|Net Performance (After Fees)||1 Month||3 Month||6 Months||1 Year||3 Years||5 Years||*Since inception (Annualised)|
|Concise Mid Cap Fund Return (%)||(-1.58)||5.31||8.07||7.73||7.51||3.86|
|Mid Cap Masters Index (%)||(-0.34)||6.89||10.23||12.75||8.80||1.32|
|Active Performance (%)||-1.24||-1.58||-2.16||-5.02||-1.29||2.54|
Global share markets were broadly higher during April with the MSCI World Index posting a positive +2.2% return for the month. US markets were higher with the Dow Jones and S&P 500 up +0.4% and +0.9% respectively. Performance varied in Europe where the FTSE 100 was up +2.8%, the French CAC40 Index up +0.3% but the German DAX Index down a hefty -4.3%. In Asia the Nikkei rose +1.6% and China’s market was particularly strong (+18.5%) on the back of monetary stimulus. Australia’s S&P/ASX 200 Accumulation Index was -1.7% lower in April with a weaker S&P/ASX 200 Industrial performance (-2.8%) only partially offset by stronger performance from S&P/ASX 200 Resources (+4.3%). At the GICS sector level, major gains were posted by energy (+8.5%), utilities (+2.0%) and materials (+1.2%), while financials ex-REITs (-4.7%), financials, (-4.2%) and information technology (-4.0%) were the detractors.
Base metals were generally stronger with the benchmark indicator, the LME Index, gaining +6.8%. Bulk commodities had a better month with iron ore up +9.4% and thermal coal (Newcastle) rising +15.1%. Gold was stable (-0.1%) and crude oil prices posted the strongest monthly rise (+25.6%) in six years.
In economic news, US GDP grew a lower than expected +0.2% during the first quarter with weakness in the oil price over the last six months resulting in lower oil and gas investment without a significant offsetting boost to consumption materialising yet. The strength of the US dollar was also a brake on economic growth in Q1 with real exports down -7.2% and imports rising +1.8%. Minutes from the Fed’s meeting in April showed no significant change in the central bank’s message and outlook. Core inflation is running at +1.8% year on year, a fraction below the Fed’s 2% target. Wage inflation remains in control with employment cost index rising to a year on year rate of 2.6%. This was the highest year on year growth in seven years, still a sluggish rate but recently accelerating from the longstanding 2% trend.
In Australia, the Reserve Bank left the cash rate on hold and noted further monetary policy easing may be appropriate in the period ahead with Australian economic growth continuing at below trend pace. Data on the consumer was patchy. Retail sales rose a better than expected +0.7% in February, resulting in a +4.3% year on year growth rate but the Westpac Melbourne Institute Index of Consumer Sentiment also fell in April and remains at a level where pessimists outnumber optimists. Business conditions improved slightly although improvement remained largely confined to industries already outperforming
Attribution Analysis for the month ended April 2015
|Top 5||Bottom 5|
|Whitehaven Coal||Sims Metal Management|
|Flight Centre||ResMed Inc|
|JB Hi Fi||Primary Healthcare|
In April the Concise Mid Cap Strategy returned -1.58%, below the benchmark return of -0.34%. Best performers for the month were Whitehaven Coal (WHC), Nufarm (NUF) and Flight Centre (FLT). Major detractors were Ansell (ANN), Sims Metal Management (GSM) and ResMed Inc (RMD).
M2 Group (MTU) announced the acquisition of CallPlus, the third largest internet service provider in New Zealand for A$245m. MTU expects the acquisition to be 15% EPS accretive in FY16 to current consensus earnings expectations. We believe this acquisition deploys MTU’s balance sheet capacity with a good return for shareholders and with time this beachhead into New Zealand offers the potential for further accretive bolt-on opportunities as well as a new customer base into which MTU can potentially sell other products.
Sims Metals (SGM) downgraded 2H15 earnings expectations citing poor scrap flow as a result of difficult external conditions in the steel market and weather impacts associated with the North American winter. We see this news as a temporary set back on our thesis for SGM. Valuation metrics remain attractive, SGM has a net cash balance sheet, the company generates solid free cash flow and is progressing through its five year strategic plan which should result in a more than doubling of EBIT on the back of cost reductions, exiting loss making business, improving purchasing decisions from scrap suppliers and optimising logistics
The dispersion of performance during April was pronounced with the worst performing index, the ASX Top 20, declining 2.6% for the month while Small Cap Resources gained an astonishingly 11.8%. With the market PE trading 16.2x 1-year forward, investors could argue that value lay in depressed Small Cap Resources and Small Cap Energy end of the market. The counter argument is while iron ore and oil prices have rebounded some 20% from previous month’s lows, the majority of Small Cap miners and energy companies will continue to lose money in the foreseeable future.
An example of the volatility currently playing out is Worely Parsons Ltd (WOR), which gained 19% for the month of April. As the improvement in the oil price (up 20% for the month) saw companies such as Oil Search (OSH) and Santos (STO) rally, the flow on effect saw investors flock to WOR without acknowledgement of the inherent risk the company still possesses in its forward earnings. Subsequently, WOR downgraded it FY15 profit on the 4th of May, which has seen the share price decline over 12% and giving back its April gains.
On the 5th of May the RBA reduced the cash rate to a record low of 2.0%. This action along with lower petrol prices, benign utility bills, higher house prices and lower deposit rates is supportive towards equity markets. The Fund remains well positioned to benefit from the above conditions with overweight positions in high quality domestic cyclical’s.
*The Mid Cap Masters Index is a price and accumulation price, free float adjusted index calculated daily for Concise on behalf of S&P. The constituent universe of index is the S&P/ASX 200 excluding the S&P/ASX 50. * The CMCF commended on the 16th of April 2008. The since inception figure is annulaised.
This publication is intended to provide general information only and has been prepared by Concise Asset Management (ABN 62 126 975 282) and (AFS Licence No. 320497), the issuer of the Fund, without taking into account any particular person’s objectives, financial situation or needs. Investors should before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. Your investment is subject to investment risk, including possible delays in repayment and loss of income and capital invested. The repayment of capital or income is not guaranteed by Concise Asset Management. Offers of interests in the Fund are contained in a current Product Disclosure Statement (‘PDS’). A copy of the PDS is available from our website: www.conciseam.com.au or contact Client Services on (03) 9642 8968. You should read the PDS and seek professional advice before making any decision about whether to acquire or continue to hold an investment in the Fund.