11 Mar 2021
We’re pleased to report the Cyan C3G Fund pushed higher again in February, rising 2.6% after all fees, ahead of comparable indices over the month and well in front of those indices over the past 12 months.
Volatility was again a feature with both the market and the Fund seeing significant gains mid-month before inflation fears and a dive in the bond markets tarnished the bullish mood of equity investors.
Australian 10 year bond rates spiked a massive 80% from 1.0% to 1.8% in February delivering large losses to longer dated fixed interest portfolios. The S&P/ASX Australian Government Bond Index fell 4.8% in the month, a significant loss for a traditionally defensive asset class.
Month in review
Online investment platform Raiz (RZI) continued its excellent run, rising another 23% in February. As we wrote last month (with updates):
“We‘ve been singing Raiz’s praises for over a year now and investors now seem to be appreciating the investment platform’s market traction. RZI now has 340,000 405,000 active customers and over $600m $660m in Funds Under Management (FUM).”
Additionally, on 1 March 2021, RZI announced an increase of its monthly account keeping fees from $2.50 p/m to $3.50 p/m which will provide a material jump in monthly revenue, assuming only modest customer churn.
Another strong performer in 2021, Alcidion (ALC) posted a 19% rise in February following its January gain of 16%. ALC’s first half earnings result produced some excellent numbers supporting the price movement: 1H revenue up 36% to $11.1m and a modest EDBITA loss of $623k, a 64% improvement. With over $12m in cash and additional contract wins (most recently on 2nd March 2021) we’re confident ALC is poised for an exciting 2021 and beyond.
One of our IPO investments, Singular Health (SHG) made a fantastic debut, up 85% and continued its momentum to close the month up 260% on its IPO price. SHG is an early-stage business that provides technology (volumetric rendering) to produce 3D and virtual reality images from 2D inputs for use in the medical, resources and education sectors. Whilst the shares’ early price action may well be channeling some investor excitement, SHG did announce a small contract win in its first weeks of trading which certainly gives some merit to the positive price action.
As often can be the case, it wasn’t all good news for the Fund.
Readcloud (RCL) pulled back again with a slide of 14% in the month. Sometimes with smaller stocks (RCL is capitalized at around $60m) their price movement can be impacted as much by fund flows as underlying business performance. RCL enjoyed some huge stock price gains in late 2020 as US institutional investors looked for a stake in the business. It appears that some of this momentum has wavered in early 2021. RCL reported solid revenue growth in 1H21 and we remain optimistic about the future of the business.
Quickstep (QHL) fell 18% in February. Whilst QHL has a solid manufacturing revenue base related to the aerospace defence industry, their ability to win new work at attractive margins has been hamstrung by the crippling of the airline industry and latent capacity of the airline manufacturers and maintenance firms. Nevertheless QHL managed to increase both its sales and underlying profit on the prior corresponding period so we do feel the market may have been overly harsh on this business.
Investor information website Reach Markets is hosting Cyan Investment Management on its upcoming ‘The Insider – Meet the Fund Manager’ program. This is an interactive presentation where we will talk about current market trends and our conviction investments. We welcome all our investors and readers to join, details below.
Friday, 12th March 12pm (AEDT)
Meet the Fund Manager – Cyan Investment Management
Whilst volatility related to NASDAQ gyrations and bond market jitters has the potential to impact near-term returns, we’re confident stock-specific opportunities will outweigh any deterioration in market sentiment.
The underlying fundamentals – certainly for the businesses in which the Fund has invested – appear buoyant.
The majority of our holdings posted results over February in-line with or ahead of our forecasts which is especially notable as these are typically higher growth investments with which we hold quite elevated expectations.
What we wrote last month still holds true:
“Not only has the corporate window opened wide again this month but our key holdings continue to post promising numbers and outlooks. There are more than three new IPOs in our sights along with pleasing results from our existing positions.”
Dean Fergie and Graeme Carson
Cyan Investment Management
AFSL No. 453209
An investment in the Cyan C3G Fund can be made by clicking here