Cyan Newsletter – 31 December 2020

14 Jan 2021

PDF of Newsletter here


The Cyan C3G Fund delivered a positive result of +1.4% in December to end Calendar Year 2020 with a total return of +7.9%. Obviously the past 12 months have presented a myriad of investment challenges, so to post a return for the year comfortably ahead of the All Ords’ +3.6% is a pleasing result.

At the end of each year we reflect on our past performances and look to the year ahead. At Cyan we are proud to have posted a compound return of 16.4% p.a. since the inception of the Fund in 2014, well ahead of all comparable indices, none of which have delivered more than 9.2% p.a.

Indeed, as at 31 December 2020, the Cyan C3G Fund has outperformed its comparable indices over most timeframes.

Throughout December there was the usual pre-Christmas scurry of IPO activity, with a mixed bag of results. One of the largest, Dalrymple Bay Infrastructure (DBI) was a major disappointment, closing down 20% on the day of listing as was Marely Spoon (MMM) competitor Youfoodz (YFZ) which fell 35%. In a growing sign the space in becoming overly crowded, Payright (PYR) a new entrant in the fashionable Buy Now Pay Later sector, fell 20% post listing.

Other IPOs fared much better including Nuix (NXL) +50%, Liberty Financial (LFG) +16% and Maas Group (MGH) +30%. In a sign of the mass of activity, there were 25 new companies listed on the ASX in the month of December.

PDF of Newsletter here


Month in review

Cyan initiated investments in two prospective IPOs and enjoyed a solid return from Playside Studios (PLY) which closed the month up 130% on its IPO price. Unfortunately our prospective listing of traffic technology company Acusensis was postponed (and the funds returned to investors).  We expect the company will aim to list in the first half of 2021.

The most material contributors to performance were:

Playside Studios (PLY +130%): This Melbourne-based video game developer made an impressive debut on the ASX. We invested in the IPO and increased our position in the early days of trading. The business is commercially successful with an established track record of revenues and profitability but is still in the relatively early stages of its growth lifecycle phase. PLY has both well-established relationships with leading global content studios such as Disney, Pixar and Warner Bros as well as developing its own proprietary product. We see it as a solid long-term investment opportunity with significant growth potential ahead.

City Chic Collective (CCX +46%): In October CCX fell 11% and we wrote: “This women’s apparel retailer did deliver some disappointing news by announcing that its bid to acquire the ecommerce assets US-based Catherine’s was unsuccessful. CCX had already raised capital to the fund the purchase and was thought to be the front-runner, but the company wasn’t willing to match a materially higher bid from a competitor (which it could afford to do if desired). That said, it is now well financed to acquire any other opportunities that may arise as it drives its offshore growth strategy. We remain invested and supportive of management”.

Our patience was rewarded as the company announced it would acquire the brand and eCommerce and wholesale business of UK-based retailer Evans for A$41m. This gives CCX further scale and offshore geographic diversification.

Kelly Partners Group (KPG +31%): This accounting and financial services business continued its recent strong share price run in December. Solid earnings momentum complemented by ongoing acquisitions and the announcement of a strategic partnership with listed insurance broker AUB Group (AUB) has caught the attention of the market. In our view, the stock has been fundamentally undervalued for some time, so it’s rewarding to have some of its inherent value realised.

The only moderate negative contributors in the month included Service Stream (SSM) and Quickfee (QFE) which both retraced by 20% with QFE impacting the Fund somewhat more due to its higher Fund weighting of around 3.5%.


As we look forward into 2021 after a challenging twelve months, we continue to find ourselves in an environment with many competing forces:

  • Premium pricing: certain sectors of the market, such as technology and some retail, are looking fundamentally overpriced albeit with continuing tailwinds in their underlying businesses;
  • Fundamental challenges: Other sectors, such as travel, tourism and education remain severely hamstrung by the continued impact of Covid;
  • Economic uncertainty: both domestically and globally, as a direct result of continued lockdowns and countered by the continuation of government subsidies and stimulus packages, and;
  • Geopolitical instability: particularly the recent focus and concern on the US and, more acutely for domestic companies, the growing trade tensions with China.

At Cyan, we look to identify companies that have strong growth paths ahead, with a proven product or service, but which are yet to reach their full potential. We aim to help the companies grow by providing capital to allow management to execute their growth strategies.

Whilst the external environment will always provide challenges and opportunities, quality investments will always be rewarded over the long term with capital growth. The issues raised above will provide an increased level of short-term uncertainly, but we are confident that markets will remain in an overall upward trend as interest rates remain at historical lows and capital continues to be directed towards equities as an asset class.

We believe our current portfolio of 27 stocks is well balanced from a risk/return perspective (no individual holding accounts for more than 7% of the total Fund) and has a combination of both exciting higher growth businesses and established cash-flow generative income investments.

We expect there to be a strong pipeline of positive news flow including new contracts, revenue and earnings upgrades and potential corporate activity that should see the Fund continue to perform well. We look forward to some of our key holdings delivering positive catalysts in the coming weeks and months.

We thank all our investors for their support and wish everyone a safe and prosperous 2021.