IperionX enters the Portfolio

The Fund had some stand out performers this month and saw the addition of IperionX to the Portfolio. Overall the Fund was slightly down 0.2% for the month of May.

• Telix Pharmaceuticals rose 15% as UBS initiated coverage with a $14 target price and highlighted the efficacy of its renal cancer diagnostic product.
• Spotify increased by 14% due to positive momentum from their quarterly results, resulting in analysts raising their target prices and expectations of cost-cutting and better pricing.
• Immutep surged 25% after reporting strong survival data in its phase 2 study, allowing the company to proceed with a larger trial and receiving positive feedback from the FDA.

Top Holdings (alphabetically)

Eckert & Ziegler Strahlen- und

Germany

Health Care

Eckert & Ziegler AG manufactures equipment for the pharmaceutical industry. The Company produces low-level radiation sources used to treat cancer, heart and other diseases, and in equipment used to calibrate gamma cameras and positron emission computer tomographs. Eckert & Ziegler also develops cancer drugs. The Company markets its products worldwide.

Immutep Ltd ADR

United States

Health Care

Immutep Limited operates as a biotechnology company. The Company focuses on developing novel immunotherapy treatments for cancer and autoimmune disease. Immutep offers its services worldwide.

IperionX Ltd

United States

Materials

IperionX Limited focuses on sustainable mineral and material supply chains. The Company develops low carbon titanium for advanced industries including space, aerospace, electric vehicles, and 3D printing. IperionX serves customers worldwide.

Telix Pharmaceuticals Ltd

Australia

Health Care

Telix Pharmaceuticals Limited operates as a biotechnology company. The Company develops and commercializes molecularly-targeted radiation therapy for the treatment of prostate, renal, and brain cancer. Telix Pharmaceuticals serves patients worldwide.

Tenet Healthcare Corp

United States

Health Care

Tenet Healthcare Corporation, through its subsidiaries, owns or operates general hospitals and related health care facilities serving communities in the United States. The Company operates rehabilitation hospitals, specialty hospitals, long-term care facilities, psychiatric facilities, and medical office buildings near its general hospitals, as well as ancillary health care businesses.

Telix Pharmaceuticals, the Fund’s largest holding had another strong month rising 15% after UBS initiated coverage of the company with a $14 target price. The company also presented further data at the American Urological Associations Annual meeting in Chicago highlighting the efficacy of its renal cancer diagnostic product TLX250-CDX in detecting small lesions of less than 2cm, which is considered important for driving the uptake of the product when it is approved later this year or early next year.

Spotify rose 14% building on positive momentum stemming from their late April quarterly result. Through May analysts lifted their target prices from $132 to around $155 on average as they reassessed the company’s prospects. Expectations of further cost-cutting/greater efficiency/better pricing also grew post the company conducting post result briefings.

Immutep rose 25% after reporting strong overall survival data from its ongoing phase 2 study in Non-Small Cell Lung Cancer (NSCLC), the largest cancer indication. This data will allow the company to commence a larger Phase 2/3 trial, named Tacti-004, in this indication. The FDA has given positive feedback on the trial design as well as granted fast-track status for the drug Eftilagimod in NSCLC, which will allow expedited approval if the results are positive.

US optical component company Lumentum rose 12% after Nvidia, the leading AI semiconductor company, reported positive earnings results. Lumentum and Nvidia are jointly developing photonics products to connect Nvidia’s semiconductors at much higher speeds within the data centre, but these products are unlikely to drive earnings until later in 2024. The company is attractively valued but the shares have performed poorly recently following weak results, which have been impacted by excess inventory at Amazon, a key customer. We believe this is a temporary issue.

German medical and industrial radioisotope producer Eckert and Ziegler fell 16% after reporting Q1 results. The medical isotope division grew revenue a pleasing 20% yoy while industrials products grew 16%. Net profit fell 29% due to charges relating to currency movements and inflation in Argentina. Guidance has not changed but we view it as very conservative following the appointment of a new CEO who is likely to have set a low hurdle in his first year.

The Fund added a new holding during the month, IperionX, which is dual listed in Australia and the US, although all the company’s operations are located in the USA. The company has two value drivers, firstly a technology to process titanium metal at lower cost and carbon emissions than the existing Kroll process, and secondly titanium mineral sands mining tenements in Tennessee. Currently, nearly 80% of the world’s titanium metal is produced in China and the Former Soviet Union (Russia, Kazakhstan, and Ukraine). For supply chain security reasons, exacerbated by Russia’s invasion of Ukraine, the US government is keen re-establish titanium metal production in the USA. In addition, titanium metal cannot currently be recycled however IperionX’s process makes this possible allowing the company to draw on huge stocks of cheap scrap titanium and boost demand from companies keen to boost their ESG credentials with recycling projects. Already the company has announced agreements with a division of watch maker Richemont and bicycle maker Canyon. We expect more agreements in the coming months.

One area of particular interest is making longer life electrolysers for the green hydrogen industry. The company is in the process of building production facilities in Virginia after successful small-scale production at the University of Utah where inventor Dr Zak Fang is based. In May the company released forecasts projecting USD100mln in cashflow (EBITDA) in 2026, which, if achieved, is attractive relative to the current market valuation of just USD150mln. The company forecasts USD100mln in capex will be required to reach this level, which may be funded via further capital raisings, partnerships, or government grants.

Wet AMD company Opthea fell 14% on little news.

Major Drilling fell 11% as the market became concerned that faltering global macro indicators will translate into lower-than-expected demand for drilling services in the near term as junior miners struggle with financing. Weather also delayed a restart of some drilling programs. At its recent June result, Major Drilling announced that, based on discussions with existing customers, it was increasing capex to build capacity for demand in 2024. Despite this, the market is focused on short-term demand, which so far is still holding up very well.

Stroer reported organic revenue up 7.3% for the quarter, with their out-of-home business outperforming the German advertising market by nearly 10%. Management expects this outperformance relative to the overall advertising market to continue through the next quarter but refused to give full year guidance on the back of economic uncertainty. This uncertainty continues to be the underlying driver of share underperformance. We have taken a medium-term view and see great value in their unique businesses, value that will be better appreciated after economic conditions become clearer.