The Monash Investors Small Companies Fund (Fund) is an unlisted retail unit trust offering investors an Australian equity exposure with a strategy of outperforming the S&P ASX Small Ordinaries Total Return Index over the medium term (5yrs).

The Fund has been in operation since July 2012, and over this time after all fees has outperformed the Index by approximately 4% per annum and deliver an average total return of approximately 10% per annum.

This fund is appropriate for investors with “High” and “Very High” risk and return profiles. A suitable investor for this fund is prepared to accept high risk in the pursuit of capital growth with a medium to long investment timeframe. Investors should refer to the TMD for further information.

Monthly Performance Report: April 2025

The Monash Investors Small Companies Fund was flat for April, up 0.3%, against the broader market which ticked up with the Small Ordinaries up 1.8%.

Despite the fairly benign monthly outcomes, the market took us on a wild ride in April, falling earlier in the month on the back of the Trump Administration’s tariff announcements, but fully recovering those sudden losses with similarly spectacular speed.

Last month we provided greater insight into how we’re navigating the current heightened uncertainty. Where we sit today, investors don’t seem as concerned about this uncertainty as they were a few weeks ago. But shifts in perceptions don’t necessarily reflect shifts in reality. Irrespective of what comes next, our approach, as set out last month, remains unchanged. We seek to be relatively fully invested across a prudently diversified portfolio of attractively priced, good quality, smaller ASX-listed companies with plenty of idiosyncratic attributes. In short: good, cheap & different. We’re wholly focused on the long-term prospects for our businesses, and seeking to enhance the risk/reward profile of the Fund through rotating out of mature, less attractive opportunities, and into the most prospective of our opportunity set.

Commentary

Principal contributors this month were Eagers Automotive and Catapult Group. Eagers continued its strong and somewhat surprising re-rate, up 23% and contributing 1% to the Fund. The position has reached a full 5%, and we’re trimming at these higher levels from where we don’t find the risk/reward set-up as attractive as at ~$10 per share. Eagers is a high quality business with a leading market share, significant scale benefits, and its integrated business model. It’s also benefiting from very strong sales growth of BYD which it distributes into Australia. But at this level of maturity, growth is likely to be much lower and returns in the short-term will be dominated by movements to market multiples. At these higher multiples, expectations need to be moderated, and the stock becomes a candidate for rotation into better value elsewhere.

Catapult too has enjoyed a strong re-rate, returning 18% for the month and contributing 0.8%. Unlike Eagers, Catapult is a fast grower, and we believe remains in the early stages of building out a valuable global installed base of its wearable analytic devices to the sports industry. Its top-line is set to grow for many years to come, fuelled by a combination of expanding market penetration among elite sports teams, penetration down further into the sub-elite realms as teams and players of all calibres seek performance enhancing data and analytics, and increases to fees charged as its installed base matures. With a largely fixed cost base, top-line growth will disproportionately fall to the bottom line from here, and we believe position Catapult to deliver considerable further growth well into the future. We’ve allowed our Catapult position to grow from the 1-2% position size range to now a full 5% of the Fund, and expect to continue to hold from even this somewhat higher price level.

Detractors included software company, Readytech, which fell 19% in the wake of its announced CFO departure. The company is also struggling to win new revenue within its education and council verticals, and this is weighing on growth (and expectations). While growth has stalled in the short-term, we believe there remains a lot to like with Readytech, and we believe its significant revenue base remains attractive to strategic or financial acquirers. Having been courted by potential acquirers in 2022, with indicative bids over double its current share price, and with a substantial private equity operator as its current largest shareholder, we believe the company would likely face renewed corporate interest if its shares remain down here. Conversely, if it can return to growth, there is considerable potential for a meaningful re-rate off this low base.

Outside of Readytech, the portfolio suffered declines among many of its resource company constituents. Bellevue Gold being the most notable, off 21% following its production downgrade and discounted capital raise. Metro Mining (a large position at over 4%) fell 9% as the price of bauxite settled down, Pilbara fell 11%, Peninsula Energy fell 13% ahead of going into a trading halt in anticipation of a production downgrade and likely cap raise a la Bellevue Gold. Mac Copper and Karoon Energy each fell 6-9%. Our resources exposure has fallen in recent months as we’ve allowed weightings to fall along with share prices, and have selectively cut back positions. We do however retain slightly smaller positions now in a range of companies exposed to uranium, lithium, copper, bauxite and gold. Timing is always a challenge with these, but on balance we’re constructive toward this now smaller part of the portfolio and its potential to generate value over time, notwithstanding recent challenges.

Underperforming Recently, but Positioned Well for the Cycle

The past few months have seen the Fund lag its benchmark, the ASX Small Ordinaries, with that underperformance now reaching 7% over a 12-month period. This level of underperformance, we feel, warrants additional commentary, both in terms of key contributors to this lag, as well as our views on current positioning. As outlined last month, Opthea has been written to zero, costing us 2% over a 12 month period (or a bit under 1% on our original cost). As noted above, some of our resources positions detracted in April, and have now detracted quite meaningfully over the past year. We’ve refined our portfolio management process in terms of these positions, and intend to manage sizing more tightly than in the past as we move forward. Paladin, as an example, contributed handsomely to performance in 2023 and into 2024. Maintaining our positive view on uranium, and Paladin’s prospects, we allowed our position to expand in size along with the company’s share price performance. However, when and as the company ran into some operational issues, and sentiment toward the sector turned south, the shares handed back more than all our gains. Having invested around $9 per share, Paladin reached $16 by April 2024, and have declined ~60% since. On a large position, this alone has been a meaningful contributor to our 7% underperformance. Likewise Pilbira Minerals which was a full position size a year ago, and has declined ~60% since.

Other meaningful positions have de-rated over a 12-month frame, including Lovisa, which was discussed in detail in our February monthly report, accessible here. Like Paladin, Lovisa had been a strong positive contributor in the period immediately before, and while in this case we did reduce our weighting to control risk (and in effect, lock in gains), its subsequent de-rate has been a drag.

We don’t mean to be overly negative here. Internally, we view variation in performance versus our benchmark in the order of 5-10% – and in either direction – as very run of the mill over any given 12-month period. Our objective is to deliver meaningful outperformance over longer periods of time, net of fees, but in order to achieve this, we need to be different, express our variant perspective in terms of portfolio positioning, and of course to ultimately be correct (on balance, and on average) in our judgement. Over the medium to long-term, each of the core DMX Asset Management and Monash Investors processes has delivered demonstrable outperformance of our benchmarks, and having brought our two capabilities together now into a streamlined and comprehensive smaller companies (ASX Smalls & Micros) operation, we’re cautiously enthused about the set-up for the Monash Fund for the years ahead.

With considerable hard work put into broadening the portfolio, and reinforcing its multi-thematic composition, we highlight that today’s portfolio is characterised as having:

• Long-term compounders that have generated value over many years and are positioned to continue to do so. Telix, Lovisa, and Catapult Group are good examples.
• Deep value across many idiosyncratic names. Austin Engineering, Viva Leisure, and Servcorp are good examples. All well-financed, sub-10X earnings multiples, and each growing.
• Takeover targets that may deliver us an occasional boost. Smartpay is one currently under offer, EML Payments is a prime candidate, and RPMGlobal will likely eventually put itself up for sale.
• A basket of smaller market cap growers with upside tail potential. Austco Healthcare, Credit Clear, Kinatico, and Pureprofile are good examples.
• Undervalued smaller financial companies that are attractively-priced, growing, and may benefit from further industry consolidation. Count, Fiducian Group, and Sequoia are good examples.
• A modest exposure to a range of resources companies that individually carry some degree of risk and uncertainty, but equally carry significant upside potential. Metro Mining, Paladin, Pilbara, Mac Copper and Bellevue Gold are good examples.

Additionally, we note the portfolio has a strong liquidity profile, and is able to easily scale in both directions. A few appropriately-priced low-liquidity names are included, but these are well-managed within a broader portfolio context. Overall, we’re enthused about the breadth and prospectiveness of the opportunity set that comprises the Fund today.

Summary

We continue to navigate this particularly uncertain period by sticking to our core philosophy of remaining invested across a diverse portfolio of good businesses, well-managed, and attractively priced. We rotate at the margin, trimming or exiting mature investments in favour of adding to or initiating new more prospective investments. Heightened volatility can assist this process, but economic disruptions can complicate it.

Despite relatively soft recent results, we’re enthused about the value inherent across the Fund, and its multi-thematic nature including multiple ways to win over time. We look forward to continuing to navigate this peculiar market environment, and to seeing developments unfold across our portfolio in the months ahead.

Thank you for your trust and support. We welcome your direct enquiry any time.