NAPS Australia & NZ 2024

Welcome to the second edition of the NAPS Top Stocks Australasian edition. The No-Admin Portfolio System (NAPS) portfolio has been running in the UK for the last nine years and has demonstrated how consistent overall performance can be achieved with little intervention.

The entire philosophy behind Stockopedia.com is not to 'tip' stocks. This is because we believe we don't need to. The history of stock market returns shows that simple rule-based stock picking models have been far more consistent and effective than human forecasts.

So don’t view the NAPS portfolio as a tip sheet. It is constructed using a simple rules based approach with only minimal discretion. It is purely for the purposes of education only and does not reflect an actual portfolio.

How you create and manage your portfolio is entirely up to you.

NAPS is a 20 stock portfolio from the highest StockRank™ stocks, diversified across sectors, rebalanced annually. It’s a “select once, leave for a year portfolio” that requires no more than an hour to put together.

Portfolio Rules

Diversified Portfolio

To ensure a well diversified portfolio we select two stocks from each of the broad economic sectors as identified by Stockopedia. We select the two highest StockRank™ from each sector and add it to the portfolio. That’s it!

However in order to ensure that our Australasian NAPS portfolio’s diversification reflects that of the Australasian market, we have included a separate sector, Real Estate in acknowledgement of its size and contribution.

Further, given their smaller size we have only selected one stock from each of the Telecoms and Utilities sectors.

In total the portfolio has 20 stocks spread across a diverse range of economic sectors and all with high ranking StockRank™ (QVM) scores.

Average daily trade of $50,000

There are a number of stocks in Stockopedia who have exceptional qualities, however do not provide a realistic option for investors seeking to take a position.

The lack of liquidity in their stock means spreads are huge (assuming there is enough stock available to take a position) and therefore any trading price you are forced to take may not reflect the qualities of the business.

In order to overcome this problem, stocks in our portfolio must meet a basic screen that they trade on average above $50,000 per day to be included.

It should be noted that this is still a low level of liquidity, however it does provide a realistic chance for a retail investor to take a position in these businesses (even if it takes a few days).

*NEW Rule* Expected (Forecast) Revenue Growth

While it may be nice to have a great set of numbers being a business with juicy margins

and low overheads, with our businesses we want to see advancement in terms of sales

and product penetration. Therefore we have added the criteria that there must be

expected revenue growth in the next period to show as a business, its top line is moving in

the right direction. This rule is only applied at the point of stock selection.

No changes during the year

While a lot can happen within 12 months, not much will happen with the NAPS portfolio. In fact, nothing at all.

In the spirit of a quantitatively derived ‘no admin’ portfolio, there are no changes to the stocks included in the portfolio irrespective if there's good news, bad news, or shifts in market sentiment. The list will remain the list for the next 12 months.

We will at times provide a periodic review on the portfolio, however its construction will not change. It will remain the same until 31 December 2024.

Performance reporting

Though this Australian NAPS portfolio is for education purposes only and not intended to be a portfolio investors should replicate, we will introduce some basic assumptions to aid with the interpretation of results.

For calculation and demonstration purposes, our portfolio of 20 stocks will be equally weighted. The portfolio compounds upon the returns from the 2023 portfolio. The total value of the portfolio at the end of 2023 had increased from an initial $200,000 to $217,931, including $10,139 in cash from dividends received. Therefore $10,876 will be allocated to each stock (after allowing for brokerage). From last year’s portfolio, six stocks will be retained and rebalanced, and 14 will be replaced.

Total performance will include both dividends and brokerage ($19.95 per trade). This amount is selected for illustrative purposes only.

Dividends will not be reinvested and we will assume that the ‘buy’ price for every stock is the closing price on 29 December 2023.

There will be no rebalancing events. Nor will any additional capital be added to the hypothetical portfolio. The portfolio performance will be measured from the close of 29 December 2023 to the close of 31 December 2024 (the last trading day of the year).

The 2024 NAPS Stocks

All data as at 31st December 2023

2024 NAPS Portfolio Stock Write-ups

Basic Materials

Mount Gibson Iron (ASX:MGX)

Mount Gibson Iron Ore (MGX) is a producer from its Koolan Island operations located on an island (as the name suggests) off the coast of Derby (Northern WA) by about 130km. It recently sold its mid-West hematite assets to Fenix Resources for some $29M in total, leaving it the largest shareholder in FEX with an estimated +$300M in the Bank.

MGX is now free to focus on realising as much cash as they can from the Koolan Island operations, but historically it has been problematic. Further, it is expected to run out in FY26 and while more is to be done, particularly on the Main Pit, it's fair to say the mine is closer to its end of life than the start.

Speculation rises on what the next move will be. FEX seems a natural fit, though the grade is less than currently experienced and geographically it's not close. Other deposits of higher grades are also being considered.

But investors have been calling for a dividend for a few years. Though the company has now clearly said it intends “ to resume paying dividends going forward and will review dividend capacity, including the expected generation of franking credits, at future interim and full-year periods.”

Many expect that franked dividends will return next year as questions on how the ballooning cash balance, supported by a recovery in iron ore prices, will be used. The rising rate environment has been a blessing, and investors look to the 2nd quarter activities report for more information.

Resolute Mining (ASX:RSG)

Gold is at all time high levels so it was not unusual to see at least one gold stock make the list this year. In this instance it is African focused (though ASX listed) Resolute Mining.

The company has two African mines. One in Mali, though only 30kms from Cote d’Ivorie (Syama) and the other on the east coast in Senegal (Mako). It also has exploration activities in the wider area, including Guinea.

Investors who ignore sovereign risks may be wondering why the stock is not at a higher price, and let's face it, it is cheap for a gold miner. Operationally the company has flagged improvements at both its Syama and Mako operations this quarter, with the expected AISC continuing to fall, now at US$1100-US$1200 oz and with Gold doing what it is doing, it's very hard not to get excited by RSG. However we will have to wait for the December Activities Statement to see whether the excitement is justified.

Building on this, the company is now cash positive as per the last quarterly update which de-risks the exploration activity significantly. Especially as investors build on the excitement of the cash to be received from the Ravenswood (QLD) sale. Without discussing the offer in too much detail, RSG were to receive a staged payment based on what the Gold price did. As Gold is at record USD levels, investors eagerly await the March Activities Statement to hear of how those extra funds will be applied.

Consumer Cyclicals

GWA (ASX:GWA)

GWA make toilets, sinks, showers, tubs and other water products for the bathroom, kitchen and laundry. They are behind such brands as Caroma, Methven, Clark and Dorf. They design their own products and sell them to both residential and commercial customers. The products are manufactured by suppliers in Asia and Europe. They derive most of their revenue from Australia, with 10% coming from New Zealand and 8% from the UK.

Sales are largely driven by new builds and renovations, with 60% coming from the renovations and replacement segment in Australia. About 60% of their revenue comes from their four largest customers, with the single largest customer accounting for 24% of revenue.

In FY23 revenue declined by 1.6% impacted by the general economic slowdown with rising interest rates and inflation causing people to think twice when it comes to renovations and look for value options where possible. All three markets registered declines, with the largest declines coming from New Zealand due to the recession there. Some of the declines in volumes sold were able to be offset by increased prices charged.

Following the AGM at the end of October, analysts upgraded their earnings expectations, especially for FY25. This has led to a sharp rebound in the share price.

There is still a lot of uncertainty about the outlook in the short term, with the residential renovations market expected to remain subdued. Demand for commercial health and aged care, as well as detached residential and affordable housing is expected to improve.

Super Retail (ASX:SUL)

Super Retail is one of the ASX’s largest listed retail groups. It was originally formed from Supercheap Auto group, but now also includes the well known brands BCF, Rebel and Macpac.

Revenue grew 7% to $3.8 billion in FY23. 38% of revenue comes from Supercheap Auto, followed by Rebel with 34% and BCF with 22%. Supercheap also earns the highest margins with an operating margin of 15.2%. This compares with the overall group operating margin of 11.1%. BCF is the biggest drag on margins with an operating margin of only 7.3%.

Overall profits have been growing strongly for an extended period. The Net profit five year CAGR is 15.4%. That said, the market is expecting profits to decline by 15% in FY24. That may prove to be overly pessimistic, however management have highlighted that they are expecting the cost of doing business (CODB) to increase due to upward pressure on wages, rents and energy costs.

The trading update at the AGM for the first 16 weeks was generally positive albeit with modest gains. Total sales were up 4% compared to the prior period. This was boosted by new BCF store openings. Stripping out new stores, like-for-like sales increased 2%. Gross margins had also improved slightly.

The share price has accelerated rapidly over the last three months, rising by 37%. This reflects increasing EPS forecasts from the analyst community, along with a generally improving outlook for retail as interest rates look to be at or near their peak.

Financials

GQG Partners (ASX:GQG)

Investors in listed fund managers have had a pretty torrid time over the past few years, but 2023 saw a bit of stabilisation. One fund manager that has largely tracked sideways over the past two years is GQG Partners. GQG only listed in October 2021. They are a US based manager, and have about US$113 billion under management, invested across a range of international equity strategies.

As of November they had experienced net inflows for the year of $9.0 billion. Most of their listed competitors were experiencing outflows. The ASX boards also lost one of its main listed fund managers when Janus Henderson ceased trading on the ASX from the beginning of December.

GQG is controlled by CEO Rajiv Jain who holds about 70% of the issued shares. This increases the level of key man risk, a risk that investors in listed fund manager Magellan Financial (ASX:MFG) are very familiar with following their high profile founder’s departure.

Revenue at GQG has grown very strongly over the last few years and is on target for about US$500 million in 2023 from only 65 million in 2018. Earnings per share peaked at 10.3 cents in 2021 and are expected to be about 9 cents in 2023.

Being a capital light business, it is the return on investment and return on equity that really stand out. ROE is currently 76%. Combined with very high margins, cash exceeding debt, and strong free cash flows, these factors all contribute to a very high Quality score of 98.

Kina Securities (ASX:KSL)

Kina Securities is a small financial services company listed on the ASX, but based in Papua New Guinea. It is important to note that their accounts are presented in Papua New Guinean Kina. They are generally not on the radar of institutional investors due to their small size. They offer a full suite of services across banking, including both retail and commercial banking, as well as wealth management and stock broking services.

Kina Securities have been on a strong growth trajectory for the last five years. Revenue has grown at a CAGR of 24% and EPS at 25%. At the same time, the share price has been volatile, but overall has declined.

They conducted significant capital raises in 2020 and 2021 as was the case with many financial institutions looking to shore up their balance sheet during the pandemic. They now have a strong capital adequacy ratio of 20.8%.

The Value score is high at 98. This reflects the fact that Kina traditionally trades at a discount, due to its size as well as the perceived risks of investing in PNG and the broader region. This includes political risk, an example of which was manifested over the last year as the corporate tax rate increased from 30% to 45%.

They are a challenger brand competing with the much larger BSP Financial (ASX:BFL) which has about 65% of PNG’s market share with a growing regional presence.

Real Estate

Stockland (ASX:SGP)

One of our largest REITs makes it to the list this year in Stockland Group. The end of 2023 was a busy one for the company as it acquired 12 master planned communities (MPC) from Lend Lease for $1.063B. These will be added to the existing MPC business.

The acquisition established a new Communities portfolio partnership that it has established with Supalai Australia Holdings (SGP owns 50.1%). This acquisition is transformative as the company seeks to enhance ROIC and ensure continuous development and recurring income streams.

The timing of the acquisition is interesting as the company expects full economic entitlement by 4Q24. It suggests that the offer will lift gearing levels to the upper end of its 20%-30% range. The transaction is spaced out over a number of tranches. Think of SGP as the developer and operator and Supalai as the bank (assuming they receive FIRB approval).

Notwithstanding the big recent deal, SGP is a diversified property group, with assets spanning Town Centre, Residential, Office and Logistics. At the minute, Workplace and Logistics brings in about 40% of all revenue. This acquisition will increase its exposure to Residential (own and develop).

SGP has strong occupancy rates, and the existing MPC was performing ahead of expectations. While the distribution for the half year fell to 8 cents following such a transformational purchase, look for that to resume its positive trajectory this year, assuming it can make the new LLC MPC acquisition stick.

Cedar Woods Properties (ASX:CWP)

It was not unusual to find another ‘community focused “ REIT appear at the top of the list. Ceder Woods Properties is a high ranking developer which has a long history and a diversified national portfolio of development assets. It achieved earnings growth for the 2023 financial year.

With aspirations to further reduce gearing next year, the company has significant pre-sales (over $500M) for Q1 which it says partially derisks future earnings. At the AGM the company spent a lot of time re-iterating the supportive macro themes it sees and long-term demand for housing. Further, its exposure to more affordable markets like QLD, WA and SA means it has been more insulated from rate rises than most.

At the AGM the company provided no formal guidance until they receive greater clarity on sales volumes, the delivery program and details on the sale of the Williams Landing shopping centre. This is a little worrying as I would have hoped clarity on many of these issues would have been obtained by now. The company also made note of the reduced dividend which it says reflects a payout of only 53% of earnings, this has been considered in light of future capital needs.

Notwithstanding this, the company says its current portfolio of 10,000 lots/dwellings, plus the further progress of strategic alliances will support medium term earnings.

Energy

Beach Energy (ASX:BPT)

Beach Energy is an oil producer with a significant natural gas and oil portfolio. The company is a proud SA business with its roots located in the Cooper Basin and then Otway Basin. It experienced its own transformative moment once it acquired Lattice Energy in 2018 which turned it into a major producer by combining other Australian and New Zealand assets.

After an initial honeymoon period, the company has been mired in project delays and cost blowouts. Most recently in early 2023 when the company said it was no longer prudent to maintain capital expenditure and timing estimates for its Waitsia Stage 2 gas project. As a result it had no option but to withdraw guidance for the project. As mentioned though there have been plenty of other prior examples.

However since that cathartic moment, the business has steadily gone about improving production from here. The often quoted major shareholder Kerry Stokes looms large over the business and this has likely resulted in ex-CEO Morné Engelbrecht leaving to be replaced by ex-STO executive Brett Woods. At the AGM the company said that Waitsia coming online and the resolving of Otway and Cooper Basin issues means they “anticipate a material step-up in production and free cash flow”.

That last statement means investors now are waiting for the company to pay a much larger dividend, and if it achieves its goal, it certainly has the capacity to do that.

Karoon Energy (ASX:KAR)

Karoon Energy was a struggling explorer known as Karoon Gas until it too made the transformative acquisition of the Bauna oil field in Brazil from Petronas. Overnight the company emerged as a producer, even though the deal took over a year to complete.

The company recently has announced and completed an acquisition to obtain a 30% interest ~+$1B Gulf of Mexico deal which further expands the business’ operations outside Australia and Brasil. They were also successful in securing two large exploration blocks in the Santos field. In fact it has emerged so much into a producer, price tends to be more correlated with oil prices than not.

KAR is in an expansive phase. In its latest Activity Statement in September it said it was engaged in, “active evaluation of production growth opportunities”. The part acquisition of the “Who Dat and Dome” petrol and oil gas field builds scale with +57-63% CY24E contributed to production guidance. Operations are similar to that in Brazil and it appears a good strategic fit. Most importantly, it derisks KAR’s production profile. They will become the second largest Australian listed producer, even their reserves will see a nice uptick. Though on first glance, a lot of exploration activity will go to Who Dat and Dome in CY24.

While assessing the current fundamentals are a challenge, what can’t be denied are the growing revenues, profitability and reserves. Assuming oil prices hold their own, KAR should perform well through the cycle.

Industrials

Southern Cross Electrical Engineering (ASX:SXE)

Southern Cross Electrical Engineering is a leading national electrical, instrumentation, communications and maintenance services group of companies. They offer their services to the mining/resource, infrastructure, defence, commercial, and construction industries/sectors.

They are often thought of as a mining services business, with tight margins, project based earnings and a lumpy earnings profile. This perception is not unjustified, and it is not the full story.

Revenue did decline by 16% in FY23, primarily due to the completion of two major resource projects. However they achieved record levels of earnings as their margins improved. The contribution from resources to revenue fell from $283 million in FY22 to $169 million in FY23. Commercial also declined a small amount, but infrastructure rose from $104 to $141 million on the back of projects such as the Western Sydney International Airport. This diversification of revenue will help to smooth the revenue profile, as will recurring revenue from services and maintenance which now accounts for 35% of all revenue.

SXE have grown through acquisitions as well as organically. Looking to the future they are positioning themselves to benefit from the energy transition as electricity gradually replaces gas for many applications and more energy is sourced from renewable sources.

The strong results announced mid year have led to a surge in the share price of about 19% over the last six months. However, the value metrics are still looking very reasonable with a forecast PE ratio of 10.6 and dividend yield of 6.8%. Consequently all three factor ranks score 94 or above.

Lindsay Australia (ASX:LAU)

Lindsay Australia has been carried over from last year’s NAPS portfolio. It was the second best performer last year with a total return of 60%. Despite this strong performance, it still carries an overall StockRank of 99 with Quality especially high at 97.

Lindsay is a transport business focussed on freight logistics for rural products. They also have a rural supplies business and a fresh produce logistics business. 76% or revenue comes from the transport business where they have a large fleet of trucks and rail containers and trailers, primarily transporting agricultural products and food. They have a strong presence in refrigerated transport which was boosted when competitor Scotts Refrigerated Logistics collapsed last year and they acquired a lot of the assets.

Lindsay delivered a record result for FY23, achieving a 22% increase in revenue, and a 95% increase in underlying profit and EPS. They also increased the dividend by over 50%. Their cash flow has been very strong and they have been able to use it to fund growth as well as dividends with minimal issuance of new shares.

The industry is a very competitive one which means they generate single digit operating margins. Margins have been particularly tight for the rural business. They are exposed to external events outside of their control such as weather events that affect harvest sizes. This makes forecasting difficult, but they are continuing to invest in growing the business, including investing in growing their transport fleet as well as a recent acquisition to expand the rural business.

Technology

Data#3 (ASX:DTL)

A returner to the list this year is DTL and is there any wonder why? You can search through previous editions to read about our positive view on the business and what they do.

It was interesting to read in the departing addresses of the CEO and Chairman of the Board that AI was becoming a major digital milestone for most businesses as a priority. They are already seeing AI enabling rapid product development and they are also looking at opportunities to apply AI within their own business to further improve operational efficiencies.

This bodes particularly well for a company that grew revenues in the double digits last annual reporting season. At the AGM the company said that the first half of the year (though quieter than the previous second half) is expected to be another bumper period with little change to the company's dividend policy. With 65% of the business under contract to start with, DTL remains a company with a strong growth trajectory ahead.

Dicker Data (ASX:DDR)

A company who has also seen a strong improvement in price over the past year is Dicker Data.

It is unsurprising to see their fundamentals improve over that time with the latest 3rd Qtr update seeing the company flag a 10% lift in profit over the quarter. This was particularly pleasing as they have, “been impacted by costs associated with rising interest rates and increased depreciation and amortisation as a result of recent acquisitions.” For the full year, they are seeing an increase of 8.0% on the previous comparative period.

Operationally the company is performing well achieving high levels of ROIC and ROE. This translates to a fairly reasonable dividend which they are comfortable they can sustain and unsurprising for a founder led organisation. (David Dicker has been CEO since founding the firm, though recently has been selling and that should be noted.)

Like most IT services firms it points to AI as a driver moving forward. Though in DDR’s instance they also point to strong demand for software, networking and storage. Further, Microsoft will end its support of Windows 10 in Oct 25, therefore many corporations will be upgrading their systems, particularly in light of rising cyberthreats. In fact their access and surveillance business (DAS) delivered over 126.7% growth in the 9 months to September and is seen as a key driver moving forward.

With the increasing importance of the internet of everything, the reliance on companies like DDR should grow.

Telecoms

Telstra (ASX:TLS)

Another returnee for 2024 is the largest company in this list and the sole representative of the Telecommunications sector, it is Telstra. There is not much more to add to TLS as it has been spoken about before (refer to previous comments). Just to reiterate, this is a very different business that Vicki Brady controls than what Andy Penn inherited. The movement towards the T25 vision has seen significant change in this business.

The spectrum purchase is really (positive) BAU, so we look to the AGM for strategic guidance as to where the business is headed. As always, managing TLS is part business savvy and part PR. The latter often sees strange areas of focus appear within the commentary. But focussing on the business side, the company reaffirmed its EBITDA CAGR expectations of single digits growth. This is unsurprising given the significant amount of infrastructure spend of $3.6 - $3.7B ahead of it. Much of that in the Digicel and Viasat projects (which it needs to do and further enhances the quality of the business.)

The recent acquisition of technology consultancy Versent for $267M is only small, but is designed to help scale the Telstra Purple tech services business, which will drive NAS (Network Application and Services) growth and further support SME as they further digitise their businesses.

If the company can continue to slightly increase the dividend that would be great as well (with the special dividends a nice bonus.)

Consumer Defensives

Ricegrowers (ASX:SGLLV)

Ricegrowers Limited, also known as SunRice, is a global FMCG business focused on rice and related products. It was formed out of a growers cooperative in the Riverina district. As such it has a dual share structure. Class A shares can only be held by active rice growers. They have voting rights but no rights to dividends. Class B shares are traded on the ASX and can be held by the general public. They are entitled to receive dividends but they do not have voting rights. The size of a class B shareholding is limited to 10% of the total class B shares.

This structure places a ceiling on the value of shares as there is no possibility of a takeover offer. Thus investors need to be aware that they are likely to have a persistent valuation discount. The compensation is that they are trading on a dividend yield of over 8%, fully franked.

Revenue has been growing steadily over the medium term at a rate of 6.8%. EPS growth has been more muted at 1.5%. EPS had been in decline until 2021 but has come back strongly in the last two and a half years. As with many agribusinesses they operate on fairly tight margins with an operating margin of 6%.

They are now a global business, sourcing rice from many different countries and selling into a wide network of countries. They are the number one rice brand in Australia, as well as multiple Middle Eastern markets and across the Pacific.

Shaver Shop (ASX:SSG)

Shaver Shop is another business that has carried over from the 2023 NAPS portfolio into the 2024 portfolio. In 2023 Shaver Shop delivered an overall positive result of 6.3%. The share price actually fell 6.2%, but a grossed up dividend return of 12.5% more than compensated. This strong dividend return has been a feature for SSG for a number of years now, and is likely to continue with a current yield of 9.3%. Dividends are fully franked as the majority of earnings are generated in Australia. This high yield contributes towards the high value score of 95.

Despite the name, Shaver Shop only derives about 25% of their revenue from shavers. The rest comes from other beauty and personal care products with hair cutting and styling accounting for 42%.

The addressable market for health, beauty and personal care products is estimated to be $10B+ in Australia and New Zealand. Currently Shaver Shop accounts for only 3% of that. Whilst their store network in Australia is fairly mature, there are opportunities for expansion in New Zealand.

Shaver Shop is a very profitable business. Sales have increased every year for the last 10 years. Their gross profit margins are over 44% with an operating margin of 11% and return on equity of 21%.

Shaver Shop received a significant boost from the pandemic. Whilst sales for the first four months of this year declined compared to the same period last year, they have managed to hold onto most of their pandemic era gains and are now generating revenues and profits well in excess of their pre-pandemic levels.

Health Care

Ansell (ASX:ANN)

Ansell is another stock being carried over from 2023’s NAPS portfolio. Ansell was disappointing last year with an overall loss of 8.6%. The share price declined 11% with the return boosted 2.5% by dividends. Ansell’s dividends are not franked as most of their earnings are generated overseas.

Ansell is a health care company that is focused on manufacturing and distributing personal, protective equipment, especially gloves. 55% of their revenue comes from the health care segment. The remainder comes from the industrial segment, again primarily from gloves, which are used in industry to protect the hands of workers.

Ansell’s share price was in decline for most of 2023. It took a particularly sharp dive in mid July when they foreshadowed a disappointing full year result and a significant downgrade to guidance for the FY24 year.

The share price bottomed in late October and has since rebounded quite strongly, outperforming the broader market. This followed the AGM where management maintained their previous earnings guidance and expressed some confidence that their investment in productivity improvements was going well.

Ansell remains a high quality business. Revenue has declined over the last two years, but market analysts are forecasting that this year will be the turnaround year. With the challenges that followed the pandemic having largely been worked through, there is renewed optimism that they may have turned the corner and be looking at a sustained period of improved performance. This is reflected in the StockRank of 95.

Monash IVF (ASX:MVF)

As with Ansell, our second healthcare stock has also carried over from last year into this year’s portfolio, although due to its very strong performance, partial profits will be taken to reweight it. Last year it generated a total return of 42.4%, which included a strong grossed up dividend return of 6.6%. This appreciation in the price has resulted in the Value score dropping to 53, however the Quality score and Momentum score are high, leading to a StockRank of 90.

Monash IVF is involved in assisted reproductive services and other associated services such as ultrasounds. They had a very successful year in FY23, increasing their market share from 21.3% to 22.7%, through both organic growth and acquisitions. Revenue grew 11.1% and underlying NPAT increased 14.7%.

They continued to experience growth in the early part of FY24. Medicare data showed industry growth of 2.8%. Monash exceeded industry growth, increasing their market share further.They also acquired an independent IVF practice in the northern suburbs of Perth. They are forecasting growth in underlying NPAT for the first half of between 15% and 19%.

There are a number of areas that Monash can focus on to grow their top line. These include attracting more fertility specialists by providing a compelling value proposition to doctors, improving success rates through science and technology and acquiring existing practices. External demand factors continue to provide support. These included the maternal birth age having increased by two years over the last 20 years, and favourable government funding.

Utilities

Vector (NZE:VCT)

As with last year we reserve our NZ business for an infrastructure stock. While last year’s GNE retained a high rating, this year it was usurped by Vector. VCT is the largest distributor of electricity and gas, owning and operating networks which span the Auckland region. It has distributed more than NZ$96M pa to the beneficiaries of Entrust (formerly the Auckland Energy Consumer Trust) and it is one of the largest companies on the NZX

VCT paid a dividend yield and pleasingly in the recent September quarterly update, gas distribution grew 2.5% on the same time last year. Electricity was up 4.2%, much of that coming through Residential volumes. And total connections to Auckland's Gas Distribution Network rose 1.2% on last year, though it was down for the quarter. The company also recently paid a NZ$0.055 special dividend to investors with excess funds made during the sale. Other funds were used to pay Auckland-based beneficiaries and to pay down some debt. The completion of the 50% interest sale of its New Zealand and Australian metering business to a QIC Private Capital consortium means it will no longer be disclosing installed meter numbers.

The focus on Auckland is a priority as on-going wet weather and life changing events created by the Auckland floods and Cyclone Gabrielle hit the region. The company now has a heightened awareness for infrastructure resilience, which supports its increasing spend in the area.

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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.

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The authors hold interests in the following stocks mentioned in this article. SSG. This position can and will change at any time without notice.