UBS Microcap Fund (UBS0057AU) Report & Performance

After fees and expenses, the Portfolio increased by 2.23% during the month, underperforming its benchmark by 131 bps.

The largest positive contributors were Energy One, XRF Scientific and Murray Cod Australia. Energy One confirmed FY23 guidance will be met, with total revenue expected to be $44.5m and EBITDA of $12.3m. XRF Scientific reached new all-time highs, driven by strength in the mining and industrial sectors. Murray Cod Australia rallied after reiterating growth plan to achieve 10k tonnes of fish in 2030 and the successful recapture of escapee fish despite a provision of $2.6m previously made.

The largest negative contributors were NextEd, Lycopodium and Smartpay. Tertiary education provider NextEd updated the market with FY23 guidance which was slightly below expectations. The miss was largely a result of growing pains, where short-term classroom leases were booked as operating expenditure rather than being amortised. Lycopodium traded lower despite no stock specific news. Payment solution provider SmartPay reached all-time highs during the month but finished lower on fears of slower transacting volumes in the more challenging economic environment.

After fees and expenses, the Portfolio increased by 2.19% during the month, outperforming its benchmark by 216 bps.

The largest positive contributors were Botanix Pharmaceuticals, Fleetwood and Lycopodium. Botanix Pharmaceuticals provided an update regarding their activities leading up to FDA approval date, initiating label negotiations and accelerating commercial activities ready for launch of its novel drug Sofpironium Bromide. Building solutions provider Fleetwood entered an accommodation agreement with Rio Tinto to supply 250 rooms, expected to generate a further $100-$120m in revenue over the period to April 2027. Engineering services provider Lycopodium was selected by Barrick Gold Corporation to complete the feasibility study and basic engineering scope for its Reko Diq Copper-Gold Project in Pakistan, valued around $55m.

The largest negative contributors were PeopleIN, Alliance Aviation Services and Paladin Energy (not held). Talent solutions business PeopleIN traded lower after concluding a strategic review announced in November 2022 which provided no new insights. Alliance Aviation Services continued to be sold off following the ACCC’s rejection of the takeover approach from Qantas Group. Uranium company Paladin Energy (not held) rallied on the back of the Namibian government confirming there are no imminent legislative changes that would impact its ownership of the Langer Heinrich Mine.

After fees and expenses, the Portfolio decreased by 1.40% during the month, outperforming its benchmark by 186 bps.

The largest positive contributors were MaxiPARTS, SmartPay and Supply Network. MaxiPARTS announced and completed the acquisition of 80% of workshop consumables distributor Forch Australia which is expected to provide immediate incremental improvement to profit margins. Payment solution provider SmartPay outperformed after announcing its FY23 result which highlighted a 62% increase in revenue and 81% increase in EBITDA. Supply Network upgraded its FY23 guidance during May, highlighting that industry conditions remain very supportive.

The largest negative contributors were Lunnon Metals, Top Shelf International and XRF Scientific. Lunnon Metals traded lower, levered to the underlying Nickel price which traded around $20,430 USD/T down from monthly highs of over $24,950 USD/T. Top Shelf International fell after announcing it seeks to raise $40m at a 19% discount to the 10-day volume weighted average price. The funds will be used to reduce debt while supporting the launch of their agave spirit.

XRF Scientific retraced after reaching all-time highs, driven by strength in mining and industrial sectors.

After fees and expenses, the Portfolio increased by 4.20% during the month, outperforming its benchmark by 142 bps. The largest positive contributors were XRF Scientific, Lycopodium and SmartPay. XRF Scientific continued to outperform, driven by strength in its mining and industrial sectors. Sales revenue was up 45% in the March quarter to $40.5m, with NPAT up 39% to $8.2m. Lycopodium provided a strong update, increasing full year NPAT guidance to $45m (previously $40m).

Payment solutions provider SmartPay highlighted terminal fleet growth of 62% and transaction revenue increasing 76% (y/y) in Australia. Additionally, they announced a strategic review of its New Zealand business to unlock greater value. The largest negative contributors were Alliance Aviation Services, Botanix Pharmaceuticals and Top Shelf International.

Alliance Aviation Services traded lower on the back of a negative ACCC decision which opposed Qantas’ proposed acquisition at $4.75/share. Botanix Pharmaceuticals conducted a $10m capital raise at a 10% discount to the last traded price to prepare for FDA approval and commercial launch of their novel drug Sofpironium Bromide. Top Shelf International continued to trade lower after a small capital raise to help fund the completion of their agave distillery, which was conducted at a 13% discount to the last traded price.

After fees and expenses, the Portfolio declined by 2.25% during the month, underperforming its benchmark by 153 bps.

The largest positive contributors were Monash IVF, NextEd Group and Mincor Resources. Reproductive and fertility services group Monash IVF traded higher on no stock specific news. Education business NextEd Group reached all-time highs as the market digested their stella 1H23 result, with record revenues of $43.6m (up 239% on pcp) and EBITDA of $6.6m (up 403% on pcp). Mincor Resources was subject to an on-market takeover bid from Andrew Forrest’s Wyloo Metals at $1.40/share representing a 35% premium to the last closing price of $1.04.

The largest negative contributors were Liontown Resources (not held), Janison Education and GR Engineering Services. Liontown Resources (not held) received a non-binding indicative proposal from Albemarle Corporation at $2.50/share. Janison Education was removed from the AllOrdinaries index which saw selling by passive index funds, further weighing on the share price. GR Engineering Services traded lower after paying a $0.09 dividend for the half year.

After fees and expenses, the Portfolio increased by 0.76% during the month, outperforming its benchmark by 446 bps.

The largest positive contributors were Lycopodium, Ridley Corporation and XRF Scientific. Lycopodium provided a strong 1H23 update, increasing full year guidance across both revenue and NPAT reflecting a robust portfolio of projects and studies currently in delivery. Importantly, the business continues to be awarded new projects given high demand for base metal projects in support of the energy transition. Ridley Corporation posted a strong result, with EBITDA up 13% (y/y) to and NPAT up 20% (y/y). Management highlighted that despite challenging conditions they expect earnings growth in all business segments and improved asset utilisation. XRF Scientific continued to perform, driven by strength in the mining and industrial sectors. Sales revenue was up 46% on the pcp and NPAT was up 34%.

The largest negative contributors were Pacific Smiles, Mincor Resources, and Top Shelf International. Pacific Smiles traded lower after updating guidance to be at the bottom end of the previously advised range. Mincor Resources was sold off on the back of a weaker underlying Nickel price, in addition to a poor 1H23 result which flagged a slow ramp up of the Kambalda operation. Top Shelf International completed a capital raise to help fund the completion of their agave distillery, conducted at a 13% discount to the last traded price.