider the PDS for the Fund before deciding whether to acquire, or continue to hold, an interest in the Fund. Initial Applications for units in the Fund can only be made pursuant to the application form attached to the PDS.
Performance figures assume reinvestment of income. Past performance is not a reliable indicator of future performance. Comparisons are provided for information purposes only and are not a direct comparison against benchmarks or indices that have the same characteristics as the Fund.
Monash Investors, Winston Capital and Perpetual do not guarantee repayment of capital or any particular rate of return from the Fund and do not give any representation or warranty as to the reliability, completeness or accuracy of the information contained in this document. All opinions and estimates included in this document constitute judgments of Monash Investors as at the date of this document are subject to change without notice. Perpetual is not responsible for this document.

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