05 Jun 2015
The Cyan C3G Fund has now returned 21.9% (after all fees) since its inception in July 2014. Over the same period the Small Ordinaries Accumulation Index has returned just 4.1% and the All Ordinaries Accumulation Index 7.8%.
It is certainly worth noting that the Fund’s monthly volatility in achieving this return is markedly lower (at 7.9% p.a.) than the market indices – reflecting our conservative investment style and aversion to the higher-risk market sectors.
Download Monthly report here: Cyan C3G Monthly May 15
THE CYAN C3G PORTFOLIO
There were only a handful of movements of note in May, being:
AMA Group (AMA) +18%: This automotive collision repair consolidator negotiated an option to buy one of its largest competitors in the smash repair business, Woods Accident Repair Centres.
Given the company’s previous success in integrating new businesses, this was well received and saw the stock rise 18% through the month. Given the business’ non-cyclical nature, AMA is gaining additional interest from the investment community
Freelancer (FLN) +16%: Since listing, Freelancer has had a difficult time attracting long-term investor support due to unsustainable hype at the time of listing (Nov 13) and poor liquidity. However the April 2015 purchase of an online payments system combined with a well-supported $10m capital raising (at a premium to market), an impending US roadshow, along with improving sales and margin numbers, have seen renewed interest in the business.
We have been invested in FLN since January and consider it to have one of the strongest and most attractive long-term thematics (in web-enabled business outsourcing) of any business listed on the ASX currently. We agree, it’s a big call!
Speedcast (SDA) +14%: This stock has been somewhat of a sleeper, having produced only modest monthly returns since August 2014 when we first invested in the IPO and subsequently bought additional stock on day 1 of its listing. However this pan-Asian satellite communications provider continues to win new work across various government, maritime and enterprise clients and hence has seen its price rise to nearly $3.00 at the end of May from the $1.96 IPO price.
Praemium (PPS) -7%: After recent gains Praemium has experienced some weakness in the past couple of months as the stock appears to be caught up in the broader sell-off of financial services businesses. However the underlying fundamentals remain positive and despite recent falls, the stock remains well above our initial purchase price.
We remain of the view that the market is expensive on a broader basis. As with last month, we still have a relatively high cash balance whilst continuing to look for company specific opportunities.
Given the broader market has fallen more than 3% in the first 4 days of June, this strategy appears prudent at the moment.
We reiterate our current strategy, based on the following key themes:
1. Invest in quality – weight the portfolio towards proven companies generating high return on equity and redeploying capital back into their own business.
2. Avoid high risk and volatile sectors – including any direct resources exposure, highly leveraged businesses or unproven business models.
3. Invest in companies that earn through the cycle – these include a number of positions in the financial services, telco and healthcare sectors.
4. Invest in companies with specific growth drivers – these include those exposed to structural changes within industries, growing market share or with significant geographic expansion plans, either organically or through acquisition.
5. Deploy a portion of our high cash balance to build opportunistic positions as we identify them – corporate activity and new IPO activity remain buoyant and we are spending much of our effort exploring and researching new investment opportunities.
We are obviously extremely pleased with how the C3G Fund has performed since inception and we look forward to keeping our investors updated with the Fund’s progress.
Download full report here: Cyan C3G Monthly May 15
Graeme Carson and Dean Fergie
Cyan Investment Team