22 Sep 2025
After months of investor focus being directed towards macro influences of trade tensions, global economic conditions and geopolitical risk, August offered a welcome change with reporting season redirecting attention back to company earnings performance and (in some cases) fundamental valuations.
Reporting season always brings a mixed bag of strong outperformance, missed earnings expectations, forward earnings guidance or non-committal forward looking statements. This season was no different, with around 29% of companies beating expectations, 36% missing and 35% in-line. In the end most ASX indices ended the month in positive territory with the S&P/ASX All Ords Accumulation and S&P/ASX Small Industrials Indices delivering rises of 3.2% and 6.4% respectively.
In recent months the discussion around the valuation gap between large caps and small caps has intensified. As a cohort, the smaller end of the market outperformed the bigger end. The risks associated with stretched valuations at the large end was on display in James Hardie Industries (JHX) and CSL Ltd (CSL), which fell 31% and 22% respectively in the last two weeks of August in response to disappointing announcements.
Frustratingly, the Cyan C3G Fund performance was impacted by some downward stock price movements in companies which delivered good earnings results. This resulted in a disappointing monthly return of -4.8% for the Cyan C3G Fund over August.
However these falling stock prices in August had appreciated materially in recent months as evidenced by strong monthly Fund results coming into the end of FY25 and the solid 12mth Fund return of 16.0% to 31 August 2025.
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Month in Review
Exactly half of the holdings in the portfolio delivered flat or positive performance across April, but the portfolio weightings impacted the net outcome to the negative side.
The strongest gain was from transport technology company EROAD (ERD +56%). We had recently taken a small position in this hardware-based SaaS company that provides tracking and other efficiency solutions to large vehicle fleets across New Zealand, Australia and North America. ERD benefited from the recent announcement of proposed NZ legislation which could materially expands ERD’s reach into the country’s 3.5m light vehicle market. The proposed legislation introduces electronic user charging (eRUC) to replace the existing Fuel Excise Duty on petrol to capture the growing number of EVs on our roads. There is speculation that similar legislation could be proposed in Australia and other geographies and EROAD’s solution is perfectly positioned to capitalise on this potential development.
Acusensus (ACE +12%) continued to deliver impressive results, with 20% revenue growth in FY25, guided to accelerate to 33%-41% in FY26. ACE has dominated the Australian traffic camera market over the past 5 years and for the first time disclosed that the adjusted EBITDA of the Australian operation equates to ~$20m. This is a clear leading indicator for the performance of the international camera and road worker safety businesses that are still relatively immature and presently loss-making. We continue to see ACE as a high conviction position in the Fund.
Among the weakest share price performance impacting the return of the Fund in August are discussed below.
Alcidion (ALC -17%). The Australian and UK focused hospital software business and long-term holding of the Fund delivered a very strong, albeit well-flagged FY25 result, as illustrated below.
Management spoke of material opportunities in all major regions of operation. We are frustrated by the latest price movement, particularly in light of the company’s watershed result. But as with most of our negative returning positions in August, the company is in good shape and delivered a solid result with strong underlying cashflow and profitability. The monthly price weakness appears to be attributed to lack of a defined FY26 forecast, which is always difficult given the lumpiness and timing of large contract wins. However, the ALC share price remains up 56% to date in 2025.
ReadCloud (RCL -14%). Again, this education software and services business suffered share price decline on no negative news. The price decline was on low trading volumes and, in our view, is no reflection of the underlying health of the business. RCL share price is up 19% in 2025 year to date.
Raiz (RZI – 12%). Raiz has undergone somewhat of a transformation over the past 18 months, by exiting its loss-making Asian operations and redirected growth capital to its Australian business. The FY25 result is a strong improvement over previous periods.
The main lingering disappointment in the eyes of investors is the rate of active customer growth which should accelerate with improved marketing strategies or complementary acquisition(s). A recent pricing lift for customers will see revenues improve further and, indeed, the Raiz share price has already lifted substantially in September.
Media
There were a number of media pieces done during the month as listed on our website and Linkedin.
Outlook
We are not going to speculate on short-term market movements, however we are buoyed by the improvement in interest to small and microcap companies and remain confident that the valuation gap will continue to narrow against the larger companies.
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 and we believe our companies are well positioned to execute their evolving growth strategies.
The Fund remains focussed on investing in growth opportunities through a well-diversified portfolio of emerging companies.
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
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