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Dear Shareholder,
DMXCP’s NAV increased 3.23% (after all accrued performance and management fees and expenses) for April 2021. The NAV as at 30 April 2021 was $2.8092, compared to $2.7213 as at 31 March 2021. Indices were stronger for the month, with the All Ordinaries up 3.90% and the ASX Small Ordinaries Index increased 4.93%, while the XEC Emerging Companies Index was up 7.43%.
DMXCP has returned 67.89% for the financial year to date (since 1 July 2020) (after all accrued performance and management fees and expenses).
April Portfolio Developments
April saw a number of our holdings update the market on their third quarter (1 January 2021 to 31 March 2021, 3Q21) results. Pleasingly, reflecting generally buoyant economic conditions, we saw a continuation of the strong results that we observed in the first half.
We provide an update on recent newsflow for our top 10 holdings below. Outside of our larger holdings, pleasing results were reported by XRF Scientific (ASX:XRF) (3Q21 revenue up 20% and profit up 70%, share price +36% for the month) and Ansarada (ASX:AND) which generated $2m of operating cash flow for the quarter, and grew its customers by 29% over the year (share price +24% for the month).
For the second month in a row, Easton Investments (ASX:EAS) was a significant detractor. We note that Sequioa (ASX:SEQ) had a strong 3Q21 update, and we would expect EAS to be enjoying similarly favourable industry conditions.
Top 10 DMXCP positions at 30 April 2021
While we don’t normally disclose the largest positions in our portfolio, we think it is useful to periodically provide additional visibility around the structuring of the portfolio and our thinking on our larger positions.
We previously commented on our top 10 positions in February 2020, prior to the full impact of COVID-19, and then revisited the analysis here. Following some significant recent news flow relating to our current top 10 positions, we thought it was timely to provide an update, and discuss some of this recent news.
However, we first make some general observations in relation to the top 10 positions, and provide some comments on how they reflect our investment approach more broadly.
Top 10 DMXCP positions at 30 April 2021 (in alphabetical order)
DMXCP’s NAV increased 3.23% (after all accrued performance and management fees and expenses) for April 2021. The NAV as at 30 April 2021 was $2.8092, compared to $2.7213 as at 31 March 2021. Indices were stronger for the month, with the All Ordinaries up 3.90% and the ASX Small Ordinaries Index increased 4.93%, while the XEC Emerging Companies Index was up 7.43%.
DMXCP has returned 67.89% for the financial year to date (since 1 July 2020) (after all accrued performance and management fees and expenses).
April Portfolio Developments
April saw a number of our holdings update the market on their third quarter (1 January 2021 to 31 March 2021, 3Q21) results. Pleasingly, reflecting generally buoyant economic conditions, we saw a continuation of the strong results that we observed in the first half.
We provide an update on recent newsflow for our top 10 holdings below. Outside of our larger holdings, pleasing results were reported by XRF Scientific (ASX:XRF) (3Q21 revenue up 20% and profit up 70%, share price +36% for the month) and Ansarada (ASX:AND) which generated $2m of operating cash flow for the quarter, and grew its customers by 29% over the year (share price +24% for the month).
For the second month in a row, Easton Investments (ASX:EAS) was a significant detractor. We note that Sequioa (ASX:SEQ) had a strong 3Q21 update, and we would expect EAS to be enjoying similarly favourable industry conditions.
Top 10 DMXCP positions at 30 April 2021
While we don’t normally disclose the largest positions in our portfolio, we think it is useful to periodically provide additional visibility around the structuring of the portfolio and our thinking on our larger positions.
We previously commented on our top 10 positions in February 2020, prior to the full impact of COVID-19, and then revisited the analysis here. Following some significant recent news flow relating to our current top 10 positions, we thought it was timely to provide an update, and discuss some of this recent news.
However, we first make some general observations in relation to the top 10 positions, and provide some comments on how they reflect our investment approach more broadly.
- All were EBITDA profitable as at 31 December 2020, and all but one (ASX:JAN) delivered an NPAT positive result – we prefer to back management teams of small, growing companies that have proven they can operate sustainably profitable and cash flow positive businesses.
- All but one (ASX:PTB) have no term debt and significant cash balances. Strong balance sheets are important to us, and we like the flexibility it provides to take advantage of organic or inorganic growth opportunities.
- We have a bias to value, with five top 10 holdings trading on low PE ratios, yet are growing strongly (ASX:EAS, ASX:JYC, ASX:SEQ, ASX:PTB and ASX:DSK).
- We are happy to pay higher multiples for profitable businesses with relatively low market caps that have genuine growth potential, and where there exists a large prize if they can continue to execute sensibly. We particularly like opportunities where this growth potential is misunderstood or underappreciated by the market. Included in this basket are ASX:AFL, ASX:PTG and ASX:JAN.
- Many have clear leadership positions in their respective markets (ASX:DSK, ASX:JAN, ASX:PTG, ASK:AFL, ASX:JYC).
- We retain a long term focus with several of our top 10 positions having been in the portfolio for more than three years (ASX:JYC, ASX:JAN, ASX:EAS & ASX:SEQ). In the cases of ASX:DSK, ASX:PTG and ASX:JAN, we initially bought stock in their IPOs, and then subsequently added to the positions.
Top 10 DMXCP positions at 30 April 2021 (in alphabetical order)
The top 10 positions are well diversified across a range of sectors and provide a strong balance of value and growth opportunities. We are pleased with how our larger holdings are positioned, as we are with the portfolio generally. Outside of the top 10, we own a variety of interesting, under the radar, attractively priced companies, that we believe have material upside.
By focusing on growing, profitable companies with robust balance sheets and market leading positions, we try to take out much of the risk typically associated with investing in small and somewhat illiquid ASX companies.
The DMXCP portfolio provides a diversified, difficult to replicate, exposure to an under-owned part of the ASX, where market inefficiencies and mispricing can create extremely compelling opportunities. We note that DMXCP’s net assets are currently ~$18m. We continue to target a close for DMXCP to new investors, at $20m. If you are a Sophisticated Investor5 that has interest in investing in DMXCP, we encourage you to contact us.
We look forward to updating you in early June with further portfolio news.
By focusing on growing, profitable companies with robust balance sheets and market leading positions, we try to take out much of the risk typically associated with investing in small and somewhat illiquid ASX companies.
The DMXCP portfolio provides a diversified, difficult to replicate, exposure to an under-owned part of the ASX, where market inefficiencies and mispricing can create extremely compelling opportunities. We note that DMXCP’s net assets are currently ~$18m. We continue to target a close for DMXCP to new investors, at $20m. If you are a Sophisticated Investor5 that has interest in investing in DMXCP, we encourage you to contact us.
We look forward to updating you in early June with further portfolio news.
