10 Jun 2025
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The Australian stock market put in a strong performance in May with the S&P/ASX All Ords index rising by 4.2% during the month and the S&P/ASX Small Industrials Index gaining 4.0%.
The Cyan C3G Fund did well, with a return of 7.7%, taking the one year return to a pleasing 21.1% well ahead of both the All Ords and Small Industrials at 12.4% and 8.2% respectively.
We wrote last month about the extreme market volatility and the saying that it’s “time in the markets, not timing of the markets” which is of most importance to sustained investment returns. Indeed, if an investor was trying to “pick the bottom” of April’s tariff-led market dive, the window of opportunity on the ASX was literally – three days.
May’s ongoing global market strength was largely driven by easing global trade tensions, with Trump’s 90-day pause in reciprocal tariffs (including China) being the catalyst for the market’s optimism.
Locally, the RBA’s rate cut to 3.85%, combined with Australia’s, relatively, resilient economic outlook and waning inflation, provided additional market support.
We were pleased to see ongoing interest in the smaller end of the market as larger cap valuations get stretched and corporate activity mounts, with offers currently on the table for Engenco (EGN), Envirosuite (EVS), Hutchison Telecommunications (HTA) and Webjet (WJL).
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Month in Review
As might be expected in a strong market, almost all positions in the Fund made gains during the month.
Two of the best performers this month were Zoom2U (Z2U) which has been renamed to Locate Technologies (LOC +109%) and Beamtree (BMT +33%).
We have been invested in Locate Technologies for some time due to its attractive recurring revenue software platform (Locate2U) that enables small and medium businesses to route, track, manage and optimize their delivery operations. The company has been growing steadily and tracking close to break-even. The recent flurry of interest in the company has stemmed from new shareholder support it received in a recent placement and its decision to pursue a Bitcoin treasury strategy. This is the first Australian company to do this and aligns with the strategy adopted by the successful NASDAQ listed company Micro Strategy (NASDAQ:MSTR). Whilst this is a new investment proposition for the domestic market, importantly it directs new investor attention to the company which we believe, even after its strong run in May, still offers a compelling investment proposition with a market cap of just $26m. We look forward to watching both the existing business and the new strategy develop in parallel over time.
Healthcare software provider Beamtree (BMT +33%) rebounded well after providing a solid Q3 trading update which included a collaboration with the NHS in the UK, a renewed a 5‑year contract in Ireland ($3.95 m), a $1m+ ARR software installation into a Saudi Arabian hospital and the company’s forecast that total Annual Recurring Revenue will be at $30m+ entering FY26.
Digital curricula and VET training business ReadCloud (RCL +35%) has a September financial year end and hence released its 1H25 results in May. These numbers looked great with strong take-up in the company’s VET-in-Schools courses (revenue +32%) and respectable growth in domestic Direct eBook sales (+10%). This growth, combined with prudent cost control, saw underlying EBITDA rise 73% to $1.8m with a cash balance of $3.6m at 31 March 25.
On the downside over the month we saw retracements in smart traffic camera manufacturer and operator Acusensus (ACE -8%), Birddog (BDT -4%) and Beforepay (B4P -4%).
There was some activity in the Fund with positions added in communications business Comms Group (CCG) after buying competitor Tasmanet out of administration; and the addition of fleet management business Eroad (ERD) through a discounted corporate selldown and further supported by a strong FY25 result.
Media
There were a number of media pieces done during the month as listed on our website and Linkedin.
We would draw your attention to a special series we did with Ausbiz titled “Three Stock For...”. Cyan promoted “Three Stock for a Recession Proof Portfolio” which comprised: Acusensus (ACE), Alcidion (ALC) and Credit Clear (CCR). Please view the video here.
Outlook
The Australian stock market is certainly entering mid-2025 on optimistic tone. After a volatile first half with global interest rate uncertainty and soft consumer demand, the market has, on the whole, remained fairly resilient with stabilising inflation and renewed investor interest in some of the undervalued sectors, particularly small caps.
We feel some of the key drivers in the coming months to be:
- Interest Rates: With the RBA either lowering or keeping rates on hold as inflation cools, equity markets should continue to enjoy confidence in a more predictable monetary environment.
- Corporate Activity: M&A activity continues to pick up, especially from private equity, hinting at the pockets of deep value in listed businesses.
- Small Cap : Having underperformed for several years, small and micro-cap stocks are showing tentative signs of recovery, particularly in the tech and healthcare sectors.
- Commodities: Iron ore and lithium prices remain key swing factors with China’s growth remaining uncertain. However, any signs of stimulus could provide upside for resource stocks and a boost for the local market.
Clearly global macro risks persist, including geopolitical tensions, a slowing China and weekly challenges from the US political system. But in respect to the Cyan C3G Fund the environment is looking increasingly promising with stock flows, corporate activity and general market activity improving markedly from prior periods.
This month the Fund is continuing to experience a positive uplift, both from improved market sentiment at the small end and solid underlying financial results from many of our key holdings.
Please stay in touch with our intra-month commentary via Linkedin or feel free to contact us at any time.
Dean Fergie and Graeme Carson
Cyan Investment Management
AFSL No. 453209
An investment in the Cyan C3G Fund can be made by clicking here