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 timeframe has generated strong returns to investors of approximately 10% per annum. Returns have outperformed the Index over time, and have been generated in a way that has often been significantly differentiated from other Australian share funds, helping clients to mitigate risk by blending with other assets within their broader portfolios.

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.

Dear Investor,

The Monash Investors Small Companies Fund had a strong December, up 8.5% in a softer market environment, with the Small Ordinaries Index advancing 1.4%. Pleasingly, our advance this month was broad-based with seven positions contributing 0.5% to 2.3% each while only one stock detracted more than 0.2%.

The portfolio benefited from our deliberate rotation in recent months out of prior winners and some of its relatively richly valued growth names, and into companies where a clearer current value basis is inherent. The portfolio has limited resources exposure, and no gold exposure at this point. When considering the broad Small Ordinaries return profile over the past year or two, the strong resources and gold sectors have been a challenge to our relative performance, and these will continue to present a headwind for us so long as these resources sectors continue to boom. The corollary to this though is that should they come off, we believe our portfolio is well-positioned with a range of idiosyncratic exposures across interesting industrial, financial, and technology companies, together with a minor exposure of ~10-12% across resources names (bauxite, copper and uranium exposed).

Commentary

Key contributors once again include Verbrec, which continued its re-rate, up 48% and contributing over 2% to performance. As noted previously, a non-core divestment followed by a strategic and synergistic acquisition carry the expectation of a material uplift in profitability for the group. Its strong balance sheet and low market valuation provided downside protection, and while the shares have increased materially, they continue to trade at an attractive multiple and hold the potential for significant further gains in the periods ahead. Equally helpful has been EDU Holdings’ continued re-rate, up 32% for the month and also contributing more than 2%. Its shares benefited from upgraded guidance, the announcement of an agreed highly accretive selective buyback from two large holders (of 12.5% of shares outstanding), and broadening institutional interest in the name with two brokers recently initiating coverage and highlighting material further upside potential. A non-executive director purchasing $1.6m worth of shares on-market in early December probably also boosted sentiment. A key risk with EDU is of regulatory change, and in the wake of the tragic Bondi massacre, we’re mindful of the potential for either a wholesale change to immigration policy, or the enhancement of screening and vetting, and what this may mean for international student enrolment numbers in the future. This risk is mitigated to some degree by EDU’s significant onshore recruitment (including of domestic students). At its current market value, EDU also has a degree of base level valuation support from expected earnings from its existing student body. As always, we factor risks relative to underlying value and market potential over time and manage our position size accordingly.

While as noted above, we have limited resources exposures, the names we do own performed well this month. AIC Mines (copper) and Peninsula Energy (uranium) each rose around 30% and contributed around 1% to performance. Each have been trimmed into price strength to maintain prudent exposures. Metro Mining (bauxite) recovered 10%, while a small position in Galan Lithium (a lithium developer) contributed positively with its shares also up around 30%. Galan has been exited into its price strength, and following our participation in its capital raise earlier in 2025. At these higher prices, we don’t feel comfortable with the upside/downside dynamic given it’s not a principal area of research focus for us, so we’ve taken the so-called easy money and will leave this one to others who are more across this space. We’re always comfortable folding when we feel we no longer have a relative edge with a security. That it may continue to appreciate is of no concern to us, or frankly of consequence – on average, over time – as those proceeds are invariably recycled into other prospective opportunities for which we do have strong current conviction and the expectation of material gains ahead.

Finally of note, two prior laggards – Austin Engineering and EML Payments recovered 17% and 10% respectively. In the case of Austin, it was pleasing to see its share price find a footing, supported by an active (and we believe value accretive) buyback programme. After surprise downgrades and apparent operational issues across a number of its units, we hope to hear constructive news when Austin reports next month. If they can meet revised guidance, avoid further bad news, and demonstrate improvements with its troubled spots, there remains significant upside potential with Austin from these still-depressed levels. Incremental purchases around its recent lows have positioned us well for its recent modest recovery, and positions Austin as a top holding for the fund.

Shriro Update

Shriro is a consumer product distribution business with a market capitalisation of ~$55m. It holds the Australasian distribution rights for Casio, in addition to less significant interests in the barbeque and home appliance sectors. Having lost or exited other distribution lines over the past few years, the company has been in shrink mode, generating significant free cashflow in the process, most of which has been returned to shareholders via dividends, capital returns, and buybacks. At DMX, we’ve been invested in Shriro for a number of years and have been frustrated by a seeming lack of strategic direction in terms of seeking to develop new business or make sensible tuck-in acquisitions. We believe its former principal shareholders have prioritised extracting as much cash as possible at the expense of growth and business development. Things came to a head in September when a potential delisting and buyback failed to win key shareholder support, and its 20% shareholder subsequently quit their holding (and left the board). His holding was acquired at a modest premium of 87cps by Fiona Brown, co-founder and Executive Chair of fellow ASX-listed distributor, Dicker Data. Ms. Brown has subsequently joined the Shriro board, which we are encouraged by considering her experience with the highly successful and growth-oriented Dicker Data. Her board involvement is more interesting than her shareholding with the latter likely representing ~1-2% of her personal balance sheet (considering her ~$500m of shares in Dicker Data). Where we initially thought she may have made a small opportunistic but passive investment here, we now expect with her personal involvement she will likely plan to be involved and hopefully help the company pivot toward growth and development.

We have been building a meaningful position in Shriro for the Monash Fund since 2024 and this is now our fifth largest holding, approaching 5% of the portfolio. From a valuation perspective, we note that the company has recently completed a $5m buyback at 81cps, representing 8% of its shares outstanding. This was an equal access buyback with the ability to tender additional shares. We estimate the company will have an additional $10-15m in surplus cash at present, some or all of which may be used for a follow-up buyback in the near term. Any amount that isn’t returned in this fashion, we expect, will either be distributed as a capital return or dividend, or – ideally – retained to help fund any growth efforts. With an expected NPAT earnings profile around $8m pa, its shares currently trade for 7 times current earnings, or just 5 times excluding ~$15m of surplus capital. The shares aren’t without risk, as Casio is a key relationship and any potential change to its partner model for distribution in Australasia could wipe out this business line. But the low current valuation, and the majority of Shriro’s market valuation being supported by net working capital and expected run-off earnings in the unlikely (but possible) event of Casio terminating its distribution relationship, we are comfortable that downside risks are relatively contained. On the upside, if Ms. Brown’s involvement does indeed mark an inflection point in Shriro’s growth aspirations, and the company is able to build and develop from here, the total return potential in the years ahead could be very significant.

Summary

We believe the portfolio is well placed in an absolute sense, and relatively well placed should some of the hotter sectors de-rate. We’re cautious on the broader market as we move in to 2026, with many segments having performed very strongly over the past year or two. But from a bottom-up portfolio construction perspective, we’re very enthused about the underlying value across our portfolio, the positive momentum many of our businesses are presently enjoying, and the potential for meaningful further re-rates to some of these. No one has a crystal ball for the immediate period ahead, but taking a medium to long-term view of the portfolio – as we always do – we’re confident in the differentiation and potential for strong returns it carries for investors.

Thank you for your interest, trust and support.