SGH Ltd. is an investment company, which focuses on industrial services, media, and investments. It operates through the following business segments: WesTrac, Coates, Boral, Energy, Media Investments, and Other Investments. The WesTrac segment provides heavy equipment sales and support to customers. The Coates segment offers a range of general and specialist equipment to a variety of markets including engineering, building construction and maintenance, mining and resources, manufacturing, government, and events. The Boral segment is a construction materials group. The Media Investments segment relates to investments in listed and unlisted media organizations. The Other Investments segment covers other investments and incorporates listed investments and property. The company was founded in 1956 and is headquartered in Sydney, Australia.
COMMENTARY
June saw markets continue to rise, notwithstanding geopolitical volatility during the month. The ASX 200 returned 1.4% with Energy and Financials the leading sectors, producing returns of 9.0% and 4.3%, respectively. The broader market outperformed the Small Ordinaries by 0.6%, buoyed by the market’s largest company, CBA, hitting record highs. The Iran-Israel conflict bolstered oil prices, and Santos received a takeover offer, driving the Energy sector 9% higher for the month.
US markets were even stronger, surging to reach new all-time highs, with the S&P 500 up 5% and the Nasdaq 100 6.6% higher. Yields fell, with the US10yr down 17bps & AU10yr off 10bps as rate cuts continue to be priced by the market (despite comments by Fed Chair Jerome Powell that the US could be patient while President Trump pushed for more immediate rate cuts). The AUD continued to appreciate, rising by 2.3% to end the month at US$0.658.
Australian economic growth started the year disappointingly at just 0.2%, a sharp fall from the growth reported at the end of last year, which saw Australia re-enter a per capita downturn. A combination of soft household consumption, a rare decline in public spending and extreme weather events drove the slowdown in growth. Households chose to save an increasing share of their rising incomes, with the savings rate jumping to 5.2 per cent (the highest rate since COVID lockdowns). May data showed welcome progress on inflation (2.1% annualised), assisted by relief on construction and insurance costs.
Looking to July, the focus will be on potential profit downgrades/upgrades ahead of the August reporting season. We are confident in the positioning of our fund as we enter this important time and look forward to new opportunities arising through the inevitable volatility.
Our positive contributors in June included:
ZIP Co (+55.0%) rose sharply after upgrading profit forecasts, allaying earlier investor fears that bad debts would spike due to a potential US slowdown. Charter Hall (+7.0%) benefited from the decline in bond yields. ALS Ltd (+6.4%) rallied as buoyant gold and copper prices led junior miners to raise equity for exploration programs that ALS will inevitably be testing samples from. Carsales (+5.2%) and Lovisa (+8.0%) rebounded after a period of share price weakness.
Our negative contributors in June included:
Regis Healthcare (-3.8%) fell after the government announced a four-month delay in the introduction of the new Aged Care Act. Mainfreight (-4.5%) weakened after reporting a slightly softer than expected full-year profit result. Praemium (-12.0%) and Aussie Broadband (-5.8%) drifted lower in the absence of an obvious catalyst.