Investment Matters

Company news

The season so far: off to a good start

We have already had some major announcements from your companies, which we detail below.

The majority have been received well by the market, capping off what has been a great start to the financial year for your Australian Equities Portfolio.


Emeco delivered on its guidance, with its headline profit number in line with our expectations.

Operating profit grew by 15% as the company saw a modest improvement in operating utilisation (how many hours its kit was hired for), rates and benefited from the contribution from a recent acquisition. It also comfortably achieved its net leverage target for the financial year (<1.5x Net Debt/ Operating EBITDA),

Emeco has benefited from diversification in its underlying commodity exposure, which is now more weighted towards iron ore and gold miners.

These commodities have seen strong prices in recent months, particularly gold which is now at an all-time high (over US$1900/oz) and thus demand for equipment from these companies has been strong.

310720MA2Part of the shift in its exposure has come through its new acquisition, Pit’N’Portal, an underground mining services company, which will diversify the company’s services offering and provides exposure to gold miners.

In speaking to management on Monday, we gained a clearer understanding of current conditions and its plans for refinancing.

The company expects profitability next year to be in line with FY-20, as weaker demand from its coal customers is offset by strong demand from iron ore and gold customers, as well as Pit’N’Portal.

We see positive news around the refinancing of its debt as a key catalyst for its share price, which is still significantly below what we consider is the company’s fundamental value.


Healius pre-released its result to the market this week. While the company’s full financial result will follow in the coming weeks, headline operating profit was in line with market expectations.

The company’s Pathology division has been resilient, exceeding expectations as it benefited from COVID testing volumes (Healius was responsible for 50% of private covid testing volumes) as well as government support. Continued growth is expected as non-covid testing volumes improve. While Imaging (radiology) volumes have been hard hit by covid, they have begun to normalise in recent months.

As we noted in an earlier update, Healius recently entered an agreement to sell its Medical Centres business. This will simplify the business while improving its balance sheet and creating flexibility to pursue growth options. It will also allow the company to focus on its core Pathology and Imaging businesses, which have historically benefited from relatively stable volume and price growth.

We see that high levels of investment in its network and IT in recent years is likely to deliver benefits in the next 12-18 months. Healius is thus well-positioned as an exposure to a high-quality, defensive Healthcare stock.

CML Group

CML Group announced it will acquire Fintech company Skippr, for a consideration of $2.5m (with a further $4m payment contingent). The publicised Fintech had recently been valued at over $16m and attracted funding from leading founders and executives in the sector. 

The announcement was well received by the market, sending CML’s share price 6% higher for the week.

Skippr is an online invoice financing platform that allows for largely automated client servicing (acquisition, onboarding, funding, monitoring and reporting) integrating with major accounting platforms (Xero, MYOB etc).  

310720MA3The opportunistic acquisition brings several benefits for CML.

It bolsters the company’s technology capability, pulling the company’s technology enhancement roadmap and development forward by approximately two years. The efficiencies brought by the technology will allow it to expand its product offering and profitably lend to smaller SMEs (small and medium sized businesses).  Furthermore, the integration of Skippr’s technology into CML’s broader product offering has the potential to both improve margins and the client experience, improving retention.

As part of the acquisition, James Beeson, former CEO of skippr and an experienced finance executive will join CML Group as Chief Commercial Officer, a role that was vacant for a short time.

We are excited by what we see as an intelligent acquisition that accelerates the company’s growth prospects.


Lynas announced that the U.S. Depart of Defense has signed a contract for Phase I work on a U.S. based Heavy Rare Earth separation facility. 

A key part of our investment thesis has been the strategic value of Lynas’ assets, which currently provide the only viable source of Rare Earth minerals outside China.

The announcement was well received by the market, with shares in Lynas finished the week 3% higher.

Lynas, in partnership with Blue Line now has funding to complete a detailed study for the construction of a Heavy Rare Earth separation facility.

The facility would be the only source of separated Heavy Rare Earths outside China and will produce materials that are used in high-performance magnets such as those used in electric motors.


Intega provided an update to guidance for its FY-20 financial result. The company has been resilient through FY-20 and expects to slightly beat the profit guidance it set earlier in the year. 

It will, therefore, perform ahead of its results last year, a great achievement in the current environment. We are also pleased to see an improvement in the company’s working capital position. 

Shares in the company finished 9% higher for the week.

Sandfire Resources

Sandfire’s quarterly report showed record production for the fourth quarter, with the company benefiting from higher gold production (a biproduct) and a favourable price environment.

The company continues to invest in exploration in the region surrounding Degrussa (its primary producing mine), as it looks to utilise its established infrastructure.

Offshore projects T3 and Black Butte also remain on track, with exploration continuing at T3 and a feasibility study expected to be completed at Black Butte within the next few months.

After a strong result in FY-20, the company is expecting a weaker year in FY-21, with lower grades and gold bi-product credits. 

However, we continue to see the company as undervalued based on the value of its options for growth in future years.