Here’s a microcap punting on bringing back Le Tan – and asset manager CVC wants in
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Never heard of Heritage Brands? No reason why you should’ve, really, since it is a tiddler listed on what was the Newcastle stock exchange and has since morphed into the National Share Exchange.
Even so, it is one among a number of microcap picks by one savvy money manager for 2019.
Listed asset manager CVC, which has a range of investments spanning shares, property, venture capital investments and the like on its books, generated an internal rate of return of 20 per cent just on its equity holdings last financial year.
The outsized returns were generated on stakes in Thorney Opportunities (ASX:TOP), Telix (ASX:TLX), Eildon Capital (ASX:EDC), Mitchell Services (ASX:MSV) and the like.
But every portfolio has its dogs.
For CVC, it was Incentia Pay (ASX:INP), Universal Biosensors (ASX:UBI), Tasfoods (ASX:TFL), Prime Media (ASX:PRT) and Indoor Skydive (ASX:IDZ).
Even so, it still likes Tasfoods and Universal Biosensors, which are among its top tips for 2019. And others such as Mitchell Services, which it is also still keen on, have been hit hard in the market’s recent sell-off, with the shares holding at 4c, well off the year’s high of 5.2c.
The strong performance of its equity investments has prompted CVC to open the doors to outside money. It will accept external funds for the first time, which it will manage in a demonstration of its confidence in its microcap picking skills.
In a sign of its confidence, it will seed $15 million of its own money to the newly planned fund.
It’s picks for outsized returns this financial year are Probiotic, IDT Australia, Mitchell Services, Universal Biosensors and Tasfoods, and the aforementioned virtually unknown Heritage Brands.
Boasting Soul Pattinson as its biggest investor with around half the shares on issue, Heritage Brands (NSX:HBA) is worth just $7 million. It specialises in getting hold of long standing brands in the consumer health sector, such as Cedel, tanning lotion Le Tan, Innoxa and the like which it hopes to revitalise with a limited spending program.
After struggling virtually since its inception, Heritage Brands is finally getting some runs on the board, even paying a small dividend as it has benefitted from ramping up its online presence while targeting the China market for additional sales.
A big upswing to Heritage Brands’ share valuation could come from a shift to the ASX which will bring with it a higher profile, albeit with higher listing costs.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.