A new position we established in January was Kelsian at $6.50. Kelsian is an anagram of its old name Sealink, which some may recognise. We like Kelsian as it’s a relatively defensive business with exposure to borders reopening.
The bus division has long-term contracts that are highly predictable, while the marine and tourism division will benefit from increased tourism as borders reopen. The stock fell heavily in late 2021 when they missed some new bus contracts and fell further with the market in January.
There are additional contract opportunities this year and we think the upside potential is not being priced into the stock – so it’s fundamentally attractive with optionality. Further, management are large shareholders and highly motivated to drive the business forward in future years.
Which stock in the fund are you most bullish on?
We are bullish on all our holdings long-term. Our benchmark is 8 per cent per annum absolute, which is quite unusual as most other funds have an index. An absolute benchmark focuses the mind on generating a positive return over time rather than just beating an index.
Markets are currently being driven by macro themes such as inflation, supply chains, and input prices, which means the short-term performance of stocks is more difficult to call. But longer term, fundamentals win out.
If I had to pick some we are most bullish on, I would include Equity Trustees, which is benefitting from a structural shift to independent trustees, and has acquisition opportunities ahead.
News Corp is another, due to the underlying value of very high quality assets with clear catalysts for the realisation of that value. And NIB Health for its solid top line growth and attractive multiple using normalised earnings/margins.
What’s a stock you’d like to own but can’t for some reason?
We look at international markets and stocks for insights on local stocks and global trends. Universal Music Group, the world’s largest music label, looks interesting. Universal Music Group was recently de-merged from Vivendi, and is benefiting from the structural shift to streaming through the likes of Spotify and Apple Music.
Universal currently trades on a 22 times calendar 2023 P/E. However, this view is from a distance. We haven’t done the same level of due diligence on Universal as we would on a local stock we review for the fund.
As mentioned earlier, we added Kelsian to the portfolio in January. We have been watching Kelsian for years and the sell-off finally gave us the opportunity to buy at an attractive price – that’s the great thing about volatility. Many people hate it, we like it!
The Prime Value Emerging Opportunities Fund only invested in one IPO last year – Pexa, which we recently exited on valuation grounds. It wasn’t a great year for IPOs, hopefully there are better opportunities ahead.
I think the UK version of Would I Lie to You, on ABC, is the funniest show on TV. Matt Kidman’s podcast Success & More Interesting Stuff is great – his engaging style balances information and entertainment and it’s local so relevant to our market.