Monthly Report

Monthly Report

November 2015

November 2015

Net Performance (After Fees) 1 Month 3 Month 6 Months 1 Year 3 Years 5 Years *Since inception (Annualised)
Concise Mid Cap Fund Return (%) 0.65 6.24 (-1.78) 9.53 10.11 4.79 3.51
Mid Cap Masters Index (%) (-0.27) 5.27 (-4.44) 10.03 9.46 4.42 0.92
Active Performance (%) 0.92 0.97 2.66 -0.50 0.65 0.37 2.59

Market Performance

Midcaps continued to outperform the broader Australian equities market in November. The S&P/ASX 200 Accumulation Index fell -0.68% last month resulting in a 1.90% return over the rolling 12 months, below the monthly (-0.27%) and annual rolling (+10.03%) return for the mid cap benchmark. The S&P/ASX 200 Accumulation Index generally underperformed global markets. The US S&P500 and Dow Jones rose 0.05% and 0.32% respectively in local currency. China’s Shanghai Composite Index rose 1.86%, Japan’s Nikkei was up 3.48% and European markets were strong with both the German (+4.90%) and French (+1.22%) indices higher.

Outperforming sectors during November included Information Technology (+6.99%), Heath Care (+5.32%) and Financials ex-REITs (+2.49%) with Materials (-12.40%), A-REITs (-2.93%) and Utilities (-1.69%) the laggards.

Commodity prices remained under pressure with nickel, aluminium, copper, zinc and lead prices all reaching six year lows. Oil prices fell -10.1%, gold was -6.8% weaker, iron ore fell -13.7% and thermal coal price rose +3.3%. The Australian dollar traded up +1.29% to AUDUSD $0.72.

The US economic recovery continues. Consumer spending and capital goods orders edged up in October and the unemployment rate fell to 5.0%, the lowest level since the global financial crisis. Average hourly earnings rose to +2.5% year on year, a six year high and the estimate for third quarter GDP growth was revised up to +2.1%, an improvement on the initially reported +1.5%.

Data out of China suggests the economy is continuing to experience slowing fixed investment and rising consumption growth. The official PMI remained unchanged at 49.8 in October, indicating weakness in the manufacturing sector.  Inflation moderated to +1.3% year on year and industrial production decelerated to +5.6% year on year in October. Retail sales growth, however, was healthy reaching +11.0% in October.

In Europe, the European Central Bank spent the month signaling further monetary easing was a distinct possibility to address lower than desired levels of inflation. In Australia, inflation (+2.1%) remains at the low end of targeted levels due to spare capacity in the economy. Economic expansion is running at a moderate pace, a level strong enough for the RBA to judge that a 2.0% cash rate remains appropriate to foster growth.

Mid cap news for November included Slater & Gordon (SGH) fell heavily on news the UK Government has announced proposals that could impact on the rights of people injured in road traffic accidents. Myer’s (MYR) like for like sales in the first quarter were stronger than expected. Primary Health Care (PRY) released a weaker than expected trading update to the market. Metcash (MTS) announced its 1H16 results with EBIT declining 12.7% on the back of highly competitive trading conditions in all its markets, particularly food and grocery.  Both Aristocrat Leisure (ALL) and CSR Ltd (CSR) released solid financial results for recent trading periods.

Attribution Analysis for the month ended November 2015

Top 5 Bottom 5
Southern Cross Media Sims Metal Management
G8 Education TPG Telecom
Platinum Asset Management Star Entertainment Group
Challenger Whitehaven Coal
Mantra Group Recall

Fund Performance

The Concise Mid Cap Strategy posted a return of +0.65% in November, +0.96% ahead of the benchmark fall -0.27%. Positive contributors to performance included Southern Cross Media Group (SXL), G8 Education (GEM) and Platinum Asset Management (PTM). Laggards for the month were Sims Metal Management (SGM), TPG Telecom (TPM) and Star Entertainment Group (SGR).

Southern Cross Media (SXL) was a strong performer in November (+19.4%), having confirmed press speculation of merger discussions with Nine Entertainment Co. (NEC) and upgrading 1H16 earnings guidance at its AGM.  SXL is now forecasting metro radio revenue growth of +7-8% in 1H16 with the positive rating impacts on the drive schedule from the return of Hamish & Andy converting to forward bookings and an improved earnings outlook.  The earnings rebound underway at SXL is yet to be adequately recognised by investors with recovery in sales and earnings lagging improving ratings. We see further upside supported by improving market conditions and an attractive valuation.

Challenger (CGF) share price continues to benefit from a positive policy response by the Government to the Financial System Inquiry (FSI). New policy initiatives are likely to lead to the introduction of a new annuity product set, deferred lifetime annuities (DLAs), which we foresee providing CGF with an additional platform for growth.  The introduction of DLAs with a favourable tax status are likely to prove a powerful incentive that would result in superannuates increasing asset allocations to annuities in the pre-retirement phase. Providing retirement solutions to a wider audience (ie those in superannuation accumulation phase rather than retirement phase) can be expected to result in CGF not only benefiting from the ensuring demand increase for annuities, but demand for DLAs would also increase the quality of CGF’s earnings as this would be the beginning of a trend to longer tenor annuities, resulting in book growth with a longer dated income stream.


As outlined earlier the Mid Cap index has outperformed the ASX 200 by approximately 8% over the last twelve months.  This trend is set to continue.  The valuation of the ASX 200 is near enough at long term averages with the market Price to Earnings multiple (PE Multiple) slightly over 14x.  In recent years, equity market performance has been driven by global quantitative easing by central banks driving down the cost of funds and subsequently inflating asset prices.  As opportunities for central banks to continue lowering the cost of funds become limited, investors are switching focus looking for earnings growth.

After benign earnings growth in FY15, consensus estimates for the ASX 200  earnings growth in FY16 is 2%. Ex Resources and Financials, consensus estimates of earnings growth is 8%.  Resources and Financials comprise around 62% of the ASX 200 by market cap, with a particular emphasis in the 20 largest companies.  Accordingly, market estimates of earnings growth in FY16 is heavily biased towards Mid Cap Industrial companies.  With valuations around fair value Mid Cap companies are set to deliver strong outperformance.

*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: 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.