Montgomery Smaller Companies Fund – Portfolio Analysis « ROGER MONTGOMERY

Montgomery Smaller Companies Fund – Portfolio Analysis

Montgomery Smaller Companies Fund – Portfolio Analysis

My colleagues and I just received an excellent presentation from Montgomery Small Companies Fund portfolio managers Gary Rollo and Dominic Rose. As a reminder to readers, the fund launched on September 20, 2019 and in the twenty-five months to October 31, 2021, the fund turned $1.00 to $1.63 including distributions, outperforming the benchmark. S&P/ASX Small Ordinaries Accumulation Index (benchmark), which had turned $1.00 into $1.27.

The last six months have been a tough time for most investors, especially those who favor growth, and the Montgomery Small Companies Fund is down around 17%, while the benchmark is down around 6%. %. Therefore, in the thirty-one months to April 2022, early investors in the Montgomery Small Companies Fund had turned $1.00 into $1.36, while the benchmark had turned $1.00 into $1.21.

Gary Rollo and Dominic Rose’s presentation focused on the fund’s portfolio analysis was most interesting, and I thought it would be a valuable exercise to reiterate the highlights here.

  1. The portfolio is expected to experience revenue growth of nearly 10% per year over the next two years, roughly triple the benchmark’s revenue growth of 3.3% per year.
  2. The portfolio is expected to see EBITDA growth of 15% pa over the next two years, compared to 3.4% pa for the benchmark.
  3. The portfolio is expected to experience NPAT (net profit after tax) growth of 18% per year over the next two years, compared to 2.9% per year for the benchmark.
  4. From a valuation perspective, the Portfolio sells on an EV/EBITDA (Enterprise Value to Earnings before Interest, Tax, Depreciation and Amortisation) ratio of 6.5X (over two years) and this is a 18% discount to 8.0X benchmark. .
  5. And finally, the portfolio is selling at a PE (price to earnings) ratio of 11.7X (over two years) and this is a 14% discount to the benchmark’s 13.6X.

In summary, the portfolio – over the next two years – is growing 3x faster than the benchmark at the revenue level, 4.5x faster at the EBITDA level and 6x faster at the NPAT level.

Nonetheless, from a valuation perspective, the Montgomery Small Companies Fund versus the benchmark in two years is selling at an 18% discount on the EV/EBITDA line and a 14% discount on the NPAT line. .

Compared to the benchmark, the portfolio offers strong growth at a discounted valuation.


MORE FROM DavidINVEST WITH MONTGOMERY

Chairman and CEO of Montgomery Investment Management, David has over 30 years of industry experience. David is a highly skilled and experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was written by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The main purpose of this article is to provide factual information and not to provide advice on financial products. Furthermore, the information provided is not intended to provide a recommendation or an opinion on a financial product. However, any commentary and statement of opinion may contain only general advice prepared without regard to your personal objectives, financial situation or needs. For this reason, before acting on any of the information provided, you should always consider its suitability in light of your personal objectives, financial situation and needs and should consider seeking independent advice from a financial adviser if necessary before making any decision. This post specifically excludes personal advice.

Why Every Investor Should Read Roger’s Book VALUE.ABLE

NOW FOR JUST $49.95

find out more

SUBSCRIBERS GET 20% OFF WHEN REGISTER


Comments are closed.