Deep Yellow (positive impact) held its annual general meeting this week. The company reiterated the success it has had over the past 12 months in expanding its resource base, as it works towards its Mineral Resource target of 100Mlb to 150Mlb. The company also further elucidated its mergers and acquisition strategy, highlighting that it looks to acquire 2-3 uranium projects to establish a diversified pipeline for development from 2023-2030 and intends to supply between 5-10 Mlbs of uranium per annum. The company is currently assessing 6-8 targets, with the first acquisition anticipated during 1H 2020.
Healius (neutral impact) held its annual general meeting on Monday this week. The company has updated its guidance with respect to net profit after tax for FY-20, expecting underlying net profit after tax to be in the range of $94-102m. This would represent a 5.2% increase in comparison to last year at the mid-point of this range. The company sees that it is likely that underlying net profit will be at the top of this range if the strong trading conditions seen thus far in its Pathology division continues. In terms of the transformation program currently underway, the roll out of its information and picture platform, iCAR, is nearing completion (which relates to its Imaging division). Furthermore, it continues to roll out its new laboratory information system (LIS) having completed the upgrade in NSW, with the remainder of the program expected to be completed within the next three years (which relates to its Pathology division).
Last week, we sold what remained of our position in Pact Group Holdings.
On a broader, portfolio level, the sale served to reduce the Australian Equities Portfolio’s exposure to companies who are in the process of a “turn-around” of their operations. While we recognise that such companies can present as compelling investment opportunities, there can be considerable difficulty in timing when this value will be realised and/or recognised. Thus, a high concentration of such investments is less desirable at the portfolio level as it can lead to relatively bar-belled performance.
We recognise that there may still be potential for Pact Group to create value from integrating and rationalising its extensive network of packaging assets and provide sustainable packaging solutions. However, we also recognise that there can be considerable execution risk in achieving this outcome, which relies on the strategy devised by newly appointed management and their ability to execute.
With these considerations in mind, we saw that the recent rally in Pact’s share price presented an opportunity to realise our position at a price that reflects reasonable value on probability weighted basis, while simultaneously reducing our exposure to “turn-around” companies in the portfolio.