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SCHOOLBLAZER LIMITED Investor Presentation 2021
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Investor Presentation
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2 September 2021
Company Announcements Office
Australian Securities Exchange
Authorised by the Board for immediate release
Unit 4
17 Stanton Road
Seven Hills
NSW 2147 Australia
www.hgl.com.au
P +612 8667 4660
HGL Limited
abn 25 009 657 961
Hancock & Gore Delivers on Funds Management Strategy with Launch of New Fund Investor Webinar on Tues 7 Sept
Highlights:
- Hancock & Gore launches the H&G High Conviction Fund, offering wholesale investors a strong long-term track record of outperformance investing in sub-$100m market cap ASX-listed companies
- H&G Investment Management will present the fund to prospective investors via webinar, scheduled for Tuesday 7 September at 11am AEST
- Hancock & Gore intends to launch additional funds in the coming months, consistent with its strategy to build a funds management division contributing recurring revenue and profitability
HGL Limited ((ASX: HNG), "Hancock & Gore", "HGL" or "the Company") is pleased to announce it is today launching the H&G High Conviction Fund. This is the first fund being launched by the Company's recently acquired funds management business, H&G Investment Management Ltd.
Fund Background and Performance
Including its original vehicle, The Supervised Fund, the H&G High Conviction Fund has delivered a 14-year track record of consistently outperforming both the broader Australian equity market and also the ASX Small Ords Accumulation index. In the year to 30 June 2021, the Fund returned 38% (after all fees), surpassing the ASX 200 by 15%.
The Fund has a concentrated portfolio of listed equities, predominantly sub-$100m market capitalisation companies listed on the ASX, and is targeting a return of 15% per annum before fees.
It is open to wholesale investors only.
Further details about the Fund are available on the H&G Investment Management website here. The Fund's most recent presentation is attached for reference.
Hancock & Gore intends to launch additional funds in the coming months, consistent with its strategy to build a funds management division that will be a core contributor to future profitability and provide recurring revenue.
HGL
Value of $10,000 invested since inception as at 31 July 2021
Includes the original vehicle. The Supervised Fund, launched in November 2007 by Supervised Investments Australia Limited (SIAL). SIAL was sold to HGL Limited (trading as Hancock & Gore Limited) in March 2021, and The Supervised Fund subsequently rebranded as H&G High Conviction Fund. The strategy of investing in micro capitalisation listed equities has remained consistent.
Past performance should not be taken as an indicator of future performance.
Investor Webinar
On Tuesday 7 September 2021 at 11am AEST, the Portfolio Manager of the H&G High Conviction Fund will host a webinar to present the Fund and allow prospective investors the opportunity to engage with management.
Investors are invited to send questions prior to the webinar to [email protected].
Attendees will also be able to text questions to management using the conferencing platform.
Register for the investor webinar at the following link: https://us02web.zoom.us/webinar/register/WN_xlvcVmDVQ4uL9PT0UcQgsQ
After registering, you will receive a confirmation email containing a calendar invitation and information about joining the webinar.
For more information, please contact:
Joseph Constable
Hancock & Gore
0431 886 186 / [email protected]
About HGL Ltd
HGL is a diversified investment company with a focus on active management and driving shareholder returns, investing in a broad range of opportunities across Private Equity, ASX listed equities, funds management, real property, debt funding and other alternative investments. We seek to become a trusted partner of choice that aims to solve our partners' problems, identifying and pursuing opportunities that benefit all parties.
HANCOCK & GORE
(ASX: HNG)
H&G High Conviction Fund
September 2021
Disclaimer
Equity Trustees Limited (Equity Trustees) ABN 46 004 031 298 | AFSL 240975 is the Trustee for the H&G High Conviction Fund (the Fund). Equity Trustees is a subsidiary of EQT Holdings Limited ABN 22 607 797 615, a publicly listed company on the Australian Securities Exchange (ASX: EQT). The Investment Manager for the Fund is H&G Investment Management Limited (H&G) ABN 45 125 580 305 | AFSL 317 155. This information has been prepared by H&G to provide you with general information only. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither H&G, Equity Trustees nor any of their related parties, their employees or directors, provide any warranty of accuracy or reliability in relation to such information or accept any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Information Memorandum before making a decision about whether to invest in this product.
The Fund is only open to wholesale clients, who are Australian residents, as defined under section 761G of the Corporations Act.
Confidentiality
This presentation is confidential and is being provided to prospective investors in the Fund. Its use for any other purpose is not permitted. It may not be reproduced or redistributed, in whole or in part, and its contents may not be disclosed to any person without the prior written consent of the Investment Manager.
- H&G HIGH CONVICTION FUND
| Fund name | H&G High Conviction Fund |
|---|---|
| Investment manager | H&G Investment Management Limited |
| APIR code | SIA0002AU |
| Fund inception | November 2007 (relaunched April 2021) |
| Fund size | A$13m |
| Fund pricing | Monthly |
| Fund type | Open-end unit trust |
| Base currency | Australian dollars |
| Investor eligibility | Wholesale and sophisticated investors only |
| Custodian | JP Morgan |
| Auditor | Ernst & Young |
| Management fee | 1% plus GST p.a. + fund costs capped at 1.05% p.a. |
| Performance fee | 20% of benchmark outperformance, with a high water mark, paid semi-annually |
| Benchmark | 5% p.a. |
| Buy/sell spread | 0.4% |
- H&G HIGH CONVICTION FUND
Performance
- H&G HIGH CONVICTION FUND
Value of $10,000 invested since inception as at 31 July 2021*
Past performance should not be taken as an indicator of future performance.
*Includes the original vehicle, The Supervised Fund, launched in November 2007 by Supervised Investments Australia Limited (SIAL). SIAL was sold to HGL Limited (trading as Hancock & Gore Limited) in March 2021, and The Supervised Fund subsequently rebranded as H&G High Conviction Fund.
The strategy of investing in micro capitalisation listed equities has remained consistent.
Who we are: group overview
H&G Investment Management Limited is a wholly owned subsidiary of HGL Limited ((ASX: HNG) trading as Hancock & Gore Limited).
Hancock & Gore Limited is one of the oldest publicly listed companies. Originally a sawmill operator, the company was incorporated in 1904.
Today it is a diversified investment group.
- H&G HIGH CONVICTION FUND
- H&G HIGH CONVICTION FUND
Our team
Sandy Beard
Chairman
30+ years of investment experience and Director of numerous public and private companies
Former CEO of CVC Limited (ASX:CVC) (between 1991-2019) where he oversaw annual shareholder returns in excess of 15% per annum for over 15 years
Chair of Hancock & Gore (ASX: HNG) and FOS Capital Ltd (ASX:FOS); director of Pure Foods Tasmania (ASX:PFT) and Centrepoint Alliance (ASX:CAF).
Joseph Constable
Portfolio Manager
5+ years of experience across capital markets and investment management
Former Investment Manager at Supervised Investments Australia where his stock selection returned 31% p.a.; previous funds management experience at Smith and Williamson (UK) and Hunter Hall International; current Director of Hancock & Gore (ASX: HNG)
MPhil (University of Oxford); Bachelor of Arts with Honours (University of Melbourne)
Iain Thompson
Compliance Manager
20+ years of experience across finance and company secretarial roles
Former Company Secretary of Brickworks Limited and Chief Financial Officer of Hancock & Gore (ASX: HNG) since May 2015
Bachelor of Economics (Macquarie University); Chartered Accountant; Graduate of Australian Institute of Company Directors
Nicholas Atkinson
Investment Director
25+ years of experience across capital markets, corporate finance and investment management
Former Executive Director of Institutional Equities at Morgans Financial (14 years), where he oversaw rapid growth of the division's profitability for 10+ years
MBA (Macquarie GSM); Bachelor Commerce (University of Queensland); Grad Dip Applied Investment & Finance (FINSIA)
Phillip Christopher
Investment Director
10+ years of experience across private equity, capital markets and investment management
Former Director at Alceon Group Private Equity (6 years) and Analyst at Goldman Sachs in Natural Resources M&A / Capital Markets advisory
Bachelor of Economics and Bachelor of Commerce (University of Western Australia)
What we do
| Investment return objective | To provide investors with an annual return which out-performs the Benchmark, being 5% p.a. The manager is targeting to provide long term performance of at least 15% p.a. (before fees) by investing predominantly in Australian Microcaps listed on the ASX, whilst minimising the risk of a permanent loss of capital. |
|---|---|
| Strategy | The Fund seeks to invest its capital in companies with a significant discount in the share price relative to perceived inherent value. These companies have superior fundamental prospects, yet negative external events have attracted a flight of investors. The Fund seeks to assist investee companies to demonstrate, grow and realise their inherent value. |
| Recommended investment timeframe | 5-7 years |
| Target portfolio composition | • 70-95% in publicly listed companies, with a specific focus on ASX-listed companies with a market capitalisation of up to $100m |
| • 5-30% in cash | |
| • High conviction portfolio of 10-20 stocks | |
| • No leverage within the portfolio | |
| Risk level | Very high |
- H&G HIGH CONVICTION FUND
Our approach
- Look for companies run by passionate co-owners
- Identify large gap between market and inherent value
- Research the prevailing industry conditions
- Meet management, suppliers, customers and competitors
- Determine catalysts that could unlock inherent value
- Long-term focus beyond recent financial results
- Actively engage in implementation of strategic change
-
Remain engaged with management and possibly board
-
H&G HIGH CONVICTION FUND
Our purpose
- H&G HIGH CONVICTION FUND
Our edge
We are active investors
- We work with management to develop and implement strategic change to improve business performance and unlock value for our Unit holders
- We engage with all company stakeholders to achieve strategic alignment
- We will occupy board positions where required to drive our change strategy
We search where others don't
- We focus on microcaps that are too small for most funds meaning that for many of our holdings we will be one of few institutional investors
- To that end we intend to keep the Net Asset Value of the Fund below $50m for the foreseeable future
- We believe small, concentrated funds can generate larger long-term returns
We meet challenges that others avoid
- The Microcap companies we invest in have superior assets that are adversely impacted by non-operational externalities such as fractious shareholders, domineering directors or industry pressures
-
Such externalities tend to cause uncertainty and under-valuation by the market, offering us an opportunity that many others don't see
-
H&G HIGH CONVICTION FUND
- H&G HIGH CONVICTION FUND
Alignment
36% of the Fund is held by the Portfolio Manager & immediate family
We focus on preservation of capital
We only invest in companies with conservative balance sheets
We do not gear any of our positions
Portfolio
31 August 2021
- We currently own positions in 19 companies
- 82% of capital is invested in listed equities
- 77% of capital is invested in < $100m market cap companies
- 15% of capital is invested in resources stocks
- Net asset value: $13m
| Top 8 holdings | % of fund at cost | % of fund at value |
|---|---|---|
| Cash | 18% | 18% |
| Kangaroo Island Plantation Timbers Limited | 9% | 17% |
| Bisalloy Steel Group Limited | 4% | 12% |
| Po Valley Energy Limited | 7% | 10% |
| Centrepoint Alliance Limited | 3% | 6% |
| Hillgrove Resources Limited | 3% | 5% |
| Clearview Wealth Limited | 3% | 4% |
| Comms Group Limited | 3% | 4% |
- H&G HIGH CONVICTION FUND
- H&G HIGH CONVICTION FUND
Case studies
DRIVERS OF RECENT PERFORMANCE
Raiz Invest
- Financial technology app
- Listed at $2.00 in 2018 – overpriced considering nascent state of business
- Fell out of favour with institutions due to unrealistic expectations of IPO
- Underlying this was a powerful app with a strong millennial user base of >250k active customers and growing FUM
- Return Jan 2020 – Feb 2021: 157%
-
We no longer hold stock in Raiz
-
H&G HIGH CONVICTION FUND
3-year share price
Centrepoint Alliance (ASX: CAF)
- Financial advisory group
- Was temporarily loss-making due to external events: Royal Commission into Financial Services and adverse advice claims
- Institutional investors sold out despite solid underlying business and top-rate group of advisers
- Return since October 2019: 181%
- We still hold stock in Centrepoint (6% of the fund)
3-year share price
- H&G HIGH CONVICTION FUND
Two detractors
ASX: PVE
- Time held: 10 years
- 6-month share price return: -17%
- Weighted impact on Fund return: -2%
- Investment thesis: Po Valley Energy owns natural gas fields in Italy. The company is awaiting production permits for first gas in 2022. Natural gas is a critical transition fuel as the EU moves to renewable energy.
- Outlook: PVE expects to receive permits by the end of 2021. The natural gas price in Italy is at multi-year highs.
ASX: PYG
- Time held: 6 months
- 6-month share price return: -16%
- Weighted impact on Fund return: -1%
- Investment thesis: PayGroup provides payroll and human capital management solutions. The company processes around 6.7m payslips annually in 41 countries and has grown recurring revenue by over 60% since listing in 2018.
-
Outlook: PYG upgraded its FY22 revenue outlook in its July 2022 AGM and is on track to continue its growth trajectory.
-
H&G HIGH CONVICTION FUND
- H&G HIGH CONVICTION FUND
Opportunities
CURRENT INVESTMENTS AND POTENTIAL RETURN
Kangaroo Island Plantation Timbers (ASX: KPT)
- 20k hectares of arable land, of which 15k hectares planted with timber
- 90% of KIPT's plantations were fire affected in the 2019/20 bushfires
- Stated asset backing of $1.65 per share (cash & receivables: $0.65; land: $0.91; pontoon: $0.09)
- Share price at 31 August 2021: $1.21
- In May 2021, KIPT received a $1.05 per share takeover bid, which was rejected by the board and shareholders
- KIPT stock represents 17% of the fund
- H&G HIGH CONVICTION FUND
Kangaroo Island Plantation Timbers
- KIPT owns 86% of the plantation forestry on Kangaroo Island
- Post-bushfires, the company has pivoted to an agricultural strategy
- Kangaroo Island's agricultural property prices have experienced significant uplift in the last 2 years
- Most of KIPT's land is in high rainfall area, > 600mm p.a.
- In addition, there are 7,000 megalitres of water entitlements attached to the land
Above: KIPT's estate
Right: Kangaroo Island in context
Below: Kangaroo Island average annual rainfall 2001-2010
- H&G HIGH CONVICTION FUND
Kangaroo Island Plantation Timbers
Strategy:
- Work with the shareholders, board and management to ensure the company unlocks its inherent asset value
Target price:
- $1.65 in next 2 years, 37% upside
- IRR: 17% p.a.
- Weighted impact on fund return: 6%
Right: our assessment of the inherent value of KIPT's assets
| Value of land | $96,357,500 | $1.71 |
|---|---|---|
| Remediation | ($45,000,000) | ($0.80) |
| Cash & receivables | $36,700,000 | $0.58 |
| Pontoon | $5,000,000 | $0.09 |
| Net assets | $93,057,500 | $1.65 |
South Australia – historic performance
Above: agricultural land values in South Australia
Right: charred softwood in KIPT's plantation; photo taken on site tour by portfolio manager in April 2021
- H&G HIGH CONVICTION FUND
Bisalloy Steel Group (ASX: BIS)
- Australia's only manufacturer of quench and tempered steel (high-tensile and abrasion-resistant)
- Markets: resources, construction and defence
- A real and profitable business that has suffered corporate upheaval with CEO fired in July 2020 and board completely replaced in November 2020 AGM
- Share price at 31 August 2021: $1.46
- Bisalloy stock represents 12% of the fund
5-year share price
- H&G HIGH CONVICTION FUND
Bisalloy Steel Group
- Bisalloy owns its 23,600m² processing plant in Unanderra, NSW with a capacity of c. 60,000 tonnes p.a.
- Earnings per share growth over the last 5 years: 40% p.a.
- Current price to earnings ratio: 7x
- Fully franked net dividend yield: 6%
- Business has strong tailwinds from spending in the resources sector and ongoing defence expenditure
Bisalloy's steel is being certified by Rheinmetall for use in the Australian Defence Force's Land 400 Phase 2 Program, building Combat Reconnaissance Vehicles (CRVs)
Around 70% of Bisalloy's steel is used in the resources sector for mining dump truck trays
- H&G HIGH CONVICTION FUND
Bisalloy Steel Group
Strategy:
- Work with shareholders, board and management to help stabilise post-corporate upheaval and communicate to the market
- Given unique market position, defence upside and growth profile, Bisalloy should be trading on a P/E ratio of at least 10x
Target price:
- $2.12 in next 2 years, 45% upside
- IRR: 21% p.a.
- Weighted impact on fund return: 5%
A vehicle being assembled with quench and tempered steel plate in Bisalloy's facility in Unanderra
Bisalloy's steel is also used in the construction sector
- H&G HIGH CONVICTION FUND
HANCOCK & GORE
Thank you!
H&G High Conviction Fund
JOSEPH CONSTABLE
+61 431 886 186
[email protected]
