We are on the home stretch with three quarters of the NAPS (No Admin Portfolio System) completed for 2024. As a reminder, if you are interested you can read:

• Launch post here

• First quarter review post here

• Second quarter review post here

For those new to this piece, just a quick reminder that our Australia and New Zealand NAPS is run as an education tool and is not intended to be taken as advice or a portfolio recommendation.

We perform absolutely no changes to our basic selection of stocks that we selected way back at the start of the year when we selected the highest StockRank scores in each sector that were large enough to invest in. Be sure to remind yourself of the rules by reading the launch email.

We have just completed the reporting season for most of these businesses and therefore there are likely to have been changes in the StockRank score for an individual company. This may mean they are no longer at the top of the tree. But as this exercise is purely for the purposes of general interest, we share this learning exercise with members to see if a passive/stock specific fund can beat the market.

And as a benchmark, given that we look quite deep into the market, we measure it against the S&P/ASX300, therefore we compare ourselves against the total return of the VAS Vanguard Australian Shares Index ETF.

And always remember: Past performance is no indicator of future performance.

Performance for 3 months (01 July 2024 - 30 September 2024)

* +0.02% higher due to currency conversion of VCT into AUD

^ Difference in sum is due to rounding

Performance for 9 months (01 January 2024 - 30 September 2024)

* -0.05% lower due to currency conversion of VCT into AUD

^ Difference in sum is due to rounding

The NAPS portfolio does not represent the actual return of a financial product. It is used purely for the purposes of education. The performance figure should not be relied upon in any way.

It has been particularly pleasing to see the strong quarterly outperformance despite the market being on a tear. In fact the market closed the quarter at an all time record high and many stocks likewise are trading at elevated levels. Incidentally, three months ago when we last did a quarterly review markets were at all-time highs as well.

But make no bones about it, there have been some terrible performance figures in some individual stories, but then outstanding results in the others. What this perfectly illustrates is the value of a well diversified portfolio and why we should not be fixated on one stock, rather we should look at the portfolio as a whole.

It’s also important not to forget that had we run this exercise a month ago, many of the price takers out there had returned putrid results. But that has all changed in the last few weeks, and they have contributed strongly to outperformance despite their prices being down for the quarter and year.

So what do we take from this? That our portfolio returns are not a function of timing the market so much as being time in the market that is important. While no one could point to the rising iron ore prices and renaissance in the mining sector, we know about the Middle East tensions and have done so for some time. This also extends to the stressed Australian consumer who didn’t receive a break this quarter. Ultimately in our view, if you pick good businesses and stick with them then they should look after you as a collective over the long run.

Out of interest, for the 12 months passed the portfolio has a total return of 24.71%. Since inception back in 2023 it is 17.27%. Paying your Stockopedia membership for decades.

Leading into the end of the year hopefully a few of the laggards and losers can keep improving in terms of price performance in order to see the continued outperformance of the NAPS. The next quarterly review of course will be the last for 2024.

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Stock Review

We will divide the stocks into winners, laggards and losers for the third quarter. As previously mentioned ad nauseum, no changes have been made to the portfolio and this is used solely for the purposes of education.

The winners

Resolute Mining (ASX:RSG) Current StockRank™ 87. 3mth total gain +42.31%

With the gold price remaining at record high levels it is not unsurprising to see a highly leverage (to the gold price) African producer in Resolute Mining (ASX:RSG) trading at multi-year highs. At the time of its half year result though it did say that overall production was down due to maintenance work at their Syama (Cote d’Ivorie) Sulphide Plant and waste stripping at Mako (Senegal).

However beyond the price of the commodity, there were some positive developments that have been latched on. The first was the fact that AISC (all in sustaining costs) was likely to keep tracking lower in the 2H of 2024. (Though at $1,442/oz it is still quite high). Further they had received approval for senior debt facility renewals for the years ahead. But most importantly was the announcement that it had increased the mineral resource size at Mako following drilling at a Satellite site. And they also declared a maiden resource at its Guinea (Mansala) project.

With the work at Mako, they had increased the size of mineralisation by 30% with remaining open to the southwest of the project. A more accurate timeline on the the potential of this extension is expected inQ1 2025. In Guinea while drilling to date has an inferred Mineral Resource at 6.6M tonnes, there is more drilling to do and where it sits within the Company’s overall organic growth strategy. A decision there, plus the direction of the price of Gold will have a big say where RSG finishes up.

Super Retail (ASX:SUL) Current StockRank™ 97 3mth total gain 39.16%

Super Retail’s rollercoaster ride for 2024 has continued. After a strong first quarter it was one of the worst performers in the second quarter, only to come screaming back in the third quarter with almost a 40% return. Overall they have returned 26% for the year to date including a grossed up dividend yield of 10.8%.

The FY24 results were modest. Revenue grew by 2.1% but profits fell by 8.7% due to higher operating costs including wages and rent. Online sales have been particularly strong, increasing by 9% to 13% of total revenue. 77% of sales now come from loyalty program members.

But it was the early trading for FY25 and the upbeat outlook that lit a fire under the stock price. Total sales growth for the first seven weeks of the year was 5% with a 15% surge in Macpac sales, helped by cold rainy weather, and 6% growth in Supercheap Auto, their largest division. Like-for-like sales increased 3%.

They are continuing to invest for growth, target 25 new stores in FY25 along with a new distribution centre and investment in store refurbishment. Pressure on costs will remain with a 3% increase in award wages implemented in July. Overall the business remains very solid as reflected by the high StockRank of 97.

Ricegrowers (ASX:SGLLV) Current StockRank™ 99 3mth total gain +27.21%

Ricegrowers has had another very strong quarter with a total return over 27% and 48% since the start of the year.

Following on from the strong results release at the end of June, the AGM at the start of September added to the upbeat assessment. Management outlined their 2030 growth strategy. It includes a target to grow revenue from the current level of $1.9 billion to $3 billion. They aim to double their sales in ANZ and the Middle East and grow their position in the US. They are also focused on building the snacking business and growing the Riviana and CopRice businesses.

As part of the last point, they acquired the pet food business SavourLife. Sunrice was already the manufacturer of the SavourLife dry dog food. This business will add to their portfolio of revenue from branded products. It is expected to be EPS accretive in the first year.

The CY2024 rice harvest was a large one at 618,000 paddy tonnes, and the 2025 harvest is also looking like it will be large. Recent flooding across Thailand, Vietnam and the Philippines may damage those rice crops leading to higher realised prices for Australian rice.

The StockRank has rebounded from 95 back up to 99 as the Momentum score has strengthened.

Stockland (ASX:SGP) Current StockRank™ 84 3mth total gain +25.66%

We have talked about the acquisition of the 12 master planned communities (MPC) from Lend Lease for what seems an eternity. Last week the ACCC finally gave its blessing to the $1.063B deal, though it has been forced to divest its 100% interest in the master planned residential community development at Forest Reach in the Illawarra region. In that same announcement it was confirmed that Stockland will provide an update on its FY25 guidance once all approvals from the FIRB and landowners have been obtained. Remember - they are making the acquisition with Supalai Australia Holdings, whose parent entity is Thai based.

In our view this deal is important as Funds From Operations (FFO) for the coming year are forecast to be 32.0 - 33.0 cents per unit. However this excludes an income from the master planned residential community additions.

As previously stated however they are a diversified property group, with assets spanning Town Centre, Residential, Office and Logistics. Residential as a division becomes larger if the LLC MPC gets added to the business as will now likely happen.

Pleasingly the distribution for the latest half resumed its upward trajectory, though Investors may be disappointed that for the full twelve months it is still lower. It will be interesting to see what happens here post any acquisition as the debt of hand does ramp up. Though it improves its earning profile.

Cedar Woods Properties (ASX:CWP) Current StockRank™ 98. 3mth total gain +23.95%

Cedar Woods Properties delivered an annual result that was a little ho-hum. It was interesting to see revenue was slightly down due to a larger portion of lower value land settlements over the past 12 months. However the land sale of the Williams Landing Shopping Centre boosted their cash on hand over the period. And it looks like their strategic partnerships with QIC & Tokyo Gas Real Estate seem to be going well. In the case of the latter, most recently a third deal was done in Subiaco, WA.

In its most recent annual result it continued to champion the dynamics which are driving the property sector across Australia (ex-Vic) and felt their distinct focus away from the Eastern Seaboard insulated them somewhat from other mitigating factors. Pleasingly for investors they have managed to significantly increase their distribution this half and also for the full year. Analysts expected this to also further increase in FY25 and FY26. True to word, they used cash from the sale to help pay down debt in this higher interest rate environment.This led to net debt falling some $75M ( ~39%) despite some asset writedowns over the period which appears prudent.

In terms of future outlook they point to strong demand in their markets as evidenced by strong presales of their properties and have flagged NPAT growth of 10% for the year ahead assuming all things being equal.

Ansell (ASX:ANN) Current StockRank™ 93. 3mth total gain +21.03%

Ansell has continued the momentum from the second quarter into the third quarter with a very strong total return. For the year to date ANN has now returned 28.4%. The StockRank has slid from 96 to 92 as the rising stock price led to a deteriorating Value score.

The full year results released in late August were actually fairly poor. Revenue fell 2.2%, operating profit fell 39%, net profit by 49% and dividends were cut by 16%. Management stated that adjusted operating profit only fell by 5%. I become sceptical when normalised earnings are below reported earnings every year for the last six years, often significantly so. Abnormal adjustments should only happen occasionally, not every year.

Despite this, the overall sentiment from the results announcement was very positive and the share price duly rallied. There were a number of reasons for this. The glut in medical gloves and PPE that resulted from overstocking during the pandemic has largely been resolved with inventories almost back to normal levels. They also announced they were making about 10% of their workforce redundant with staff in Sri Lanka and Malaysia most affected as they bring in more automation.

The integration of the Kimberly-Clark business has commenced and so far there has been no nasty surprises. They also issued earnings guidance for the coming year which was a bit higher than the market consensus.

Kina Securities (ASX:KSL) Current StockRank™ 97 3mth total gain +13.33%

Kina Securities has continued to power forward and has generated a total return of 37.9% for the year to date making it the fifth highest performing stock in the portfolio.

The half year results were generally quite strong. Revenue increased by 21% compared to the prior half year. NPAT declined by 9% but that was mainly due to the large fraud discussed last quarter. Excluding that, NPAT increased by 7%. Dividends were held steady.

The strong growth was underpinned by loan book growth of 12%. This drove net interest income growth of 14%. Other segments of the financial institution also performed strongly. Fees and commissions increased 15% driven by growth in the bank’s digital channels.The funds administration business had revenue growth of 5% and funds under management grew by 14%.

The discrepancy between revenue growth and profit growth was due to a 27% increase in operating expenses, excluding the cost of the fraud which was A$5m. Expenses included increased investment in cybersecurity and physical security in light of the civil unrest. Staff costs increased by 24% as they try and attract and retain higher calibre staff.

Overall there was very little change in the StockRank with it dropping slightly from 98 to 97.

Shaver Shop (ASX:SSG) Current StockRank™ 99 3mth total gain +12.27%

Shaver Shop continued its strong performance for the year having generated a total return of 25.9%. During the quarter they paid a final dividend of 5.5 cents per share. At the current price it has a historical dividend yield of 8.3% fully franked, and given that it was added to the portfolio at an average price of $1.156, the yield has been 8.8%.

The StockRank has remained at its starting level of 99. Quality declined marginally, but this was compensated for by improvements in Value and Momentum.

The full year results were a bit soft, with sales declining by 2.3%. Sales reached their lowest level since 2021. Profits fell 10.1% to their lowest level since 2020. Sales improved in the second half of the year compared to the first.

The start of FY25 has also been a bit weak with sales down 0.8% although August was better than July. In the December quarter they will be launching a private brand called Transform U which aims to fill some of the gaps in their product range.

Despite the recent softness in business operations, the share price has remained strong as the market recognises the underlying quality of the business.

Telstra (ASX:TLS) Current StockRank™ 86 3mth total gain +10.73%

After what can only be called a disappointing update from the company in the last quarter, the stock has pretty much got back to where it was in the quarter prior to the one just past, which means for the last 3 months the stock is up. It delivered a full year result that was uninspiring (if

you can call NPAT of ~$2M boring) with results meeting targets as shared at the update in Mid May.

There was a lot of emphasis on underlying and actual results which always makes me a little nervous. Though If you are in TLS it is likely more for the dividend which it was able to meet increasing it on the prior year.

Operationally, it had a special mention (not in a good way) to its Fixed Enterprise business, with further cost cutting there expected to help the firm reach its FY25 cost cutting targets. That said the outlook for the year ahead hasn't changed that much from the year just passed therefore one could expect much of the same from TLS barring a marked shift in its operations.

Southern Cross Electrical Engineering (ASX:SXE) Current StockRank™ 91 3mth total gain +10.2%

Southern Cross Electrical returned a mere 10% for the quarter taking its year to date return to 129.6% retaining its position as the top performing stock in the portfolio.

The StockRank slipped further from 93 to 91, as the strong momentum petered out.

As expected, Southern Cross’ full year results revealed record profits. Further, the order book was also at record levels, up 18% on the prior year. They are also expecting the record level of EBITDA to grow a further 30% to at least $53m in FY25.

The balance sheet is strong with a cash balance of $84m and no financial debt.

They are well positioned to capitalise on the structural tailwinds of data centres, electrification and decarbonisation and infrastructure spending. Data centres have a high electrical fit out requirement with electrical work being the largest component of construction costs. There order book for data centres is now over $150m and they are expecting over $100m per annum in revenue from data centres for FY25 and beyond. There is a huge opportunity around the theme of renewable energy and more efficient electricity usage. The Collie Battery Energy Storage project alone is worth $210m to the group. They are also heavily involved in major infrastructure projects such as Sydney’s new Metro programme and the Western Sydney International Airport.

The laggards (positive but underperformed the market)

Lindsay Australia (ASX:LAU) Current StockRank™ 94. 3mth total gain +7.95%

After a very strong year in 2023, Lindsay Australia has struggled in 2024 and year to date -11.4%. However the third quarter saw a modest rebound. The full year results were released in August, and whilst they were generally soft with key profit measures declining, that had been largely foreshadowed and the actual result was probably a little better than people were expecting.

Underlying EBITDA came in at $92.1m which was consistent with the guidance range provided in May of $88 to $94 million, but well short of the earlier guidance of $102 to $108 million. Revenue grew 19% to $804m, but this included the acquisition of rural business WB Hunter. Like for like revenue grew 6%.

As is often the case with this type of business, profits were impacted by a number of factors outside of their control. This included wet weather which caused lower horticultural volumes across the entire business and especially in North Queensland, 40 days of rail outages on the east/west line and macroeconomic factors.

The business has grown its capacity over the last three years as seen in the revenue growth. Whilst cost pressures are expected to remain, they are well positioned to profit from any uplift in demand with transport demand having risen off a three year low in the final quarter, and rural having picked up in the second half.

Vector (NZE:VCT) Current StockRank™ 96 3mth total gain +6.58%

As expected for our only NZ play, Vector said there were challenges in their sector at the moment. But there were definitely some saving graces from their report. Things such as further technical innovation through its digital platforms, like for example "Diverge," which helps manage energy loads efficiently, and improve network performance. This is all not to undermine its financial performance with strong growth in most key metrics over the year. This was despite the NZ$60M impairment it took on its Gas Distribution business that it did because

It seems committed to its distribution to investors as it delivered a 24-cent per share dividend in 2024, which included a special dividend of 1.75 cents. The board also emphasized reviewing the dividend policy after the Commerce Commission’s regulatory decisions, ensuring it continued alignment with cash flow and investor expectations​.

As with most utilities businesses, it capital expenditure is high, but it does so in and amongst a growing Auckland as well as life-cycle asset replacement work

GWA (ASX:GWA) Current StockRank™ 98 3mth total gain +5.18%

GWA’s full year results were sufficient. Revenue grew by 0.4%. They claim normalised operating income grew by 5.4%, which is consistent with the trading update they released in June. Statutory operating income actually fell 6.8%. Whilst there are legitimate reasons to adjust earnings, GWA’s are a little bit dubious. They include investments in IT projects which in the modern world are really an ongoing cost of doing business. Classifying the restructuring of the New Zealand business as abnormal is more acceptable.

Other positives from the result included the strong cash flow which in turn enabled the strengthening of the balance sheet through debt reduction as well as an increased dividend payout.

Sentiment regarding the outlook is fairly subdued. Their fortunes are tied to construction and renovations in the residential and commercial property markets. The residential property market is in a tight spot with affordability deteriorating as prices rise in tandem with high interest rates. At the same time construction activity has softened due to poor affordability, high costs for labour and materials and planning delays.

From an investment perspective, the relatively cheap valuation compensates for the subdued outlook meaning that the overall StockRank retains its high value of 98.

GQG Partners (ASX:GQG) Current StockRank™ 94 3mth total gain +0.53%

GQG Partners stunning start to the year tapered off during the third quarter but they have still generated a total return for the year to date of 70%%.

The half year results released in mid August were very strong. Funds under management grew 50% on the prior year, revenue grew 53% on the prior corresponding period and operating income was up 55%.

As is always the case for a funds management business, funds under management (FUM) is the primary driver of returns. Net inflows for the first half were US$11.1 billion. FUM has now reached $161 billion compared to US$112.6 billion at the start of the year. All four of their main strategies have outperformed their benchmarks over one year, three years, five years and since inception, and by considerable margins.

The StockRank remains high at 94. The Value score is 62 reflecting the strong price performance, but a forecast PE ratio of 11.7 is not high, provided the growth expectations can be met.

The losers

Mount Gibson Iron (ASX:MGX) Current StockRank™ 83. 3mth total loss -18.29%

It is unsurprising to see the price of Mount Gibson match that of the underlying commodity that it extracts from Koonan Island which is Iron Ore. It confirmed that for the full financial year there had been a marked improvement in shipping volumes through the period. We also got a glimpse of what they would do with some of their ballooning cash balance as the company also announced an in market buy back of up to 5% of their capital on issue. At the time of writing this amounted to 1 million shares which is still only tiny given the fact that there were 1.2B shares outstanding at the time of its full year result. Though to be fair, the buy back only started in mid-September

According to the Board they are confident, “...in the Company’s outlook as it seeks to maximise cash flow from the remaining 2-3 year life of the Koolan Island operation. This underlying value is not presently reflected in the Company’s share price (in their view), making a buy-back an effective value-accretive capital management initiative.”

Just prior to the buyback announcement they had provided a resource update from their Koolan Island project confirming what we already knew of the mine’s limited life and the fact that Koon Island is Australia’s highest grade direct shipping hematite iron ore operation.

Beach Energy (ASX:BPT) Current StockRank™ 73 3mth total loss -16.94%

It has been tough recently for oil and gas producer Beach Energy. The most recent challenge culminating in the FY24 report where it downgraded the size of reserves. Particularly a downgrade of its Enterprise and Thylacine North reservoirs. When combined with a production shortfall for the year, the share price was always going to have a tough time.

In the full year presentation it pointed to the demand for gas locally. While at the moment its split between liquids/gas are 61/39, this is expected to change once the Waitsia Gas Plant located in the Perth Basin comes online. Something that is forecast to happen in 2H 25 . They also flagged operating cost and capital reduction spending which is never a good thing from a company that you hold. They were able to maintain the dividend, but I feel that this is more of a symptom of Seven Group Holdings maintaining a significant interest in them.

The reality is cash burn is high and therefore this is something analysts will keenly watch moving forward. Though the company did say in its full year result that it expects to see free cash flow growth (pre-growth development spending) to increase markedly. This will in no doubt be designed to ensure a strong dividend is had and to keep the naysayers at bay.

Karoon Energy (ASX:KAR) Current StockRank™ 83 3mth total loss -10.97%

Karoon Energy has been primarily focused on the development of the Who Dat assets in the Gulf of Mexico as that is seen as the growth engine for the business moving forward. Not only that, but the Neon Foundation Project in Brazil will remain a focus moving forward. There was a short term shutdown at the Who Dat operations as a precautionary step on account of Hurricane Helene, but that has now ended and the ramp-up of production to pre-shutdown levels is expected to take several days.

In the half year result, we learned that consistent production from assets like the Baúna Project in Brazil and new contributions from the Who Dat acquisition underpinned the business notwithstanding the tough operating environment that KAR faced. Cash rose significantly over the period and working capital turned positive as a result. According to the firm’s half year result they have the financial flexibility to support ongoing projects and future growth.

The remaining six months of their financial year will be spent on optimising operational efficiencies at the Brazilian and Gulf of Mexico operations. Further exploration work at the Neon project could help with sentiment, as will the commitment to paying solid dividends, and share buybacks. What the company can’t control though is the price of oil and that will play a large role in the full year outcome.

Data#3 (ASX:DTL) Current StockRank™ 64 3mth total loss -7.24%

A disappointing outcome for DTL from a price perspective who by definition are highly leveraged to the digitisation of everything . At the start of our coverage of DTL we pointed to the departing CEO and Chairman and it would appear that this is starting to have an impact as wafer thin margins can no longer be supported by deep industry experience anymore. That said, at the time of its full year result it made reference to its long-standing relationships as a strong point of their result.

The fact it grew profits was pleasing. Though the sales growth was quite small. And the fact that margins remained very small (and in the case of the Services Division saw a slight deterioration) suggests a plateauing of sorts. Though at the time of its half year report that while they didn’t provide specific earnings guidance, the pipeline to start the new Financial Year is strong according to them. To appease investors they also declared an increased dividend which was somewhat to be expected. But it has an unsatisfactory Beneish M score which needs to be closely monitored.

This of course does not change the landscape. The pursuit of operating efficiencies by corporate Australia using AI continues unabated and was commented on within the latest annual result… Hopefully for investors their financials can better reflect this shift.

Monash IVF (ASX:MVF) Current StockRank™ 55 3mth total loss -1.89%

The share price of assisted reproductive services firm Monash IVF fell off a cliff following the release of their full year results in August, tumbling from $1.42 to $1.18 where it remains.

The catalyst for the fall was not the results themselves but rather the settlement of a class action lawsuit that had been brought against them. In 2020 an action was filed against them regarding non-invasive pre-implantation genetic screening technology. They agreed to a settlement of $56 million. Their insurance covered $19.1 million and they have to cover $36.1 million, plus about $8.4 million in their own legal fees.

The company did make solid returns over the financial year. Revenue grew by 19% and they were able to achieve market share growth whilst also increasing prices. Underlying earnings also grew by 17%.

However the impact of the lawsuit has put considerable strain on the balance sheet. They have a net current asset deficit of $63 million, $44.5 of which relates to the settlement. Cash on hand and their available debt facilities will cover it, but they will be stretched very close to their limit. This has resulted in the Altman Z-score being in the distress zone.

The Quality rank has fallen from 83 to 55 and the Momentum score has also tumbled resulting in the overall StockRank sliding to 54.

Dicker Data (ASX:DDR) Current StockRank™ 86. 3mth total loss -1.06%

It was disappointing to see the outcome of Dicker Data. While not exactly the same business as they generate a larger proportion of revenue. They are a keen champion of the digitisation of everything as a key tailwind of theirs. Fast forward to today and they are pointing to challenging business conditions as a reason why they saw a slight fall in underlying gross sales over the first six months of the year when compared to the same time 12 months ago.

They are optimistic about the remainder of the year (as you would expect) pointing to the improved performance in the second quarter of the year and their positioning at the forefront of the AI revolution given their partnerships with Microsoft and NVIDIA. They were also able to improve margins slightly according to them through their own efficiency gains. Needless to say though this is still a tight margin business.

The Company’s Dicker Access and Surveillance (DAS) business continued to strengthen its position adding new services like the safety platform vendor Duress, however likewise didn’t meet the lofty goals it set itself.

To offset declines in ROA and ROC, the company has kept its quarterly dividend the same for this interim period and slightly higher than what it was 12 months ago. In order to maintain that trend they will need to meet the objectives that they set themselves.

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Information in this commentary is current as at date prepared unless otherwise stated. However, please bear in mind that investments can go up or down in value, and that past performance is not a reliable indicator of future performance. For more Important Information please refer to the Disclaimer section of this website.

This communication may contain general financial product advice. It has been prepared without taking into account your personal circumstances, and you should therefore consider its appropriateness in light of your objectives, financial circumstances and needs before acting on it.

If our advice relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement (PDS) before making any decision.

The authors of this piece  holds direct interests in DTL, GWA, SSG, SUL, RSG,  . This position can and will change at any time without notice.