Monthly Report

Monthly Report

September 2017

September 2017

Net Performance (After Fees) 1 Month 3 Month 6 Months 1 Year 3 Years 5 Years *Since inception (Annualised)
Concise Mid Cap Fund Return (%) 0.19 1.70 4.17 4.46 10.52 10.98 5.05
Mid Cap Masters Index (%) 0.53 1.07 3.74 7.47 12.63 11.74 3.47
Active Performance (%) -0.34 0.63 0.43 -3.01 -2.11 -0.76 1.58

Market Performance

Global share markets rose in the September quarter on the back of a pick up in global economic growth and shrugged off the strengthening language from numerous central banks around the unwinding of quantitative easing stimulus. The MSCI USD Accumulation index, a measure of global equity markets, rose +4.84% over the quarter. For the month, Australia’s share market as measured by the S&P/ASX 200 Accumulation index, was a relative underperformer falling -0.02% compared to the +2.24% gain for the MSCI USD Accumulation index.

Domestically, monthly sector level gains were driven by Healthcare (+2.2%), energy (+1.2%) and financials (+1.1%), while laggards included telecommunications (-4.6%), utilities (-3.7%) and staples (-1.9%). Mid caps (ex ASX50 to ASX200) continued to outperform the broader market.

There continues to be signs that the world’s largest economy has momentum. Positive US economic data last month included the September ISM Manufacturing Index coming in stronger than expected and motor vehicle sales hitting 18.5 million on a seasonally adjusted annual rate, the highest rate since July of 2005. Key indicators of Chinese economic activity remain healthy but have moderated somewhat over the quarter. Export data remains healthy and consistent with the theme of global trade picking up in recent months. Domestically, economic data releases continue to show the economy appears to be tracking at a satisfactory pace. Business conditions are generally healthy and rose to the highest level since early 2008. Consumer sentiment, on the other hand, continues to track below the key 100 mark, indicating pessimists outnumber optimists.

In commodity markets, most commodity prices weakened last month after posting strong gains for the September quarter. Copper (-4.5%) was the laggard with aluminium spot prices relatively flat (-0.1%) and West Texas crude the standout rallying (+9.7%).

In September Fairfax (FXJ) released its Scheme Booklet relating to the separation of Domain from Fairfax Media. The Independent Expert’s report concludes the demerger “is in the best interests of FXJ shareholders”. Macquarie Atlas (MQA) announced it would increase its interest in the French toll road asset, partially funded with a $450m equity raising. Myer (MYR) released its financial results and noted post reporting trading has been below expectations so far in the 2018 fiscal year. TPG Telecom (TPM) reported a FY17 result that was above expectations. However, guidance for FY18 was below consensus expectations and the company cut its dividend to help fund its mobile network rollout.

Attribution Analysis for the month ended September 2017

Top 5 Bottom 5
Seven Group Holdings Aveo
CYBG PLC Metcash
Reliance worldwide TPG Telecom
G8 Education Nufarm
Boral Spark Infrastructure

Fund Performance

The Concise Mid Cap Fund returned +1.70% for the quarter, above the benchmark return of +1.07% for the Mid Cap Masters Index. For the month the fund was up +0.19%, behind the index return of +0.53%. For the month major contributors to performance included Seven Group Holdings (SVW), CYBG Plc and Reliance Worldwide (RWC) with Aveo (AOG), Metcash (MTS) and TPG Telecom (TPM) the major detractors. Major contributors for the quarter were WorleyParsons (WOR), Mineral Resources (MIN) and Reliance Worldwide (RWC) while Aveo (AOG), Nufarm (NUF) and HT&E (HT1) were the laggards.

News on portfolio stocks included;

In September, Nufarm’s (NUF) result was in line with guidance where EBIT growth reflected the benefits of cost reduction and efficiency initiatives as well as market share gains in particular categories. Going forward, NUF earnings are expected to be underpinned by further transformation initiatives and well as growth in focus markets. The company continues to assess opportunities that will arise from the industry consolidation of multinationals with a focus on seeking assets that are aligned with the core or help build out NUF’s portfolio of herbicides, insecticides, fungicides and plant growth regulators.

Outlook

Global macro economic events continue to heavily influence short term movements in equity markets. Accommodative policy settings by central banks while aiming to stimulate inflation provide a positive backdrop for equity market returns. Despite uncertain short term share price performance, over the medium term investors will continue to reward companies showing sustainable growth in earnings.

Australian economic conditions remain patchy. Retail sales are slowing and inflationary pressures remain weak indicating a weak demand environment. Accordingly, the opportunity to continue driving earnings higher remains tough. It is in this environment where the quality of company management will dictate the future earnings growth profile. Specifically, we are looking to invest in companies where the strategy of company management will lead to an improved market position over competitors.

*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.