June 2024 Quarter in Review
In the June quarter the ASX200 run faltered recording a fall of 129 points or 1.6% closing at 7,768. The market traded sideways over the volatile period fluctuating within a 400-point range as the market seeks greater certainty. The Reserve Bank (RBA) held rates at 4.35% reiterating the focus on controlling inflation and highlighting the uncertain economic outlook with updated forecasts now predicting elevated inflation until late 2025/early 2026. The RBA communication has shifted such that further interest rate increases cannot be ruled out.
State of Australia
The Australian economy recorded a soft period with weak GDP growth and unemployment beginning to rise with fewer job vacancies available. Members of the RBA board identified various sectors of the economy were fairing differently under the economic conditions. Generally, households continue to feel squeezed but fall in to two categories homeowners benefiting from raising house prices and non-owners bearing the brunt of increases. Likewise, business reported narrowing of margins with upward pressure on costs and an inability to pass those costs on to consumers. However, the pressure is largely squeezing small business more than large corporates.
Limberg Asset Management Portfolio Positioning
The elevated level of the Australian Sharemarket poses increased risks with the price to earnings ratio substantially above long-term averages, suggesting company valuations are stretched. The focus over the coming quarters is to build cash and defensive assets with judicial investment in undervalued investments with potential to provide growth and outperformance over the long term.
We continue to monitor developments in two portfolio holdings in Dubber and Wizr.
Dubber weighted on performance this quarter as the company finalised its recapitalisation. Dubber has shifted its corporate strategy away from its ‘land grab’ focus where the company prioritised imbedding its service in major telcos worldwide to refocus on near term revenue generating activities. Dubber has reiterated its problems were isolated to its rogue CEO. Despite its issues, services have continued uninterrupted, no customers have been lost and remain engaged with Dubber services. The CFO has reiterated in the coming six months for a return to revenue growth and breakeven on Financial Year 2025.
Wizr also detracted from this quarter’s performance albeit on small movement. Looking back to the March Quarter this year the company announced the end to the loan moderation strategy where they focused on improving loan margin whilst maintaining credit quality. It is our expectation that the upcoming results for the June Quarter will show a return to loan book growth.
Income holdings in portfolios continue to deliver recording another quarter of consistent monthly income with minimal signs of distress reported. With interest rate cuts now pushed back into 2025 and likely to remain higher for longer we will look to build and maintain exposures in these assets.
We would like to take the opportunity to thank you for your enduring trust and continued support over what has been difficult period in markets. We are, as always, here to help and happy to discuss our investment principles with anyone that could benefit from our services.