Other top performing investments for the quarter included the technology stocks, Technology One (+30%) and Hansen (+16%), as well as the New Zealand telecommunications company Chorus (+18%) and a new investment to the portfolio, the waste management company Bingo (+19%).
Detractors to performance included Medical Developments International (-23%) which fell after the US Food & Drugs Administration approval for its pain relief product was delayed. Japara Healthcare (-20%) also performed poorly after the announcement of a Royal Commission into the aged care sector. NextDC (-11%) also contributed negatively with the share price pulling back somewhat from its highs of around $8 earlier in the year.
Portfolio Changes
The Australian share market has been very volatile recently, mainly due to fears of rising US bond yields and a trade war. We took advantage of the volatility and downturn in markets to add a few new holdings to the portfolio.
New additions to the portfolio included Mercury NZ (MCY), Bellamy’s Australia (BAL), Cleanaway Waste Management (CWY), Arena REIT (ARF) and Sigma Healthcare (SIG). Greencross Limited and 1300 Smiles were removed from the portfolio. Sirtex Medical was also removed after being taken over by a US healthcare company.
Arena REIT (ARF) is a real estate group that owns, manages and develops specialised real estate assets across Australia. Arena invests in sectors that are underpinned by supportive macroeconomic trends including population growth and emerging demographics comprising: childcare/early learning services; education – including schools, colleges and universities (and associated facilities); healthcare – including medical centres, diagnostic facilities, hospitals and aged care facilities (and associated facilities); and facilities with government and other high credit quality tenants.
Arena benefits from several supportive trends such as population growth and growing government subsidies in addition to attractive characteristics such as an occupancy rate of around 100%, high tenant renewal rates, triple net leases, and a relatively long weighted average lease expiry of 13 years. Arena’s seven medical centres, which are leased to ASX-listed Primary Healthcare, also benefit from government subsidies.
Mercury NZ Limited is a renewable energy company based in New Zealand. Mercury invest in, develop and produce electricity from renewable sources and sell energy and energy related services and products to retail and wholesale customers. The company’s electricity generation comprises two complementary fuel sources, Hydro and Geothermal. It operates the nine hydro stations on the Waikato River and five geothermal power stations in the Central North Island. Mercury NZ’s metering business, Metrix, provides electricity retailers with advanced metering infrastructure solutions for their residential and commercial customers.
Bellamy’s Australia Limited is a Tasmanian company who offers a range of organic food and formula products for babies and toddlers. Bellamy’s has operations in Australia, China, and South-East Asia and also delivers its products through an online portal. It offers over 30 products that are tailored to the needs of babies and toddlers though supermarket chains, pharmacy chains and independent stores.
Cleanaway Waste Management is a provider of waste management services in Australia. Cleanaway specialise in the collection, treatment and recycling of waste. The company aims to remove, recover and reuse the maximum amount of waste with minimal environmental impact. Cleanaway collects and treats organic materials such as grease trap waste, green waste, food waste, waste generated by abattoirs, organic wastes from industrial processes as well as biosolids waste generated by sewage treatment plants.
These wastes are beneficially used for soil conditioners, potting mixes, composting, land rehabilitation, landscaping, forestry and agricultural purposes. Biosolids and organic waste applications are used on large-scale agriculture and mine site rehabilitation projects across Australia. Waste oil is also collected and processed for reuse as pristine base oil.
Sigma Healthcare is a full line wholesaler and distributer of pharmaceutical products through its pharmacy and grocery sales channels. Sigma has a pharmacy-led network, including over 700 retail brand members representing the brands Amcal, Guardian, PharmaSave, Chemist King and Discount Drugstores.
