MoneyTalks is Stockhead’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.

Today we hear from Luke Winchester, MD and CIO at Merewether Capital, a specialist small and microcap boutique funds management firm nuzzled in the heart of Knights country, Newcastle, NSW.

A little background…

Having won the last 11 games, back-to-back, the dark horse-riding Newcastle Knights play some other rugby league team, at 4pm (AEST) on Saturday.

Over on the ASX, the just-ended FY 2023 earnings season saw 130 companies from the benchmark index drop their loads, with 47% of them reporting weaker profits compared with last fiscal.

But we’re not here today for the big boppers. It’s all about the underdogs.

Merewether Capital’s Inception Fund invests in small and microcap companies listed on the ASX, with the ability to invest in pre-IPO opportunities.

Luke goes in for a long-only, high conviction strategy (10-25 positions) with a focus on profitable growing companies with skilled and aligned management teams. It’s small cap world in Merewether, where Luke’s motto is – one-eyed on footy, wide-eyed on markets*.

(Ed* Well, actually that’s a complete fabrication on my part. Obviously he’s got a better motto somewhere. I hope. I’ll ask him.)

But for right now, if the suit fits …

Over to you Luke:

“Let’s see if I can’t compare some stocks to the mighty Knights!” Luke says.

“My selections are based on some of the best performers during a thrilling season. Some came out of the blue, some have been long overdue.

“All outperformed. All are finalists following a tough FY23 season.”


Rectifier Technologies (ASX:RFT) Vs. Kalyn Ponga (NRL:KT)

“Have to start with Kalyn Ponga. He’s the town hero, sexy, skillful, explosive, the best on the park,” Luke says.

Kalyn Ponga (NRL:KP)

Position: Fullback/Captain

Age: 25

Knight #296

The Knights’ 2018 and 2020 Danny Buderus medal winner, Kalyn Ponga has evolved into one of the league’s premier game-breakers.

A Mackay junior, KP made his NRL debut for the North Queensland Cowboys in 2016 before arriving in Newcastle in 2018 and almost won the Dally M Medal in his first season in red and blue.

A highlight-reel machine and Queensland Origin representative, Ponga is contracted until at least the end of the 2027 season.

And for the Magician of Merewether, well, Luke says that the ASX Kalyn Ponga of reporting season was definitely that great and under-rated Aussie power electronics maker – Reccy-T*

(Ed* he means Rectifier Technologies)

“Just look at the headline numbers, 144% revenue growth, 1213% net profit growth, absolutely explosive.”

Rectifier Technologies (ASX:RFT)

Founded: 1992

Sector: Electrons design and production

CEO: Yanbin Wang

“So, Reccy-T is an Aussie company, listed here but with a strong global presence. These guys specialise in developing and manufacturing highly reliable and highly efficient power conversion products.

“Rectifier enjoyed some remarkable growth in ’22/23, in both sales and profitability terms. The surge in revenue, coupled with efficient cost management, resulted in a significantly improved net profit margin.

“RFT’s post-tax profit clocked $6.5mn, marking a substantial increase from the $492k recorded as of 30 June 2022.

“Total revenues soared by circa 144% to reach $39.8mn, while pre-tax profits at circa$8.75mn absolutely trounced the $1.25mn last year.

“Around since 1992, RFT’s been a great contributor in the Aussie power electronics field bringing a wealth experience, strong reputation and heaps of industry knowledge.”

But more importantly, Luke says, they sell electrical components to electric vehicle charger manufacturers.

“One of the sexiest thematics on the market with multi year tailwinds behind it as governments around the world spend billions to roll out high powered charger networks.

“Despite this, the stock trades on 11x earnings, so it’s down to earth just like Kalyn!”

Rectifier: Team Song


XRF Scientific (ASX:XRF) Vs. Tyson Frizell (NRL:Friz)

“Leader of the forward pack is Tyson Frizell. A heart bigger than Phar Lap and while probably past his prime (Ed: He kept that for the mighty St George Dragons), but Tyson remains just as explosive in attack or defence. There’s legs in the beast yet.”

“I think he compares neatly to a proven performer likeXRF Scientific (ASX:XRF).

Tyson Frizell (NRL:Friz)

Age: 31

Position: 2nd row

Knight #321

A dynamic and hard-running back-rower, Tyson Frizell has established himself as one of the game’s best edge forwards in a career spanning the last 13 years.

Frizell started his career at the Cronulla Sharks before becoming an established first-grader at the St George Illawarra Dragons.

A NSW and Australian representative, Frizell made the move up the M1 in 2021 to join the Newcastle Knights and is signed on until at least the end of the 2023 season.


XRF Scientific (ASX:XRF)

Founded: 1972

Headquarters: Perth, WA

Sector: Mining, medtech

Subsidiaries: Modutemp, Orbis Mining

CEO: Vance Stazzonelli

XRF manufactures equipment and chemicals, which are distributed to production mines, construction material companies and commercial analytical laboratories, in Australia and overseas, and used in the preparation of samples for analysis.

“The laboratory services business has had a fantastic run over the last few years with the cyclical exposure to mining and construction companies leaving them in good stead,” Luke reckons.

“The business once again reported great numbers, revenue up 38% and profit before tax up 36%, but the market was unenthused as it looks forward and thinks the cyclical strength is coming to an end.

“Will that happen? Maybe, but like Tyson Frizell I think XRF has a couple more great seasons left in it.”

XRF has manufacturing, sales and support facilities located in Perth, Melbourne, Europe and Canada, plus a global network of distributors and representation in the United States, South America, Africa, the Middle East and Asia.

“The technology has all sorts of applications, but the standout is used to measure the composition and purity of materials and is mainly applied in industrial quality control and in process control for manufacturing processes in industries such as metals and mining, construction materials, chemicals and petrochemicals,” Luke says.

“Handy in a pickle. Diverse set of talents. Strong.”

XRF: Team Song


Vysarn (ASX:VYS) ) Vs. Bradman Best (NRL:Braddy)

What about Bradman Best? Emerged this year to be one of the best young centres in the game. Plucky, fearless bristling with youth and potential.

Bradman Best (NRL: Braddy)

Age: 22

Position: Centre

Knight #311

A man with one of the ‘best’ names in the NRL, Bradman boasts fearsome strength and speed in the Knights centres.

Best became the second youngest player to debut for the Knights back in Round 23 of 2019 and has spent four seasons in the red and blue jumper.

A Central Coast junior and Under 16s and 18s NSW Origin representative, Best is signed to the club until at least the end of the 2024 season.

Yeah. He reminds Luke a lot of…

Vysarn (ASX:VYS)

Founded: 2007

Headquarters: Perth, WA

Sector: not too sure

Subsidiaries: See below

CEO: James Clement

Vysarn’s whole schtick and strategy is to become a best on field, vertically-integrated, whole-of-life, end-to-end water service provider, focused on, in their words – ‘building value, scale and diversity through organic growth and strategic acquisitions.’

VYS already has a whole backline of wholly-owned subsidiaries:

Pentium Water: Provides specialised water management consulting services in hydrogeology, hydrology and environmental planning.

Pentium Hydro: A dedicated hydrogeological drilling and dewatering business.

Pentium Test Pumping: A dedicated groundwater management service provider.

Project Engineering: Specialists in Managed Aquifer Recharge and hydraulic engineering solutions

“VYS is A relatively new company with the main operations established and listed in 2019, there has been promise for this water services business but it has really put it all together in FY23,” Luke says.

“Revenue up 40% and profit before tax up 73% was a great result, but it’s the bright future that gets you excited.

“After some operational changes in the first half of the year, the $3.9m net profit was entirely recognised in the second half and leaves a fantastic run-rate into the new financial year. Combine that with the potential to acquire more companies to further diversify into the water services space and you have an exciting young company and a pretty good comparison I reckon.”

Vysarn (no vid): Random St George Tribute


Connexion Media (ASX:CXZ) Vs Pheonix Crossland (NRL:Fiend)

Hmmm, it gets tough after that. What about Phoenix Crossland? Comes into the team after a season-ending injury to captain Jayden Brailey.

Pheonix Crossland (NRL: Fiend)

Age: 23

Position: Halfback

Knight #310

Having progressed through the Knights pathways systems, Crossland has become a reliable and versatile player since making his debut in 2019.

Born in New Zealand before moving to the Central Coast at a young age, Phoenix formerly captained the SG Ball Cup side before emerging through the Jersey Flegg and NSW Cup competitions.

He’s been brilliant since, so we need a stock that has come out of nowhere to be a star performer. Sounds like…
Connexion Media (ASX:CXZ)

Founded: 2007

Headquarters: Perth, Western Australia

Sector: Tech, IT

CEO: Aaryn Nania

Connexion  is a developer and owner of Software as a Service (SaaS) solutions for the global automotive industry, notably its OnTRAC and CXZTRAC platforms.

Luke says OnTRAC is used by General Motors (NYSE:GM) to manage the largest Courtesy Transportation Program (CTP) in the US, and CXZTRAC is designed with OEM-agnostic functionality.

“Headline numbers of 74% revenue growth, 1114% net profit growth for the fleet management and telematics software provider.”

“But the result came from nowhere after a breakeven profit in the first half.

“The big development here was that their core customer General Motors expanded their usage of the platform to their dealership networks, effectively doubling revenue overnight. The little software business went from breakeven to annualising $3-4m in net profit based on the second half result.

“First half you had a decent bench utility but like Crossland the business has emerged in the second half the season.”


Smart Parking (ASX:SPZ) Vs Saifiti bro’s

“Wow, I’m on a roll now this is getting easy. Let’s combine the two Saifiti bro’s.

Daniel Saifiti (NRL:Dsaf)

Age: 27

Position: Front row

Knight #268

Powerhouse front-row forward, Daniel Saifiti has become a leader and custodian of the Knights forward pack since his debut in 2016.

Born in Newcastle, Saifiti has represented Fiji alongside his twin brother, Jacob, and has spent seven seasons in the red and blue jersey.

A NSW Origin representative, D-Saf is signed to the club until at least the end of the 2026 season.

UK business that has come good after some lean years?

Sounds like…

Smart Parking (ASX:SPZ)

Founded: 2006

Headquarters: Port Melbourne

Subsidiaries: Ne Parking, Town and City Parking, ParkInnovation GmbH, Enterprise Parking Solutions

CEO: Paul Gillespie

Revenue up 21% and profit before tax up 56%, it was a great result after the business did it tough through Covid and some regulatory issues. The parking management business looks set for a bright future though with management confirming they will hit their medium term aspirational target for 1500 sites earlier than expected.

“There x2 Saifiti twins –  (Ed: Pic here is of Daniel.) And they have been great this year.”

“JSaf (Dsaf’s twin Jacob) maybe hasn’t completely lived up to his potential when first emerging but together they form a great front row tandem…

“Okay, stretching here but what about Laserbond (ASX:LBL) and Environmental Group (ASX:EGL).

“Two businesses that have quite a bit in common. Both tied to sustainability, LBL’s surface engineering technology lengthens the wear life of intensive mining/construction equipment and allows for reclamation of equipment rather than replacement, while EGL is in waste services, air pollution control and gas turbine services.

“LBL grew revenues 26% and net profit 31% and EGL grew revenue by 45% and net profit by 68%. Great results, but LBL had some delays with recognising revenue in their emerging Technology division and progress within EGL’s PFAS division has been a little slower than the market hoped.

“So despite the great results, like the Saifiti brothers you could nitpick they haven’t quite hit that full potential yet.”


Smart Parking: Team talk