Coffee Microcaps January 2025 Newsletter

Welcome 2025

Hi Everyone

Welcome to 2025, and I hope everyone is ready for another trip around the sun.

The ASX Microcap market rounded out with a positive year after two consecutive negative years, albeit the second one was only marginally so. The S&P/ASX Emerging Companies Accumulation Index returned 15.70% for 2024. Much better than the big end of town, with the S&P/ASX 200 Accumulation Index returning 11.44% for 2024.

Some further numbers are detailed below. The Australian microcap market continues to be one of the better-performing developed microcap markets globally.

However, the Australian microcap index is still 12.20% off its all-time high of March 2022.

I also pulled a few valuation metrics from the various index factsheets. Given that many of these companies are not yet profitable, P/E is not particularly useful, so I went with the old-school price/book value. While not ideal, it can be applied to every underlying company in each index. I also added the dividend yield, which was also available and reflects the profitable end of the microcap spectrum.

I also wanted to include a table showing the annual calendar-year returns over the last 21 years since the S&P/ASX Emerging Companies Index started. As you can see, the index tends to return double-digit increases or decreases, so it’s pretty volatile, as expected. The GFC also caused colossal right and left tail events in consecutive years. If one can identify a trend, positive returns are clustered together in multi-year periods, so hopefully, we are at the start of another such period.

Many of you have seen the S&P500 Pyramid of Returns, and I tried to replicate it for the S&P/ASX Emerging Companies Accumulation Index. With only 21 observations, it is less impressive than the S&P500's backlog of data points. Still, I have included it below to represent the above table visually.

Pyramid of ASX Microcap Total Returns 2004 - 2024

I also updated the rolling 12M returns chart for completeness to show where we are compared to history.

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 Appendix 4c Results Wrap

The following Appendix 4c Results webinars will be on Friday, January 31st, Monday, February 3rd, and Tuesday, February 4th, and I am busy lining up companies to present. Once everything is finalised in the next two weeks, the webinar details will be sent out via social media and to the events email list, so if you are not following us on X or LinkedIn, please do so.

Coffee Microcaps Mining and Energy Webinars

As part of expanding Coffee Microcaps' offering in 2025, I will host webinars focused on junior resource names, specifically those capped under $300m. These will be separate webinars from our usual fare and cater to investors specifically interested in this space.

So, if you have any suggestions for companies you would like to see present at our first webinar, which will be happening in early February, please send me the names, and I will reach out to the companies.

Coffee Microcaps YouTube Channel

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

We had a few last events in early December, so if you missed any, catch up on the content via our YouTube channel.

Coffee Microcaps Morning Meeting December 5th, 2024

At this event, I was joined by Firstwave Cloud Technology Ltd (ASX: FCT) and HiTech Group Australia Ltd (ASX: HIT).

Coffee Microcaps Fund Manager Interview Merewether Capital

In this interview, I was joined by Portfolio Manager Luke Winchester, and we discussed two of the fund’s holdings:

Change Financial Ltd (ASX: CCA) and Cleanspace Holdings Ltd (ASX: CSX).

Coffee Microcaps Morning Meeting December 10th, 2024

At this event, I was joined by Atturra Ltd (ASX: ATA), Orcoda Ltd (ASX: ODA) and AF Legal Group Ltd (ASX: AFL).

Content Recommendation

As part of this newsletter, I also want to highlight some good content worth sharing with my subscribers.

I read a few books over the recent break, and I wanted to recommend two here. The first is Small Giants: Companies That Choose to Be Great Instead of Big, 10th Anniversary Edition, by Bo Burlingham. If you liked the Jim Collins book Good to Great, then you will enjoy Small Giants. The author focuses on small private businesses that are leaders in their fields rather than similar and significantly larger public companies profiled by Collins. 

The second book is Money: A Story of Humanity by Irish economist David McWilliams. In it, McWilliams delves into economic history and how advances in money and financial products have helped shape social, political, and commercial life over the millennia. This is an excellent read if you love history and/or economics. 

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