Cyan C3G Fund Newsletter – 31 August 2015

08 Sep 2015

The Australian stock-market experienced its worst month in almost 7 years, with the All Ordinaries Accumulation Index falling 7.3% in August. However, the Cyan C3G Fund performed relatively well, falling just 2.3% in the month and retracing less than half of the 5.1% gain it accumulated in July.

Full report available: Cyan C3G Monthly August 15


The majority of our holdings reported their earnings results for the 2015 financial year in August and we were generally pleased with the earnings performance of our portfolio of companies. Some of the major contributors (+ve and -ve) to the month’s performance include:

Opus Group (OPG) +25% in August: This previously distressed printing business once owned by McPherson’s (MCP) has been recapitalised and now is able to deliver cost-out earnings growth without the previous debt burden. Looks exceedingly cheap (5x FY15 earnings), dividend paying and is well positioned to be substantially re-rated over the next 12 months.

Bellamy’s (BAL) +12%: Came in well ahead of previously upgraded prospectus forecasts with an outlook for significant earnings growth in FY16 and beyond.

Speedcast (SDA) +8%: Delivered a strong result with growth delivered both organically and through four acquisitions since listing in 2014. SDA is well positioned in a growing international market.

BlueSky Alternatives (BLA) -3%: A strong result with assets under management (AUM) at $1.35bn materially exceeding management’s target of $1bn. We expect BLA to continue to build scale and momentum in the coming years with potential for other specific positive share price catalysts including new funds and private equity asset valuation events.

Lovisa (LOV) -6%: This fashion retailer’s result was ahead of expectations and the forecast for 2016 is improved due to store acquisitions in Sth Africa. But the big prize is an expansion into a large offshore market such as Europe or North America to complement its maturing domestic business.

M2 Telecommunications (MTU) -17%: Typically delivered a consistent result slightly ahead of guidance with forecast NPAT growth into 2016 of 30%+. Recent price weakness has been attributed to profit taking and its potential removal from the Small Ordinaries index (but inclusion in the ASX100).

AMA Group (AMA) -13%: A solid result proving the consolidation strategy is beginning to bear fruit. It’s still in its early stages and we see further upside from further company-changing acquisitions over the next 12 months.



In addition to our ongoing portfolio of higher quality smaller companies, the C3G Fund benefited from our defensive positioning with a high cash balance in response to stretched company specific valuations. We have begun to prudently and conservatively deploying cash into specific value opportunities as they are presented through the market volatility. Looking forward, we reiterate our current investment strategy, based on the following key themes:

1. Invest in companies not markets

2. Focus on quality

3. Avoid high risk and volatile sectors

4. Target companies that earn through the cycle

5. Look for companies with specific growth drivers6. Deploy a portion of our high cash balance to build opportunistic positions as we identify them

Full report available: Cyan C3G Monthly August 15