Investment Pitches

Pitch Summary:
Shopify has been an incredibly rewarding investment for those lucky enough to get in early after the company's initial public offering (IPO) in 2015. The shares have delivered a return of 2,600% or 42% annual. Its revenues have grown at 49% per annum since the end of 2014 from $105 million to estimated $8.6 billion in 2024. The massive e-commerce market is a huge opportunity, as the company's growth indicates. As you tell from the chart below, revenues are forecasted to grow above 20% for the next 3 years. Keep in mind, Shopify has been around for more than a decade — and it's still growing at these high rates. We have owned Shopify for only 2.5 years, establishing our position in the first quarter of 2022 at a cost basis of $60, after the stock collapsed from its highs of $169 in November 2021. In hindsight, our entry may have been a bit premature, as the stock continued to plunge, eventually reaching a low of $27 in October 2022. However, such market movements are inherently unpredictable, and we seized the opportunity to invest in a company we had long admired. As you can see in the chart below, the drawdowns for SHOP over the past five years have been dramatic, with the stock dropping over 80% in 2022: Fast forward to today, the stock trades at $75 — a 25% return for our holding period or 9.5% annual, which is a bit disappointing so far. However, our holding period for the stock is still relatively short and we are optimistic about the long-term growth prospects of the company. If we turn to the fundamentals of the business, Shopify had put up some very impressive growth numbers in the past 2.5 years that we had owned it (see table below): Shopify's stock surged close to 25% following a strong second-quarter earnings report that exceeded expectations on both revenue and profit. Revenue increased by 21% to $2.05 billion, surpassing the forecast of $2.01 billion, and gross merchandise volume rose 22% to $67.2 billion. The company also reported a significant rise in free cash flow and improved gross margins, aided by higher subscription prices and the sale of its logistics business. Additionally, Shopify provided optimistic guidance for future revenue growth and margin expansion, further boosting investor confidence, leading to the sharp rise in the stock price.

BSD Analysis:
Rowan Street Capital maintains a bullish long-term view on Shopify despite modest returns since their Q1 2022 entry at $60 per share. The manager acknowledges the challenging timing, with the stock declining to $27 before recovering to current levels around $75, resulting in a 9.5% annualized return over 2.5 years. However, they emphasize Shopify's exceptional long-term track record with 2,600% returns since IPO and 49% annual revenue growth from $105 million in 2014 to an estimated $8.6 billion in 2024. The company's Q2 2024 results validate the thesis with 21% revenue growth to $2.05 billion and 22% GMV growth to $67.2 billion. Improved operational metrics including enhanced free cash flow generation and gross margin expansion, supported by strategic initiatives like logistics business divestiture, demonstrate management's focus on profitability. With revenue growth forecasted above 20% for the next three years and continued e-commerce market expansion, the manager remains optimistic about Shopify's long-term prospects despite near-term volatility.

Pitch Summary:
As a reminder, Topicus is a Dutch company that acquires, manages and builds vertical market software ("VMS") businesses, primarily located in Europe. Generally, these businesses provide mission critical software solutions that address the specific needs of their customers in particular vertical markets. Topicus was spun off from Constellation Software, a Canadian company, in February 2021. Constellation Software established Topicus.com Inc. as an independent publicly traded entity and merged it with its subsidiary, Total Specific Solutions (TSS), a key player in the European VMS sector. We took a position in Topicus shortly after its spin-off, with an average cost basis of CA$70.19. Currently, the stock is trading at CA$124, reflecting a 19% annualized return over approximately 3.5 years holding period. Our investment returns have closely mirrored the growth rate of revenues, operating income and operating cash flow per share (see below): If you take a look at the graph below, which shows the trailing 12 months data, you'll notice that Topicus has seen a significant increase in cash flow generation in 2024 — doubling from the levels that we observed back in 2021. This is a result that we're certainly pleased with. However, the pace of acquisitions has noticeably slowed. This indicates that management is finding fewer attractive opportunities in the current market. We have confidence in their judgment and expect them to continue being disciplined in their acquisition strategy.

BSD Analysis:
Rowan Street Capital demonstrates confidence in Topicus, a European vertical market software acquirer spun off from Constellation Software in February 2021. The manager established their position shortly after the spinoff at CA$70.19 and has achieved a solid 19% annualized return with the stock currently trading at CA$124. Topicus operates in the attractive VMS sector, providing mission-critical software solutions to specific vertical markets across Europe. The company has shown impressive operational improvement with cash flow generation doubling from 2021 levels in 2024, demonstrating strong execution and integration capabilities. While the pace of acquisitions has slowed, the manager views this as prudent capital allocation rather than a concern, trusting management's disciplined approach to finding attractive opportunities. The close correlation between investment returns and fundamental metrics (revenues, operating income, cash flow per share) validates the manager's thesis. Topicus benefits from the proven Constellation Software playbook applied to the European market, providing a compelling growth platform.

Pitch Summary:
We have owned TTD for a little over 4 years now, opportunistically establishing a position in March of 2020 at a cost basis of $17.40 (split-adjusted). Since then, TTD has appreciated nearly sixfold, delivering an annualized return of approximately 55%. These are indeed remarkable results, but it's important to recognize that this journey has been far from a smooth ride—much like many of our other investments. Since its public debut in 2017, the stock has experienced several significant drawdowns, with the most notable occurring in 2022 when it declined by over 60% (see below). As we have previously discussed in relation to our investments in Meta and Spotify, one would have to be comfortable with sitting through these dramatic drawdowns and keeping their emotions in check in order to realize the long-term rewards of compounding that this company had delivered. Turning attention to the fundamentals of the business rather than gyrations of stock prices, the progress is very impressive as evidenced from the numbers below. Over the 4 years, revenues, operating earnings, and earnings per share have each grown at a rate of 30%+ annually. Our return from holding the stock has been even greater than that since we were able to opportunistically purchase the stock when it briefly traded at 10x revenues during the early days of the pandemic scare. The multiple has now recovered to 20x revenues, which boosted our returns. In The Trade Desk's latest quarter, the company reported a revenue of $584.6 million, marking a 26% year-over-year increase, which exceeded analyst expectations. Adjusted EBITDA came in at $229 million with an impressive 39% margin. CEO Jeff Green emphasized the company's strong position in the digital advertising ecosystem, particularly in Connected TV (CTV) and retail media. He highlighted that their success is driven by the shift towards data-driven advertising and the growing adoption of their Unified ID 2.0 solution, which is seeing broad industry support.

BSD Analysis:
Rowan Street Capital showcases exceptional timing and conviction with The Trade Desk, achieving a nearly sixfold return and 55% annualized gains over four years from their March 2020 entry at $17.40. The manager emphasizes the importance of withstanding volatility, including a 60% drawdown in 2022, to capture long-term compounding benefits. The Trade Desk's fundamental performance has been outstanding with 30%+ annual growth in revenues, operating earnings, and EPS over the holding period. Q2 2024 results demonstrate continued momentum with $584.6 million revenue (26% growth) and impressive 39% EBITDA margins. CEO Jeff Green's focus on Connected TV and retail media positioning, along with the growing adoption of Unified ID 2.0, highlights the company's strategic advantages in data-driven advertising. The manager's opportunistic purchase during pandemic fears at 10x revenues, compared to current 20x revenues, illustrates the value of contrarian timing. The Trade Desk's leadership in programmatic advertising and strong competitive moat support continued growth prospects.

Pitch Summary:
Back in our 2022 year-end letter, we highlighted Spotify, which was trading at roughly $15 billion at the time. We asked the question: "Does this valuation make any sense?" Now, just 18 months later, Spotify is valued at about $68 billion — a 4.3x increase. To put this in perspective, we initially estimated a valuation of about $70 billion by 2025, and it seems we got there a bit faster than anticipated. Spotify went public in 2018 at a price of $132 per share. We began purchasing shares that same year and continued to add to our position as the stock appreciated. Today, Spotify trades at $337 per share, reflecting a total return of 155% since its IPO, or about 16% annually — quite a respectable performance. However, our average cost basis is $216, as we increased our position as the stock rose. As a result, the stock return from that cost basis stands at 58%. While it's somewhat disappointing in comparison to the overall gain since the IPO, we remain confident in the position we've built, given the company's strong long-term growth and profitability potential. Spotify's rise in stock price has been far from a smooth journey. Take a moment to consider the drawdowns since its IPO. Much like Meta, Spotify faced an 80% decline in 2022 — an experience not suited for the faint of heart. We stayed with it… …and focused on the actual fundamentals of the business, where Spotify performed quite well over time. Active users and premium subscribers have grown at an impressive pace, while both revenues and gross profits have increased at an annual rate of over 20%. Although the free cash flows have been relatively flat until 2023, the company has recently become a strong cash generator as you can see from the chart below. Spotify achieved record profitability, reporting a net income of €274 million and a 20% year-over-year revenue increase to €3.8 billion. Gross margins improved to 29.2% — an all-time high — underscoring the company's efforts to boost efficiency. Premium subscribers grew 12%, reaching 246 million, while monthly active users rose by 14% to 626 million. The company's operating income surged to €266 million from a loss of €247 million in Q2 2023, reflecting Spotify's recent focus on cost efficiency and monetization strategies, including a streamlined podcast strategy and enhanced ad revenue initiatives.

BSD Analysis:
Rowan Street Capital demonstrates strong conviction in Spotify, noting the company's remarkable valuation increase from $15 billion to $68 billion in just 18 months, achieving their 2025 target ahead of schedule. Despite an 80% drawdown in 2022, the manager maintained their position based on strong fundamental performance. Spotify's Q2 2024 results showcase record profitability with €274 million net income and 20% revenue growth to €3.8 billion. The company achieved all-time high gross margins of 29.2%, demonstrating improved operational efficiency. User growth remains robust with 246 million premium subscribers (12% growth) and 626 million monthly active users (14% growth). The dramatic turnaround from a €247 million operating loss in Q2 2023 to €266 million operating income highlights management's successful cost efficiency initiatives. The manager views Spotify's transition to strong cash generation and enhanced monetization strategies as validation of their long-term thesis.

Pitch Summary:
We are pleased to report that Meta Platforms, our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return. We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that's simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There's no escaping it; it's the "price of admission" the market demands. If you take a look at the chart below, you'll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop. However, if we were to tune out the market's volatility (and the emotions that inevitably come with it) and focus solely on the fundamentals of the business with a long-term perspective, the results are quite impressive (see key performance data below). Over the course of our six-year ownership, the growth in revenue, earnings, and free cash flow per share closely mirrored the strong returns we achieved from the stock. We were pleased with Meta's robust progress in its financial and strategic position. There are now 3.27 billion people that use at least one of their apps each day. In Q2, Meta achieved a 22% year-over-year increase in revenue, reaching $39.07 billion, and net income rose by 73% to $13.47 billion, surpassing analyst expectations. Key to this growth is their significant investment in artificial intelligence, particularly with the development of their Llama 3.1 model. CEO Mark Zuckerberg envisions Meta AI as potentially the most used AI assistant globally by year-end, although monetization will take time. AI integration has also bolstered their advertising revenue, which grew to $38.33 billion, demonstrating its effectiveness in optimizing their core business. Their "Family of Apps" core business posted a $19.3 billion operating profit in the quarter, which resulted in a very impressive 50% operating margin — we don't often come across businesses that put up those kind of margins. The company has also increased its capital expenditure forecast to $37-40 billion, underscoring its commitment to AI infrastructure. We believe that Meta's strategic focus on AI and open-source initiatives positions it well for future success.

BSD Analysis:
Rowan Street Capital maintains a strong bullish stance on Meta Platforms, their largest holding, highlighting exceptional returns of 450% since November 2022 and a 20% annualized return over six years. The manager emphasizes Meta's fundamental strength despite significant volatility, including a 75% drawdown in 2022. Meta's Q2 2024 results demonstrate robust growth with 22% revenue increase to $39.07 billion and 73% net income growth to $13.47 billion. The company's AI investments, particularly the Llama 3.1 model, are driving advertising optimization and positioning Meta for future growth. With 3.27 billion daily active users across their apps and an impressive 50% operating margin in their Family of Apps segment, Meta shows strong competitive positioning. The increased capex forecast of $37-40 billion underscores their commitment to AI infrastructure development. The manager views Meta's strategic AI focus and open-source initiatives as key drivers for continued success.

Pitch Summary:
SharkNinja operates under two key brands: Shark and Ninja. Shark focuses on home cleaning and beauty appliances, while Ninja specialises in food preparation, cooking, and beverage appliances. Spun off from JS Global Lifestyle in 2023, SharkNinja's product range spans across 33 subcategories, from vacuums to grills. SharkNinja's innovation engine consistently produces cutting-edge products that meet market demands. They launch approximately 25 new products annually, with a focus on both iteration and invention. This translates to roughly 20 new versions of existing items and 5 entirely new products each year. Their focus on understanding and meeting customer needs has significantly contributed to their performance. SharkNinja analyses feedback to develop products, creating a strong feedback loop ensuing that its offerings are constantly evolving to meet consumer needs. SharkNinja's commitment to innovation has contributed to positive financial results. In Q1 2024, they delivered net sales growth of 28% and a 5ppt increase in FY24 sales guidance (revised from 8% to 13%). Currently holding ~4% of the $120 billion household appliance market, SharkNinja has significant room for further growth. Their strategic partnership with David Beckham is expected to further boost global brand awareness. SharkNinja is an example of a consumer company who has delivered strong results through its emphasis on product innovation and effective social media marketing strategies.

BSD Analysis:
Munro Partners highlights SharkNinja as a compelling consumer growth story driven by innovation and market share expansion. The manager's thesis emphasizes the company's systematic innovation engine, launching 25 new products annually across 33 subcategories, creating a sustainable competitive advantage. The strong Q1 2024 results with 28% sales growth and upward revised guidance demonstrate execution capability. With only 4% market share in a $120 billion household appliance market, SharkNinja has substantial runway for growth. The David Beckham partnership adds global brand awareness potential. The company's customer feedback-driven product development creates a virtuous cycle of innovation and market responsiveness. Recent spin-off from JS Global provides focused management attention and clearer investment thesis. The combination of innovation, market opportunity, and effective marketing positions SharkNinja well in the competitive consumer appliance space.

Pitch Summary:
TSMC was founded in 1987 in Taiwan and is the largest semiconductor foundry globally, fabricating more than 60% of the world's semiconductors for many of the world's largest companies such as Apple and Nvidia. The foundry model relies on scale, time-to-market and node maturity as participants work alongside 'fabless' customers to deploy their technology roadmaps. Given its market position, we see TSMC as the bellwether for the semiconductor industry. Many of TSMC's key end markets (such as smartphone, IoT (internet of things) and automotive) slowed over the course of 2023 as the broader macroeconomic environment softened. Munro saw this as an attractive opportunity to build a position through December 2023 as we forecasted TSMC's earnings to rebound into 2024 and beyond as these end markets passed through their cyclical troughs. Two key drivers beyond broad end market growth are core to our investment thesis: the first being revenue from AI servers growing as a portion of overall revenue (think Nvidia GPUs and custom ASICs for AI training/inference). TSMC expects AI server revenues to grow at a 50% CAGR over the next 5 years, representing more than 20% of their total revenue by 2028, a target they have revised upwards twice since Q2 23, emphasising how quickly this new market opportunity is emerging. The second key driver is that as AI proliferates through consumer and business applications, as recently showcased by Apple at the WWDC conference, the next generation of smartphones and PCs will need substantially more semiconductor content per device to run these applications, of which TSMC is a direct beneficiary. We continue to find TSMC's valuation attractive at 25x blended forward consensus EPS estimates and can see a credible path to more than $60 in EPS by 2026.

BSD Analysis:
Munro Partners presents a compelling bull case for TSMC based on its dominant foundry position and AI-driven growth catalysts. The manager's thesis centers on TSMC's role as the primary beneficiary of the AI infrastructure buildout, with AI server revenues expected to grow at 50% CAGR and reach 20% of total revenue by 2028. The investment timing appears strategic, as Munro built the position during December 2023 when cyclical end markets were at their trough. The dual catalyst of hyperscaler AI capex and consumer device AI refresh cycles provides multiple growth vectors. At 25x forward P/E with a path to $60+ EPS by 2026, the valuation appears reasonable for a company with TSMC's market dominance and growth prospects. The manager's conviction is reinforced by TSMC's twice-revised upward guidance for AI revenues, demonstrating the accelerating nature of this opportunity.

Pitch Summary:
Analog Devices (ADI) is a leading semiconductor company that provides innovative solutions for the electric vehicle (EV) and charging infrastructure market. They offer a wide range of products, including energy measurement ICs, battery management systems, power semiconductors for on-board EV chargers, and wireless battery management systems. ADI's solutions enable longer EV range, improved battery lifetime, increased efficiency of electric powertrains, and faster charging times. Additionally, ADI is at the forefront of developing technologies for the automation supply chain, offering products like isolated gate drivers and power supply controllers for energy storage systems that support fast EV charging infrastructure. Analog semiconductors in general are critical enablers of everything from connectivity, to electrification, to automation -- and Analog Devices is a leader in the space. The stock (and the analog group in general) has been consolidating for an extended period as the auto and industrial supply chains have been going through a significant inventory downcycle. The inventory cycle is beginning to bottom out (~Q2 2024), which historically tends to be a positive time to accumulate for the next upcycle.

BSD Analysis:
The manager positions Analog Devices as a critical enabler across multiple mobility transformation themes, emphasizing its comprehensive product portfolio for EV and charging infrastructure markets. ADI's solutions span energy measurement ICs, battery management systems, power semiconductors, and wireless battery management systems, directly enabling key EV performance metrics like range, battery life, and charging speed. The company's automation supply chain exposure through isolated gate drivers and power supply controllers for energy storage systems provides additional growth vectors beyond pure EV adoption. The investment thesis centers on analog semiconductors being fundamental building blocks for connectivity, electrification, and automation trends. The manager's timing approach focuses on the inventory cycle bottoming in Q2 2024, following an extended consolidation period in both ADI and the broader analog semiconductor group. This cyclical positioning strategy leverages historical patterns where accumulating during inventory cycle troughs has preceded strong performance in subsequent upcycles. The thesis combines secular growth in mobility electrification with tactical timing around industrial inventory cycles, positioning for both thematic exposure and cyclical recovery.

Pitch Summary:
Albemarle Corporation is a global leader in providing essential elements for mobility, energy, and connectivity. As the world's largest lithium producer, Albemarle plays a crucial role in the electric vehicle (EV) supply chain by supplying battery-grade lithium hydroxide, a key component in EV batteries. The company has established strategic agreements with major automakers to deliver lithium hydroxide for millions of future EVs through long-term supply contracts spanning from 2026 to 2030. Albemarle is committed to expanding its US domestic presence by opening new lithium mines and constructing a $1.3 billion processing facility in South Carolina capable of supporting the manufacturing of 2.4 million EVs annually and processing lithium from recycled batteries. After correcting over 65% last cycle and over 80% this cycle, the price of lithium is beginning to bottom out -- which coincides with a bottoming out of the broader mobility supply chain. Unsurprisingly, Albemarle's stock price is highly sensitive to the price of lithium and has experienced similar sized corrections each cycle. While the price hasn't yet begun to move meaningfully higher yet, the downside is more defined and it has historically been beneficial to begin to position before the full turn.

BSD Analysis:
The manager presents a cyclical value play on Albemarle, the world's largest lithium producer, betting on a commodity price recovery after severe corrections. The investment thesis is built on Albemarle's dominant market position and secured long-term contracts with major automakers spanning 2026-2030, providing revenue visibility in the growing EV market. The company's $1.3 billion South Carolina processing facility represents significant capacity expansion, capable of supporting 2.4 million EVs annually while also processing recycled batteries. The manager's timing-based approach focuses on lithium's cyclical nature, noting that prices have corrected over 80% this cycle and are beginning to bottom alongside the broader mobility supply chain. The stock's high correlation to lithium prices creates both risk and opportunity, with the manager believing current levels offer attractive risk-reward given more defined downside. The strategy involves positioning ahead of the commodity cycle turn, leveraging historical patterns where early positioning before price recovery has proven beneficial. This represents a contrarian bet on both lithium price recovery and the continued growth of the EV supply chain.

Pitch Summary:
Tesla is a pioneering electric vehicle, clean energy, and automation company that has revolutionised the automotive industry through its innovative approach to manufacturing and holistic vision of the electrification, automation, and robotics spheres. The company designs, develops, manufactures, and sells high-performance electric vehicles, solar panels, energy storage systems, and robotics. In the electrification supply chain, Tesla has vertically integrated many aspects of production, including battery cell manufacturing, to reduce costs and ensure supply (a similar approach as Apple in smartphones). For automation and robotics, Tesla heavily utilises advanced manufacturing techniques in its factories, employing sophisticated robots for tasks across the end-to-end process. The company's commitment to automation extends beyond manufacturing to its vehicles, with Tesla a leader in developing autonomous driving technology (with a vision-first approach). Tesla now has over 5 millions vehicles on the road. These vehicles are essentially robots on wheels, gathering data. And, when they are ready, they can basically flip a switch and overnight these cars can become partial or full self driving. Additionally, Tesla is expanding into humanoid robotics with its Optimus project, further solidifying its position in the robotics supply chain. Through these initiatives, Tesla has positioned itself as a central player in the intersection of electrification, automation, and robotics, driving innovation across multiple industries. Only BYD in East and Tesla in the West have cost structures that we believe will be competitive in this "new world" order. As we've laid out historically, we continue to think majority of the other OEMs in the space will likely head toward zero -- similar to what happened with internal combustion engine OEMs in the early 20th century. The legacy auto OEMs will also end up being displaced over time as well -- as electric technology is simply superior to internal combustion and continues to improve. Further, both Tesla and BYD continue to separate themselves from the pack by now beginning to really lean into the software/AI side of their respective businesses -- which will ultimately power their autonomous driving experiences and the surrounding ecosystem.

BSD Analysis:
The manager presents a comprehensive bull case for Tesla, positioning it as a dominant force in the electric vehicle revolution with competitive advantages across multiple verticals. The thesis centers on Tesla's vertical integration strategy, similar to Apple's approach in smartphones, which provides cost advantages and supply chain control in battery manufacturing. The manager emphasizes Tesla's data collection advantage with over 5 million vehicles on the road serving as "robots on wheels," creating a massive dataset for autonomous driving development. The expansion into humanoid robotics through the Optimus project demonstrates Tesla's broader automation ambitions beyond vehicles. The manager believes only Tesla and BYD have sustainable cost structures in the new automotive paradigm, predicting that legacy OEMs will face displacement similar to early 20th century internal combustion engine manufacturers. The investment thesis is strengthened by Tesla's pivot toward software and AI capabilities, which will differentiate autonomous driving experiences and create ecosystem value. This positions Tesla not just as an automaker but as a technology platform company at the intersection of electrification, automation, and robotics.

Pitch Summary:
Mcpherson's Ltd (ASX: MCP) is an Australian consumer products company with a diverse portfolio of well-known brands. Their product range spans health, wellness, beauty, and household categories with key brands including Lady Jane, Manicare, Swispers which are all category leaders in the beauty accessories segment. Dr. LeWinn's, a skincare line featuring an Inner Beauty range with vegan collagen products, and A'kin, which offers botanical-based hair and skin care solutions. McPherson's is focused on natural and wellness-oriented products, catering to consumer trends in these areas. Their multi-brand strategy and involvement in various consumer product categories provides a diversified business model, offering resilience over time in a more difficult trading environment. McPherson's is susceptible to consumer discretionary spending but we believe the health and beauty category is generally more defensive than other discretionary retailers operating within the same demographic of clientele. McPherson's reported its H1 FY24 results in February which reflected a significant transformation in the company's business model. Despite an 8% decrease in revenue to $103.4 million, the company achieved a notable improvement in gross margin, increasing from 47.5% to 51.1%. This margin expansion was primarily driven by the strategic shift towards higher-margin core brands and a reduction in input costs. The focus on cost management and efficiency led to a net profit after tax (NPAT) of $1.6 million, a significant improvement on the NPAT of $0.1 million in 1H23. The company's net debt position improved significantly, with net debt excluding lease liabilities decreasing by $5.9 million to $4 million. Cash generation was also strong with $9.1 million in operating cash flows before interest and tax to 31 December 2023. An impressive transformation from the operating cash outflow of $6 million in the previous corresponding period. McPherson's declared a 2 cent dividend and if maintained equates to an attractive 10% dividend yield. The company's improved financial position and enhanced profitability metrics indicate a more resilient and focused business model, positioning it well for future growth. McPherson's recently completed the sale of its 'Multix' brand and inventory to International Consolidated Business Group Pty Ltd for $19 million, subject to post-completion adjustments. The divestment follows a strategic review announced in November 2023, aligning with McPherson's focus on its core health, wellness, and beauty brands. As a result of the sale, the company expects to incur a one-off, non-cash asset write-down of $10-11 million in FY24 related to the 'Multix' brand and allocated goodwill, with pre-tax divestment costs estimated at $1.5 million. CEO Brett Charlton emphasised that this move strengthens the company's balance sheet and reshapes the business for its future as a pure-play health, wellness, and beauty company. The sale is part of McPherson's broader transformation plan, which includes reviewing its route to market for its remaining brand portfolio. We believe that this cash could lead to either potential merger and acquisition opportunities or be returned to shareholders. The company established a strategic alliance with Chemist Warehouse in March 2022 whereby McPherson's was appointed as Chemist Warehouse's exclusive long-term distributor of a select portfolio of Chemist Warehouse-owned or controlled health and beauty brands outside of the Chemist Warehouse Network in Australia and New Zealand. At the time of the announcement, the exclusive distribution rights will be for an initial term of five years commencing on 1 July 2022. McPherson's will have three five-year options to extend the arrangements, subject to certain minimum performance thresholds on a brand-by-brand basis. A key part of the alliance was the issue of shares to Chemist Warehouse. Chemist Warehouse remains a significant shareholder in the business, owning just under 10% of the company. Following the divestment of Multix we see significant value in McPherson's and believe it could be a takeover target now that it becomes a pure play brand owner of health and beauty brands. With forecast future sales of $160 million and earnings before interest and tax (EBIT) margins of 7-10% over time, that equates to potential Ebit of around $11 million on an underlying basis in FY25/26, which places the company at an attractive enterprise value to EBIT of around 3.5 times. This attractive valuation could encourage bidders to re-emerge following previous bids in 2021. Just over 3 years ago Arrotex Australia lodged a $1.60 non-binding, indicative proposal for the company, valuing the business at about $205 million. This bid followed on from a rival bid of $172 million from Geminder. The Arrotex bid ultimately collapsed following a four-week period of due diligence. With a current market capitalisation of just under $60 million and an improving and focussed business model could we see an opportunistic return bid or perhaps a new interest? The recent downturn in McPherson's share price presents an intriguing opportunity for long-term investors and potential acquirers alike. Despite a slight revenue drop in H1 FY24, the company's strategic pivot has driven a notable improvement in the financial position of the business. McPherson's divestment of the Multix brand, coupled with a strengthened balance sheet and its strategic alliance with Chemist Warehouse, enhances its focus on health, wellness, and beauty. With a compelling valuation, we believe McPherson's is an attractive prospect. The company's transformation and current valuation make it an appealing takeover target amid rising merger and acquisition activity in the market.

BSD Analysis:
The manager presents a comprehensive turnaround and takeover thesis for McPherson's following its strategic transformation into a pure-play health and beauty company. The business model improvement is evident through gross margin expansion from 47.5% to 51.1% and strong cash generation of $9.1 million versus prior year outflows. The Multix divestment for $19 million strengthens the balance sheet while focusing on higher-margin core brands. The strategic Chemist Warehouse partnership provides distribution scale and validates the brand portfolio quality. At 3.5x EV/EBIT on normalized earnings with a 10% dividend yield, the valuation appears compelling for a transformed consumer products company. The manager's takeover thesis is supported by previous bid interest at significantly higher valuations and the current $60 million market cap representing a potential opportunity for strategic acquirers in a consolidating sector.

Pitch Summary:
Centrepoint Alliance (ASX: CAF) a provider of advice and business services to financial advice firms throughout Australia, released a trading update. Previous earnings guidance in February 2024 indicated a range of $8m to $9m EBITDA (pre LTI and one-off costs for FY24). Pleasingly, the Company is now forecasting the upper end of this range with an outcome expected of between $8.75m and $9m EBITDA with further growth expected in FY25. Key factors behind this strong financial performance include: • Growth in the licensee services revenue due to the full year impact of advisers recruited during the 2023 financial year. • Ongoing prudent expense management, particularly the efficiencies leveraged from the operating model and technology enabled productivity savings. • The successful integration of Financial Advice Matters Group which was acquired in December 2023 has resulted in FAM's earnings contribution exceeding initial expectations. In addition, CAF continues to lead the market in financial adviser recruitment with 556 authorized representatives as at 9th May 2024, an increase of 46 since the start of this financial year. In contrast, 7 of the top 10 licensee companies continue to see net losses of financial advisers. CAF trades on 7x EBITDA and pays 9.5% gross dividend yield. The sector should continue to consolidate and we expect CAF to be acquired in the future. With COG recently acquiring 19% of CAF and CUP acquiring listed peer, Diverger, we think CAF makes logical sense to be next.

BSD Analysis:
The manager presents a strong bull thesis for Centrepoint Alliance based on operational momentum and consolidation potential. The company is tracking toward the upper end of EBITDA guidance at $8.75-9 million, driven by adviser recruitment success and operational efficiencies. CAF's market-leading position in adviser recruitment (46 net additions vs. industry losses) demonstrates competitive strength in a consolidating sector. The successful FAM acquisition integration exceeding expectations shows effective M&A execution capabilities. At 7x EBITDA with a 9.5% dividend yield, the valuation appears attractive for a growing financial services platform. The manager's takeover thesis is supported by recent sector M&A activity and COG's 19% stake acquisition, positioning CAF as a logical consolidation target.

Pitch Summary:
SRG Global (ASX: SRG) announced several large contract wins valued at $350m across Australia which include multi year term contracts secured in the Health, Building, energy and Resources sectors. Highlights include: • Specialist facades contracts with repeat clients across NSW, VIC and WA • Tailings dams facilities works with repeat client in WA • Renewable energy project for structural remediation works with existing client • Specialist design and construct contract in the resources sector for concrete tanks Overall over $500m of new contracts secured in Q4 of the FY24 financial year. SRG continues to go from strength to strength, underpinned by a strong growth profile and recurring earnings base approaching 80% of their overall earnings. The company is trading on 4x EV/EBITDA and a PE of 12x with a dividend yield of 4.5% ff. We think the stock is worth at least $1.00+ now.

BSD Analysis:
The manager presents a compelling bull case for SRG Global based on strong contract momentum and attractive valuation metrics. The company secured $500 million in new contracts during Q4 FY24, demonstrating robust demand across diversified end markets including health, energy, and resources sectors. The recurring earnings base approaching 80% provides revenue visibility and stability. At 4x EV/EBITDA and 12x P/E with a 4.5% dividend yield, the valuation appears attractive for a growing construction services company. The manager's $1.00+ target price suggests meaningful upside potential from current levels. The diversified client base and repeat contract nature indicate strong competitive positioning and customer relationships.

Pitch Summary:
One of the new names purchased was OBIC, a leading enterprise resource planning (ERP) software provider in Japan. OBIC boasts the number 1 market share within Japan's small-to-medium enterprise (SME) market with approximately 30% market share. The company's ERP platform is also ranked number 1 in customer satisfaction in Japan and the company has enjoyed a 99% customer retention rate over the past decade. OBIC has delivered consistent operating margin improvement over the past couple of decades (FY24: 63.5%), helped by moving their customer base to the cloud. Going forward, the company has an opportunity to expand their presence in larger corporates who either operate an 'in-house' ERP system or one provided by competitors such as Oracle Japan, Fujitsu or SAP. We believe OBIC will continue to grow its earnings above 10% p.a. for the medium term, with additional shareholder returns from effective deployment of the company's strong cash flow and net cash balance sheet. Valuation is trading at 5-year lows, creating an attractive investment entry point.

BSD Analysis:
Bell Asset Management presents a compelling bull case for OBIC as a dominant Japanese ERP software provider with exceptional competitive positioning. The fund highlights OBIC's commanding 30% market share in Japan's SME market, coupled with number one rankings in customer satisfaction and an impressive 99% customer retention rate over the past decade. Bell emphasizes OBIC's operational excellence, noting consistent margin improvement culminating in a remarkable 63.5% operating margin in FY24, driven by successful cloud migration. The fund identifies significant growth opportunities in expanding to larger corporate clients currently using in-house systems or competitor solutions from Oracle Japan, Fujitsu, and SAP. Bell projects medium-term earnings growth above 10% annually, supported by strong cash generation and a net cash balance sheet that enables effective capital deployment. The investment thesis is strengthened by attractive valuation at five-year lows, providing an opportunistic entry point for a high-quality software business with dominant market position and clear growth runway.

Pitch Summary:
In terms of negative stock detractors, the largest individual detractor was athletic apparel and footwear company, Nike, which pulled back at the end of the month after issuing disappointing guidance for FY25 (May year-end). The company pointed to several headwinds including softness in their lifestyle footwear segment and a tougher macro backdrop, including in China. Management acknowledged that innovation needs to be improved and is also shifting more emphasis back to the wholesale channel, both of which will weigh on margins in the year ahead. While the near-term outlook is more clouded after the recent update, our view on the strength of the brand longer term hasn't changed materially and the contraction in the share price and valuation now discounts a lot more of the risks. Our analysis and engagement with the company is ongoing.

BSD Analysis:
Bell Asset Management takes a measured neutral stance on Nike following disappointing FY25 guidance that highlighted multiple operational challenges. The fund acknowledges significant near-term headwinds including weakness in the lifestyle footwear segment and macro pressures, particularly in the important Chinese market. Bell notes management's admission that innovation needs improvement and the strategic shift back to wholesale channels, both factors that will pressure margins in the coming year. Despite these concerns, Bell maintains confidence in Nike's long-term brand strength and competitive positioning. The fund views the recent share price decline as appropriately discounting many of the identified risks, potentially creating a more attractive entry point. Bell's ongoing analysis and company engagement suggests they are actively monitoring for signs of operational improvement. The neutral stance reflects a balanced view that acknowledges current challenges while recognizing Nike's enduring brand value and potential for recovery.

Pitch Summary:
Another software holding, Adobe, also posted strong performance in June, with shares rising approx. 25% after the company delivered excellent Q2 results and raised full year guidance. This update helped to ease some concerns around AI competitive threats and the softer macro environment that has impacted some other software companies.

BSD Analysis:
Bell Asset Management maintains a positive view on Adobe following strong Q2 performance that addressed key investor concerns. The fund highlights Adobe's impressive 25% share price appreciation driven by excellent quarterly results and raised full-year guidance. Bell notes that these results effectively countered market worries about AI competitive threats to Adobe's core creative software business. The strong performance also demonstrated Adobe's resilience against broader macroeconomic headwinds that have pressured other software companies. While the commentary is brief, Bell's inclusion of Adobe as a positive contributor suggests confidence in the company's ability to navigate AI disruption while maintaining growth momentum. The fund appears to view Adobe's Q2 results as validation of the company's competitive positioning and execution capabilities. Bell's positive stance reflects Adobe's demonstrated ability to deliver results despite challenging market conditions and technological disruption concerns.

Pitch Summary:
At a stock level, one of the best performing stocks in the portfolio during June was Oracle, a leading provider of software and cloud computing solutions. Shares of Oracle rallied approx. 20% as investors cheered the upbeat growth outlook, particularly in the Infrastructure-as-a-Service division (IaaS), Oracle Cloud Infrastructure, OCI. In the most recent quarter, Oracle signed IaaS contracts totalling US$12.5 billion (43% YoY growth), with some being the largest sales contracts in its history. The company also announced partnerships with Google, Microsoft, and OpenAI in areas of database performance co-location and multi-cloud solutions. Driven by strong demand for AI large language model training and inferencing, management guided 50%+ OCI growth in FY25, well ahead of consensus expectations. We continue to like the investment case for Oracle given management's ability to capture strong organic growth and expand profitability (operating margin grew 300bps in FY24). We believe the stock can continue to advance on the back of industry structural tailwinds and robust execution.

BSD Analysis:
Bell Asset Management presents a compelling bull case for Oracle based on exceptional cloud infrastructure momentum and AI-driven demand. The fund highlights Oracle's remarkable 43% year-over-year growth in IaaS contracts totaling $12.5 billion, with some representing the largest deals in company history. Management's guidance of 50%+ OCI growth in FY25 significantly exceeds consensus expectations, demonstrating strong execution in capturing AI workload demand. The strategic partnerships with Google, Microsoft, and OpenAI position Oracle advantageously in the rapidly expanding AI infrastructure market. Bell emphasizes Oracle's operational excellence, noting 300 basis points of operating margin expansion in FY24, reflecting management's ability to scale profitably. The fund views Oracle as well-positioned to benefit from structural industry tailwinds in cloud computing and AI infrastructure. Bell's conviction stems from Oracle's proven ability to deliver organic growth while expanding profitability in a high-demand market environment.

Pitch Summary:
During the month we exited Schibsted following a re-rating in the shares. As readers may remember, we first invested in Schibsted in June 2022. At the time the company was trading at an 45% discount to our estimated NAV, with its listed stake in Adevinta accounting for c.70% of Schibsted's market cap. We believed this inefficient group structure masked the highly attractive and valuable unlisted Nordic Marketplace business, with the stub assets trading at an implied c.6x forward EBITDA. It was our contention that resolving the stake in Adevinta was crucial to unlocking value, and indeed this is what occurred. In November 2023 Blackstone and Permira agreed to take Adevinta private at 115 NOK per share. The transaction saw Schibsted crystalise 24bn NOK (48% of its then market cap) whilst also retaining an 11% stake worth 16bn NOK (32%). Shortly after, Schibsted delivered a second transformational transaction, selling the legacy News Media assets to its controlling shareholder, the Tinius Trust. This removed a capital consumptive and terminally challenged asset from the group and transformed Schibsted into a purer play classified marketplaces business. Taken together these actions simplified the group structure and forced investors to pay attention to the Nordic Marketplace assets, which have re-rated to trade at >20x forward EBITDA. Whilst we believe there is still considerable value to be extracted from increasing monetisation in-line with international peers and improving margins, as well as from the unlisted stake in Adevinta, this is better reflected in the valuation. When we initially invested and were adding to the position, the valuation was inordinately wrong. This is no longer the case and, as such, it makes sense to exit the holding. Over the course of the investment Schibsted generated a +67% ROI and +47% IRR which compares favourably to the +31% / 22% returns of the MSCI AC World Index over the same period (all figures in NOK).

BSD Analysis:
AVI Global Trust successfully exited Schibsted after achieving the investment thesis of unlocking value through corporate restructuring. The fund initially invested in June 2022 at a 45% discount to NAV, recognizing that Schibsted's stake in Adevinta (70% of market cap) masked the value of Nordic Marketplace assets trading at 6x forward EBITDA. The investment thesis materialized through two transformational transactions: Blackstone/Permira's takeover of Adevinta at 115 NOK per share, crystallizing 24bn NOK while retaining an 11% stake, and the divestiture of legacy News Media assets to Tinius Trust. These actions simplified the group structure and forced market recognition of the Nordic Marketplace business, which re-rated to >20x forward EBITDA. With the valuation inefficiency corrected and the original thesis fulfilled, AVI prudently exited the position. The investment generated impressive returns of +67% ROI and +47% IRR versus +31%/22% for the MSCI AC World Index, demonstrating successful execution of a value unlocking strategy.

Pitch Summary:
In recent months we have built a new position in Reckitt Benckiser, the UK-listed consumer goods conglomerate which trades at an 39% discount to our estimated NAV. It is currently a 3.9% weight. Already trading at a discounted valuation, in March 2024 the company was hit by a litigation shock. The company's US infant nutrition business, Mead Johnson, was ordered to pay $60m compensation to the mother of a baby who died of Necrotising Enterocolitis ("NEC") – a bowel disease that mainly affects premature babies - who had been fed Enfamil pre-term baby formula. This led to a -15% one-day decline in Reckitt's share price as investors struggled to price the potential liability and capitulated. We do not intend to get into the minutiae of the case here but at a high level the facts are as follows. NEC occurs in c.10% of all premature (pre-37 week) babies and 1 in every c.2000 full-term births. It typically occurs within 2-3 weeks after birth & results in death in 15-40% of cases. Mead Johnson hold a >40% market share in the oligopolistic US infant nutrition business, accounting for c.9% of Reckitt's sales. Within this, the pre-term formula – to which the case relates – is a small portion and immaterial at the group level. Whilst mothers' milk and then donor milk are the first and second choices for premature babies, cows' milk formulas and fortifiers are necessary options where parents of premature babies are unable or unwilling to breast feed and donor supply is limited. This is standard medical practice and the decision to use such products is made by a medical professional in a neonatal setting. From as early as 1990 medical research has showed that incidence of NEC increases when cows' milk-based infant formula is used. That is – however – not causality. It is widely recognised that human milk offers the best prevention against NEC, although the risk can never be eliminated and can occur in conjunction with any kind of feeding. The Illinois Court ruled that a) there is a link between cows' milk-based formula usage and NEC, and b) that Mead Johnson were negligent as their labelling did not adequately warn of the risks. The NEC Society have spoken out against the ruling, and medical professionals continue to use the product. We are humble enough to realise that we do not possess any competitive advantage in analysing the legal merits of the case. However, 1) with close to $10bn of market cap eroded, the market appears to be discounting an excessively pessimistic scenario versus reasonable estimates; 2) the company maintain that legally the liability is non-recourse to Reckitt PLC thereby putting an at least theoretical cap on it; 3) our mandate and organisational structural does give us a competitive advantage in owning out of favour or even stigmatised companies compared to more institutional peers. Turning to the underlying business, we believe there is a lot to be excited about. Reckitt owns a collection of trusted brands which exhibit meaningful barriers to entry, high margins, and attractive growth prospects. This is split across Health (42% sales), Hygiene (42%) and Nutrition (16%). Over 70% of revenues are derived from brands that hold #1 or #2 positions in their respective category and – with more than 30 million products sold daily - will be well known to readers such as Nurofen, Durex, Strepsils, Dettol, Finish and Vanish. Across the group, underlying categories should grow at an average of 3-4% and management target mid-single-digit organic growth. The business generates industry leading gross margins (60%), healthy operating margins (23%) and strong cash generation (2023 free cash flow £2.2bn / ~15% of sales). That said, there is certainly room for improvement. Having had two CEOs from 1999 to 2019 the business is now on its third CEO in five years. Former employees talk of confusion around the prioritisation of gross margins or growth, and the 2017 Mead Johnson acquisition led to a loss of focus and neglect of the Consumer Health division. Certainly, it is an open question whether more focused management would be beneficial, with the company having explored splitting the business up in 2018. Moreover, we believe there is potential for further improvements in operating margins – something with which management seems to agree given their target to boost margins by +200bps. Following the sell-off, on this year's numbers the shares trade an EV/EBIT multiple of 11x, a PE ratio of 13x and a 7.4% free cash flow yield. These are the lowest levels in over a decade and represent the steepest ever discount to peers. For investors with a longer-time horizon, we believe this offers highly attractive value, and one that is unlikely to persist indefinitely without attracting the interest of strategic buyers and other activist shareholders. A resolution of the legal liability is the key catalyst for the shares, and the 2025 Federal litigation is likely central to this. With the continued pace of the buyback there is a path to £4 of earnings per share in 2026. As the dust settles the market will likely capitalise this at a fairer multiple than that implied by the share price.

BSD Analysis:
AVI Global Trust has initiated a new position in Reckitt Benckiser at a 39% discount to estimated NAV, viewing the March 2024 litigation-driven selloff as an overreaction. The fund believes the market has excessively discounted a $60m NEC-related judgment against Mead Johnson, which represents only 9% of Reckitt's sales and involves pre-term formula as an immaterial portion. AVI argues the company maintains the liability is non-recourse to Reckitt PLC, theoretically capping exposure. The underlying business owns dominant consumer brands (Nurofen, Durex, Dettol) with 70% of revenues from #1/#2 market positions, generating 60% gross margins and strong cash flow. Management turnover and operational inefficiencies present improvement opportunities, with targets for 200bps margin expansion. At 11x EV/EBIT and 13x P/E ratios—decade lows—AVI sees compelling value with potential catalysts including 2025 federal litigation resolution and continued buybacks targeting £4 EPS by 2026. The fund expects strategic interest and multiple re-rating as legal uncertainties resolve.

Pitch Summary:
No AI play, Nike has experienced its own sharp volatility, with a share price that's essentially doubled then halved over our four-year holding. To be back where we started is a depressing investment result given the company's revenues have over the same period risen almost 40%. The culprit is valuation. Swept up in the pandemic's working-from-home leisurewear boom, Nike's EV/sales multiple rose from c.3x up to c.5x, before settling back down under 2.5x (the lowest in a decade). Perhaps we should have sold at 2021's peak, though without 20:20 hindsight we will always find this tough. Our preference is to hold on through such swings of perception, seeking the longer-term compounding inherent to truly great businesses. Nike's shares have returned a dizzying 745-fold since listing in 1980 (no complaints there!), but looking ahead, does the company still qualify as 'great'? There have been missteps, with a recent Times article accusing the company of overstuffing the digital market whilst neglecting bricks-and-mortar retailers. This, it's claimed, has allowed new competitors (notably On Running and Hoka) to take more than their fair share of growth, with Nike's slice of US running shoes falling c.10% over the past seven years. Q4 earnings and a surprise guide for declining revenues over the next fiscal year led to a c.20% single day drop in share price, their worst on record. Yet there's cause for optimism. Fashion can be fickle, but at the technical/performance end of the spectrum, Nike still dominates (the above Times article notes that of the last six major marathons, fully half the competitors crossed the finish line in a shiny pair of high-tech Nikes). Yes, Nike needs to regain momentum (innovations are coming, with the upcoming Paris Olympics an obvious showcase), but despite the share loss in running, Nike holds strong number one positions in almost all geographic footwear sub-markets. The wider economic environment will have prompted some consumers to trade down (be that in the US or China), which is unhelpful in the near term but not of structural competitive concern. Notably its iconic basketball shoes are still enjoying double digit growth. All in all, despite some guided contraction next year, operating margins will likely remain a healthy 11-12%, and as discussed above, with investor enthusiasm low, valuations are now far from demanding. At a c.19x GAAP P/E (a 5% FCF yield), much of the derating threat has gone, leaving room for resurgent underlying compounding to once again drive investment returns.

BSD Analysis:
Lindsell Train maintains conviction in Nike despite significant volatility and recent operational challenges. The manager acknowledges disappointing share price performance over their four-year holding period, with the stock essentially flat despite 40% revenue growth due to valuation compression from pandemic highs. They identify strategic missteps including over-emphasis on digital channels at the expense of brick-and-mortar retail, allowing competitors like On Running and Hoka to gain market share in running footwear. However, the fund sees cause for optimism in Nike's continued dominance in technical performance products and strong market positions across most geographic footwear segments. The manager views current challenges as cyclical rather than structural, noting healthy 11-12% operating margins and attractive valuation at 19x GAAP P/E with 5% free cash flow yield. They believe the significant derating has created opportunity for long-term compounding returns.