Coffee Microcaps December 2024 Newsletter

A case for active small cap management

Hi Everyone

The ASX microcap market took a breather in November after posting four positive months in a row to start FY25 on a good wicket. The S&P/ASX Emerging Companies Index TR closed down -0.88% in November. By comparison, the ASX 200 TR Index did an about-face on its poor October performance, with a solid +3.79% for the month, and we saw some new record highs for the large-cap index. The microcap market remains about 13% off its record-high setback in March 2022.

As to whether we will get a Santa Claus rally in December remains to be seen. Still, historically, the ASX microcap index has returned on average a positive +0.95% for the month of December over the last twenty years. The index has returned a positive number for December in twelve of those last twenty years. That’s the form, folks, as we head into 2025, make of it what you will.

Upcoming Coffee Microcaps Zoom Webinar Events

For anyone who doesn’t know, I regularly host presentations from ASX Microcap companies via Zoom Webinars. Two or four companies usually present Thursday mornings from 9 a.m. to 11 a.m. AEDT Sydney time.

I thank Raas Research for sponsoring all the Coffee Microcaps Virtual events.

The ASX Microcap companies that present generally have the following four criteria.

•Under AUD$300m in market capitalisation

•In revenue and approaching cashflow breakeven or already profitable

•Outside the resources and biotech sectors

•"Industrial Microcaps” Include microcap technology, financial services, consumer goods, industrial products or services business, healthcare stocks, etc.

I have created a separate email list for invites to these Zoom events so that I am not spamming all my subscribers. If you want to be added to the events list, please email me at mark@coffeemicrocaps.com, and I will add you. I would love for you to join us for these free events.

Coffee Microcaps Morning Meeting December 5th

At the next event, I will welcome returning companies Firstwave Cloud Technology Ltd (ASX: FCT) and Hitech Group Australia Ltd (ASX: HIT).

Feel free to register for this event via Zoom on Thursday, 5th December, at 09:00 AEDT.

Coffee Microcaps Morning Meeting December 10th

At our final event for 2024 next week, I will welcome the following companies: Atturra Ltd (ASX: ATA), Orcoda Ltd (ASX: ODA), and AF Legal Group Ltd (ASX: AFL).

Feel free to register for this event via Zoom on Tuesday, 10th December, at 09:00 AEDT.

Coffee Microcaps YouTube Channel

All the Zoom events get recorded and uploaded to the Coffee Microcaps YouTube Channel. In addition to the ASX microcap company presentations, I interview leading ASX microcap fund managers on some of their top picks. Occasionally, we also have presentations or interviews with some international microcap investors.

So, if you can’t join the Zoom webinars due to work, kids, life, or whatever, subscribe to the Coffee Microcaps YouTube channel and hit the bell to receive notifications when new content is added.

Also, in the description section of each video on YouTube has relevant chapters, so you can jump to the start of a specific company presentation if that’s what you are after in a particular video.

Be sure to check out the channel, subscribe, and hit the bell to receive notifications of new content.

Coffee Microcaps Morning Meeting November 22nd, 2024.

At this event, I was joined by the following company:

Plenti Group Ltd (ASX: PLT)

I welcomed new CEO Adam Bennett and long-standing CFO Miles Drury to the session to discuss results released earlier that week. The core business continues to track along nicely, and with the newly established NAB distribution partnership in phase one rollout, the PLT team have been encouraged by its early traction. Still, the emphasis is that it is early days for the new NAB partnership, and it will be 6-12 months before it is fully operational. The green energy side of the business was the star performer, with lending in this segment continuing to grow at double digits, albeit off a lower base when compared to auto and personal loan books. Overall, it was a solid-looking set of numbers. Adam has been impressed by both the internal capacity and technology platform since joining, with many opportunities for cross-selling the various product lines into the existing customer base.

Coffee Microcaps Morning Meeting November 14th 2024.

Pointerra Ltd (ASX: 3DP)

We welcomed back Ian Olson for another update on how the 3DP business is tracking. Ian reiterates several key messages, the main one being that the pipeline of opportunities continues to translate into revenue and that this will reflect more and more in the numbers as we progress over the next 12-18 months. He also highlighted that their expansion into different verticals, particularly oil & gas here in Australia, was proving fruitful regarding new revenue streams for the business. Overall, Ian is happy with how things are tracking, and I look forward to having 3DP in again at the next result, hopefully.

Intelligent Monitoring Group Ltd (ASX: IMB)

Dennison Hambling joined us once again to update us on how things are travelling there after the recent capital raise and DVL acquisition. Overall, the key message is that they are very focused on integrating the current and previously acquired ADT business to extract synergies and round out their offering within the broader residential and commercial security markets. Dennison stressed that this would not be a traditional roll-up style business but rather one that acquires businesses where it makes sense to do so in the context of the overall group. Hopefully, as we progress through 2025, the numbers will become cleaner, and various pieces will all start fitting together as envisioned by Dennison and the IMB team.

Content Recommendation

As part of this newsletter, I also want to highlight some good content worth sharing with my subscribers. Hopefully, the content will be something subscribers will also enjoy and get some value from.

The Spiva Mid-Year Report is one report I always like looking at as this report, especially for the Australian Smallcaps (unfortunately, they don’t have a microcap segment), has consistently shown over the years that active managers in Aussie small caps over time can outperform the index and do add genuine alpha. Now, it is not every single manager or every single time period. Still, I think there is enough evidence in the highlighted sections below, which I have extracted from the latest Spiva report, to give any serious asset allocator reason to pause and question the index-only/passive-only mantra espoused by many financial media outlets and finfluencers as being the only means by which to obtain equity exposure in a portfolio.

Thanks for reading. If you haven’t already subscribed, you can do so below.