What's the plus? People

always criticise Xero for not generating free cash flow, not generating earnings and chasing growth through revenue growth at all costs.

They also criticise Xero for being too Aussie and New Zealand centric and struggling to get a foothold in the US.

However, the signs are that the US expansion is really going to plan.

It's really accelerating over there.

And although it will never be unlikely, highly unlikely to ever be the number one game in town compared to Intuit, there's still a significant market opportunity there.

And they're doing the best job they've ever done in extracting the benefits from the US.

What's your view on mining and specifically BHP?

Can you cut through some of the hype? What's your take, especially for those of our, of our audience that haven't necessarily heard of this yet?

Yeah.

So Firmus essentially, um, has raised a fair chunk of money, but also borrowed a lot more money to go out and effectively build a series of data centers which will also then, you know, have access to Nvidia chips.

Um, and that es- will allow businesses to access more high-powered computing.

So if you consider, you know, many of the websites that people would go onto today, you'll see a little chatbot in the corner that consumers can ask various questions, um, of a particular business and get instant responses.

Um, that sort of infrastructure or that sort of technology requires an immense amount of computing data, and a company like Fir- Firmus not only provides the data, but the computing power to deliver instantaneous responses to, to people, and that's just one example of what service they're providing.

But the thing is to consider with Firmus is, is Firmus doing something that the large companies like OpenAI and Meta can't do themselves, or is Firmus doing something that those businesses are choosing not to do themselves at the moment? Uh, because the, the pace a- and the rapid development of the computing power, and also the Nvidia chips for instance, i- is progressing at such a rate that many of the chips that Firmus might have access to now might be superseded in six months, 12 months, two years' time.

To what extent then will it be closely watched, and what do you think we can learn from it? What are the things you're looking out for?

Can you cut through some of the hype? What's your take, especially for those of our audience that haven't necessarily heard of this yet?

Yeah, so Firmus essentially raised a fair chunk of money, but also borrowed a lot more money to go out and effectively build a series of data centers, which will also then have access to Nvidia chips.

And that will allow businesses to access more high powered computing.

So if you consider many of the websites that people would go on to today, you'll see a little chat bot in the corner that consumers can ask various questions of a particular business and get instant responses.

That sort of infrastructure or that sort of technology requires an immense amount of computing data.

And a company like Affirmis not only provides the data, but the computing power to deliver instantaneous responses to people.

And that's just one example of what service they're providing.

To what extent then will it be closely watched and what do you think we can learn from it? What are the things you're looking out for?

ProMedicus is probably sneaking into a core of your portfolio

now, isn't it? Well, ProMedicus is, we think, one of the highest quality businesses on the market.

They have done a very good job in the US where they now have 11% market share.

So in many ways, they're just scratching the surface.

Yeah.

Initially, they targeted the university-aligned hospitals, which had a bit more cash to spend, so to speak.

But that is only a part of the US market.

Bupa and Medibank?

[upbeat music] I can take you where you wanna go.

Let's go.

I can take you where you wanna go.

Let's go.

I can take you where you wanna go.

We'll get another, um, voice in the chorus, Michael Wayne from Medallion Financial, and another one [laughs] from Shaun Hickman from Market Matters.

[Upbeat music playing] A couple of false starts with this, where it's looked okay technically.

So we've been jumping around sort of...

So I'm going to call it a hold.

Yep.

We have held this probably from around September last year, so not right at the lows, but basically after Pro Medicus came in with their funding deal.

Pro Medicus at the time was one of our largest holdings.

So it's been really the tale of two cities.

On one hand, you've had Pro Medicus going one way and you've had 4D Medical going the other.

It's a very high quality business.

What do you think, Michael?

Michael, what about you?

Look, just looking at it simply, um, it's towards the top end of its long-term range in terms of price and also the valuation's the highest it's been in some time.

This is a company that really boomed, you know, in the mining boom.

You know, throughout the GFC, you know, in the years after the GFC, off the back of the Chinese-led mining boom, and it's basically been going sideways ever since, never fully sort of recovered from the, the slowdown in mining investment.

It's a, a dominant player in the explosives space.

Um, it gets linked to fertiliser 'cause of the, uh, ammonium nitrate, which is a big input, and that's been caught up recently because a lot of that fertiliser, a lot of that ammonium passes through the, the, the Straits of Hormuz in the Gulf and it's been caught up there.

The company has pivoted somewhat towards being more of a mining services type software company, and that is potentially the reason why it has re-rated higher, and you've seen the PE expand and the price in the short term at least, um, increase.

It was.

[laughs]

Um, it's...

Look, I'm certainly more confident a- around these prices than when it was at $5.

It was, you know, it was a momentum stock there for a while and was pushing, you know, ridiculous numbers.

Um, but then the February reporting season came, and the market had baked in all this optimism, and then there was a slight slip-up in that I think the bad debt numbers actually did slightly tick up, and then that paused, you know, caused everyone to pause, you know, take, take heed.

And then a lot of the negative shorting came into the, the stock at that point in time.

It's been a, a wonderful sort of renaissance for this business.

Michael, has the hype outpaced the underlying financial reality? Buy, hold, or sell?

Michael, would you agree?

Had a look at this one for a while, and you know, on a quick inspection, it looks fairly attractive.

You know, the valuation's reasonable, that the growth is potentially there for a company like this.

There's a lot of consolidation that's been going on in the diagnostic space, um, and Integral's no different.

They recently acquired Capital Health, and they're integrating that acquisition into their, their business, and they seem to be extracting a lot of synergies so far, so that's all positive.

Now, the, the primary competitors, I suppose, are, you know, Sonic Healthcare's got a, a large radiology arm.

There's Healius as well.

I'd probably just hold it, um, but I wouldn't be buying, um, be-- at this stage.

Michael?

Yeah, Howard's correct.

It's a fair comment around a, a lot of these sort of startup speculative miners.

Um, regarding uranium, um, again, Howard's correct.

There's not a, an enormous amount required to run a lot of these power stations.

Um, but the, there is a lot of discussion around, you know, the proposed number of power stations or u- um, nuclear power stations.

B- um, those being built at the moment, those proposed, those being planned, um, and even some of the talk now around some of these data centers talking about having some-Sort of modular, smaller type nuclear, um, power sources to support some of the, the data centres that are being built around the traps.

What do you think?

Okay.

Michael, would you agree? It's a very good quality business.

It's one that we held widely until probably earlier in the year.

We sold out of our managed fund mainly just around the unrelenting sale.

It's like selling that was unfolding in that space with the AI apocalypse getting a lot of airtime at the time.

But it's certainly the type of company we will look to re-enter at some point.

It's obviously re-rated significantly, not trading on the same lofty multiples that it once was.

Yep.

And, you know, the Australian share market isn't that far off either.

Look, understandably, markets are very anxious with where things are at, but at the same time, they are reacting rationally when presented with the historical context.

And history suggests that these disruptions proved to be fairly temporary.

You only have to cast your mind back to 2022 when the Russia-Ukraine conflict emerged.

There was a very similar reaction in the oil price.

Markets reacted in a similar manner, but as the weeks passed, The markets seem to become a lot more comfortable with where things are at.

And we're seeing the same thing really play out this time around.

What's the market then thinking this will all mean for interest rates and perhaps the Australian dollar, given we're seeing the US weakening?

Does that look attractive when a stock's fallen that far or do you like this one? You

can probably overlay that chart to most things in the ASX tech index over the last six to nine months or whatever.

I suppose the question is, do we think computer shares as good an opportunity as some of the other names that have been beaten up just as badly, if not worse? And The short answer is no.

I think, look, computer share is not a bad business by any means.

It's got a very dominant position in the share registry services within Australia.

I think about 60 or 70 percent of ASX 200 companies use computer share for their registry services and they're fairly long term.

duration relationships there's obviously some regulatory complexity to them to making sure you get every announcement out on time and all those kind of things but also like the thing is as well with these businesses is they get to hold a lot of client or investor cash and they earn money on on the the income that they're able to generate from those services and that's one part of their business and that has improved in recent years because for so long their post gfc interest rates were were anchored very very low so that has been a kicker for them but they also rely on corporate activity um so like m a placements raisings all these kind of things and And that has been subdued and has been subdued for a while now.

What do you think about Santos?

And there's also this talk that, I've seen it in the Fin today, that this talk, it could be similar to those mean stocks that we've seen over the past few years.

Yeah, I mean, it's certainly possible.

We aren't subscribing to that view just yet because of some of those tailwinds that seem to be justified.

However, there are similarities between the boom that's going on at the moment in precious metals to what we saw in 2011 and 2012 when you had these hockey stick exponential rallies going in the underlying commodity prices for gold and silver, only for the heat to come out of it just as quickly as it went in.

So investors rushing to the party now need to be very, very careful and tread carefully because, you know, these massive run-ups in the prices, all you have to do is get a chart of gold or silver and take it out five or ten years and you're you know, it's cause for consideration, put it that way, when you see, you know, rallies of that extreme magnitude in such a short space of time.

So, yeah, there's definitely the risk that this does keep inflating.

However, you know, the momentum is very strong at the moment.

How important will this US reporting season be? And what are you looking out for?

Michael, Woodside versus Santos or, you know, is there a need to be in any of them?

People are being drawn to this area at the moment because it looks ostensibly very cheap relative to some other parts of the market.

And there's potentially an argument there to hold them based on the cheapness factor.

Woodside historically has had some very high quality assets in the bottom quartile in terms of costs of production.

But they've reached the point where its assets were quite mature and the mine life or the production lives were starting to decline quite significantly.

So they really looked for a kicker to drive growth into the future.

And they went out and did a very, very large scale deal with Louisiana LNG with a group called Williams.

So a buy for Goodman Group, would you buy it?

Yay or nay?

We've had a bit of style drift, I suppose, is what you call it.

And we've sort of been forced to.

Historically, we haven't had much exposure to commodities at all.

But over the last couple of years, we've definitely sort of built exposure to copper.

That's taken a bit of time to play out.

Capstone copper is sort of the copper stock we hold, which I've discussed previously on the call.

So are there better days ahead for Domino's?

Linus.

Yeah, this whole Rare Earths space is topical.

There's no two ways about it.

Topical.

It all really sort of came to a head 15 years ago when China basically banned for a time the export of rare earths into Japan.

And ever since then, their importance or the coverage has increased significantly.

The reality is that China controls about 70% of rare earths mining globally and 90% of processing globally.

Michael Block.

How do you see it?

Yeah, I mean, generally speaking, this is a part of the market that we have done quite well off recently.

Almost what you would call the picks and shovels type businesses to the broader AI data centre thematic that's playing out.

But, you know, IPG hasn't necessarily done as well as some of the other names.

And for instance, we hold things like Southern Cross Electrical, Genus Plus, and they're kind of similar thematic type businesses.

But IPG in particular, they only get, look, it's a growing proportion aligned to data centers of revenue, but it's still only around 18%.

It's a part of the business that they're trying to get moving.

So this trouble at the top has continued, hasn't it? Despite the fact that ostensibly Richard White has stepped down.

So good business, but too expensive for me at the moment.

Mark.

Great business.

This is probably the holy grail when it comes to being an income investor, but it's never really been thought of as an income stock.

But if you look at where the dividend per share was 10 years ago compared to today, You know, you've quadrupled the amount of income that you're receiving from this business every year.

So that's sort of what you really are looking for as an income investor.

This is a business that would have always paid, you know, 3% dividend yield, maybe 2%, 4% maximum.

So I'd probably be exiting this one.

Would you be putting new money in?

So Megaport is a business that we, one of our probably best performing businesses ever going back to our inception, probably this and Pro Medicus are two of the better ones in our history.

But the business has been extremely volatile and we haven't held it throughout that entire period either.

So we actually recently exited this from our managed fund at the August results.

It's a very good quality business.

It effectively allows businesses to secure data services when they need them, rather than having to sort of hold these services and pay for these services all year round.

So we're already approaching Melbourne Cup, believe it or not.

So do you see any value in IDP education?

What do you think, Michael?

Yeah, it's interesting.

I mean, the wreath space overall has seen some improved sentiment in recent times.

Home Co. is one of the wreaths under the HMC Banner, if you like, David De Pilla.

And this at the moment is the shining light for that particular fund manager.

It's a bit more of a conventional rate compared to some of their other ones in that respect.

You know, a bit of that neighbourhood retail, large format retail that people would be familiar with these days, whether you have a Woolworths and a Coles thrown in with a Bunnings, JB Hi-Fi, Anaconda.

So, Michael, what do you do with this one then?

Michael?

It's interesting because it's probably... one of the best royalty type businesses that you can own globally.

It's saying that we don't own it, but it does give investors exposure to a very high quality asset.

BHP is mining area C as it's termed.

So it's a pretty reasonable counterparty to have.

And effectively, Deterra gets about 1.2% of the revenues generated from that particular asset.

And that asset is an enormous asset.

Okay.

But the third big one was, what do these numbers say about the Australian consumer, given that the consumer is such a big part of the Australian economy? What do you think these numbers, you know, the likes from Coles, from Woolies today are saying about the health of the Australian consumer?

So it's interesting in that the consumers definitely shifted the way in which they go about shopping.

So we've seen volumes increase for both Coles and for Woolworths.

But what the Woolworths numbers showed really today was that despite that volume growth, they're seeing price deflation.

And that's a symptom of the fact that many people would be shifting their consumer choices.

Perhaps rather than going for the premium brands, paying premium prices, they are opting for more of the cheaper home brands and looking for value when they go shopping.

And I think Those numbers were reflected for both Coles and Woolworths.

And finally, what are you telling your clients right now and where do you see the opportunities for investors?

Is that what's happening here or am I oversimplifying things?

You're absolutely right to a degree.

It's certainly a business that we have liked over the last few years.

We saw it as a good quality value player yielding around sort of 8% to 10% depending on where the price was at different times.

It's a fund manager that doesn't rely overly on performance fees.

The vast majority of the revenue, sort of 90, 95% of the revenue comes from management fees.

So their earnings profiles fairly smooth relative to a lot of other fund managers.

So Michael, what is your best guess as to why even the result today, even the announce of this restructure, even the announcement of a share buyback is just not enough to change sentiment towards CSL?

Michael.

It's been a wonderful success story.

There's no two ways about it with Fortescue, but there was a period there where at least the investment community felt that it was potentially losing their way a bit as the company looked to diversify away from iron ore.

But the focus has very much gone on to diversification.

the iron ore side of things again um the share price over five years has really trended sideways and the iron ore price over five years has more or less trended sideways um it's obviously had periods of strength followed by periods of weakness but the production numbers have been very very good coming out of Fortescue their costs of production have been coming down as well um And historically, you know, the margins that Fortescue get are well below BHP and Rio because of the quality of their iron ore, some of their existing projects.

However, they have developed this Ironbridge project, which has seen, you know, shipments coming about 30% above expectations and consensus.

And that particular newer project has high quality iron ore coming out of it.

You've got to think that this is related to, you know, how much lower can it go? Does it necessarily mean that there is upside to come, Michael?