DMXCP Monthly ReportFebruary 2025 – DMX
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An investment company managed by
DMX Asset Management Limited ACN 169 381 908 AFSL 459 120 13/111 Elizabeth Street, Sydney, NSW 2000 DMXCP directors Roger Collison, Dean Morel, Steven McCarthy |
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Dear Shareholder,
DMXCP’s NAV decreased 1.7% (after all accrued fees and expenses) for February 2025. The NAV as at 28 February 2025 was $2.5265, compared to $2.5709 as at 31 January 2024. February was a tough month for Australian equity markets with the All Ordinaries down 4.5%, the Small Ordinaries falling 3.0% & the Emerging Companies Index decreasing 2.0%.
February Developments
While we headed into the month with optimism, February turned out to be a challenging month. We saw some very positive portfolio updates where the share prices responded strongly, but also had several positions that delivered frustrating results. We were also on the wrong side of a couple of left field surprises that negatively impacted the portfolio. And after reaching a record during the middle of February, market sentiment turned very much negative in the second half of the month as geopolitical uncertainty began to weigh on markets.
Standout reports/updates were delivered by EDU Australia (ASX:EDU, +50%) and Energy One (ASX:EOL, +45%), both of which are top 10 portfolio positions discussed below, while Asset Vision (ASX:ASV, +50%), impressively, backed up its 50% increase in January with another 50% gain in its share price in February. ASV reported a 26% increase in its recurring revenue for the first half and announced that its ARR had subsequently increased a further 10% since 1 January 2025.
Key disappointments, relative to our expectations came from Verbrec (ASX:VBC), where a key project deferral impacted profit, with VBC down 32% for the month. Raiz (ASX:RZI) was another one that fell short of our expectations, with an increase in operating expenses saw it unable to deliver the NPAT we had hoped. All other metrics though were positive, so we are hopeful of RZI reaching that NPAT milestone in H2.
In addition, outside of reporting, during the month, contractor BSA announced that it was unsuccessful in having its significant NBN contract renewed. We had taken a small position in BSA’s options to provide us with some exposure to what we expected was going to be a successful contract renewal & the subsequent uplift in the share price it would have generated. The non-renewal took the market and us by surprise, and given how far the option exercise price is from the current BSA share price (80c vs 9c) these options are likely to expire out of the money in April. And in another unexpected outcome, Field Services Group (ASX:FSG) which had been in suspension since December, announced the appointment of receivers following an unsuccessful attempt to raise capital. Whilst FSG’s debt had increased materially over the last 12 months, our assumption, which in hindsight we misjudged, was FSG would be able to raise capital to restore its balance sheet. Whilst we understand they were close to securing a capital injection, FSG was unable to retain the support of its key lender, resulting in an extremely disappointing outcome. BSA and FSG each negatively impacted the portfolio by ¬1% during the month.
Notwithstanding some disappointments, on the whole the portfolio reported solidly, in particular our key holdings, which we set out below.
DMXCP’s NAV decreased 1.7% (after all accrued fees and expenses) for February 2025. The NAV as at 28 February 2025 was $2.5265, compared to $2.5709 as at 31 January 2024. February was a tough month for Australian equity markets with the All Ordinaries down 4.5%, the Small Ordinaries falling 3.0% & the Emerging Companies Index decreasing 2.0%.
February Developments
While we headed into the month with optimism, February turned out to be a challenging month. We saw some very positive portfolio updates where the share prices responded strongly, but also had several positions that delivered frustrating results. We were also on the wrong side of a couple of left field surprises that negatively impacted the portfolio. And after reaching a record during the middle of February, market sentiment turned very much negative in the second half of the month as geopolitical uncertainty began to weigh on markets.
Standout reports/updates were delivered by EDU Australia (ASX:EDU, +50%) and Energy One (ASX:EOL, +45%), both of which are top 10 portfolio positions discussed below, while Asset Vision (ASX:ASV, +50%), impressively, backed up its 50% increase in January with another 50% gain in its share price in February. ASV reported a 26% increase in its recurring revenue for the first half and announced that its ARR had subsequently increased a further 10% since 1 January 2025.
Key disappointments, relative to our expectations came from Verbrec (ASX:VBC), where a key project deferral impacted profit, with VBC down 32% for the month. Raiz (ASX:RZI) was another one that fell short of our expectations, with an increase in operating expenses saw it unable to deliver the NPAT we had hoped. All other metrics though were positive, so we are hopeful of RZI reaching that NPAT milestone in H2.
In addition, outside of reporting, during the month, contractor BSA announced that it was unsuccessful in having its significant NBN contract renewed. We had taken a small position in BSA’s options to provide us with some exposure to what we expected was going to be a successful contract renewal & the subsequent uplift in the share price it would have generated. The non-renewal took the market and us by surprise, and given how far the option exercise price is from the current BSA share price (80c vs 9c) these options are likely to expire out of the money in April. And in another unexpected outcome, Field Services Group (ASX:FSG) which had been in suspension since December, announced the appointment of receivers following an unsuccessful attempt to raise capital. Whilst FSG’s debt had increased materially over the last 12 months, our assumption, which in hindsight we misjudged, was FSG would be able to raise capital to restore its balance sheet. Whilst we understand they were close to securing a capital injection, FSG was unable to retain the support of its key lender, resulting in an extremely disappointing outcome. BSA and FSG each negatively impacted the portfolio by ¬1% during the month.
Notwithstanding some disappointments, on the whole the portfolio reported solidly, in particular our key holdings, which we set out below.
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DMXCP Portfolio top ASX holdings update – 28 February 2025
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These top 10 holdings represent ~40% of the portfolio by weight, and we have seen good momentum across these key holdings in the last 6 months. Strong earnings growth (100%+ increases in NPAT) in the first half were delivered by EOL, EDU, PPL and KME (all organic) and from AHC and CUP (benefitting from acquisitions). In addition to the strong earnings momentum, there is also clear value upside, with the likes of CUP, EDU, EVO, SEQ, PFG and KME all trading on ~10x NPATA or cheaper.
We are substantial holders in four of these companies (EDU, SEQ, PPL and KME) and we continue to engage pro-actively and positively with Management across these and other holdings. As we start to think about FY26, we would expect to see continued strong double-digit growth across all these top 10 names.
Outside of the top 10 we are enthused by the likes of Raiz (ASX:RZI), Senetas (ASX:SEN) and Kinatico (ASX:KYP) and the interesting upside we see in these names emerging over the next 6 to 12 months. On the other hand, there are several positions such as Medadvisor (ASX:MDR) and Laserbond (ASX:LBL) that still remain challenged and will require more patience.
Overall, we are pleased with how the portfolio is positioned as we head into a more uncertain economic and geo-political environment, with our portfolio, for the most part, Australian focussed and supported by undemanding valuations and strong growth profiles.
We thank you for your continued support and look forward to updating you next month.
We are substantial holders in four of these companies (EDU, SEQ, PPL and KME) and we continue to engage pro-actively and positively with Management across these and other holdings. As we start to think about FY26, we would expect to see continued strong double-digit growth across all these top 10 names.
Outside of the top 10 we are enthused by the likes of Raiz (ASX:RZI), Senetas (ASX:SEN) and Kinatico (ASX:KYP) and the interesting upside we see in these names emerging over the next 6 to 12 months. On the other hand, there are several positions such as Medadvisor (ASX:MDR) and Laserbond (ASX:LBL) that still remain challenged and will require more patience.
Overall, we are pleased with how the portfolio is positioned as we head into a more uncertain economic and geo-political environment, with our portfolio, for the most part, Australian focussed and supported by undemanding valuations and strong growth profiles.
We thank you for your continued support and look forward to updating you next month.
