15 Dec 2021
After five consecutive months of gains, the Fund gave back 2.2% in November. All indices experienced declines in November as inflation concerns, weaker overseas markets and falling commodity prices impacted investor sentiment.
Whilst the broader re-opening of the Australian east coast has seen a dramatic pick-up in local activity, the recent experience of the market appearing to be almost totally disconnected from current underlying economic activity has remained. This has meant the market has been somewhat tricky (to say the least) to navigate on a short-term basis.
Maggie Beer (MBH +26%) was our best performer in the month. At the end of September, we wrote:
“Maggie Beer (MBH) can be expected to trade very strongly this quarter particular due to its recently acquired online hamper business Hamper Emporium;”.
Indeed the company’s trading update on 9 November noted Q122 sales growth of 24% (pro-forma) and online sales comprising of 44% of all sales which will likely re-rate the underlying results in the eyes of the market given the premium being attributed to online retail plays.
Online tutorial company Kip McGrath (KME +17%) was another positive performer, again on the back of a positive AGM update which noted a 21% increase in revenue thus far in FY22 and more than 100% growth in online lessons in FY21.
Playside Studios (PLY +7%) continued its solid performance through November, even after completing a $25m capital raising during the month, a strong validation of the market support for this growing domestic technology business. Additionally, on 1 December, PLY announced a further partnership and co-development gaming contract.
Zoom2U (Z2U -22%) dragged on the Fund’s performance despite the strong underlying customer growth and revenue of its courier service along with impressive expansion of its enterprise and SME delivery tracking software service, Locate2U. It’s obviously exceedingly frustrating when stock prices appear to contradict underlying operating performance (but we are also not so naive as to not consider possible underlying issues). Given such, we met with MD Steve Orenstein in Sydney last week and remain confident the company’s future is exceptionally bright with strong scalability and significant structural tailwinds. Z2U’s 2021 AGM presentation can be found here.
The Alcidion (ALC -12%) share price has been sliding of late on an apparent lack of news-flow. However, this month they have announced the win of their long-awaited $23m+ government contract along with, at the time of writing, a significant acquisition in the UK.
Touch Ventures (TVL -17%) traded lower with the market not embracing (for the moment) our analysis of the underlying value of the investment portfolio and the company’s significant relationship with Afterpay (APT). We met with MD Hein Vogel last week and discussed at length the investment portfolio and the upcoming opportunities for the business. Additionally the company conducted an investee company webinar during the month which should improve investor understanding of the company’s asset portfolio.
Cyan featured in Ausbiz again during the month – all of our Ausbiz appearances are listed here.
All details are in the ‘News’ section of our website.
As discussed earlier, we’re finding the market somewhat volatile and peculiar in that movements and sentiment do not always appear to reflect underlying company dynamics or performance.
This creates, in some pockets of the market, what we believe are some short-term challenges and longer-term opportunities. We’ve noted many times previously how important it is to have an appropriately diversified portfolio, across the spectrums of: 1. growth and value; 2. micro to mid-cap; and 3. economic sector (be they, for the Cyan C3G Fund, technology, consumer discretionary, services and staples, financials, health and telecommunications.)
Whilst corporate activity will now slow for the remainder of calendar 2021, we have two IPO’s coming to market before the year’s close, video technology company Birddog and consumer market and data platform, XPON.
At this point in December, we’d like to wish all our investors and readers a very happy Christmas filled with food, friends, freedom and family. 2021 has been quite a year.
Dean Fergie and Graeme Carson