ICE Fund update – Q2 2025

ICE Fund update: Staying selective in Q2 2025

In this ICE Fund update, Roger Walling, Portfolio Manager of the ICE Fund, reviews the June quarter and highlights standout contributors including Catapult, Tasmea, and Life360. He discusses the fund’s evolving positioning, the decision to exit Monash IVF, and why the team remains focused on identifying franchise businesses with pricing power, strong infrastructure, and sticky customer bases.

Watch/Listen to the Q2 2025 ICE Fund update ⏬:

Transcript:

Q2 highlights: Catapult leads contributors

The ICE Fund had several really strong contributors for the June quarter. First of those was Catapult, a stock we’ve held in the fund for many years. Catapult held its annual investor day and presented its annual results, both of which were well received by the market. They have an extremely energetic management team that continues to raise the bar on innovation and customer service in their field, while pursuing ambitious multi-year targets for success. We just see that this behaviour is consistent with being the industry leader. Catapult has entrenched itself as the leading provider of sports performance software and continues to do so, adding teams, products, and delivering cash flow. That has been a real positive for the fund in the quarter and over the last 12 months.

Tasmea – a high-margin franchise with energy tailwinds

The next contributor I will discuss is Tasmea Limited, a relatively recent addition to the fund. Tasmea first IPO’d two years ago, and we followed the stock, investing late last year. Tasmea provide technical high-value add service to their clients in the electrical and maintenance services field. They deliver a really good margin too, which in our eyes highlights the value of their franchise. Some of the work they do is remote, and competitors are scarce.   A lot of the electrical work they do involves considerable innovation. And a lot of the build that we hear and talk about concerning the energy revolution. Therefore, we believe Tasmea is well-positioned to benefit from these trends.

Life360 – scaling subscribers and ad revenue

A third business I’ll discuss is Life360. We’ve owned this company for five and a half years now. Their update in May just continues to highlight how entrenched that business is.  Their brand and family location-sharing services continue to expand globally. They now have an average of 84 million monthly users of their product. It’s an incredibly impressive platform of eyeballs. Facebook, Facebook Messenger, and WhatsApp have the most average daily users in the US, but outside of that, Life360 has the most. And when you consider how competitive that market is, that’s a really impressive set of numbers.

But for Life360, it’s not just about eyeballs. Profit from subscription services continues to grow at various healthy rates, and their advertising business, which targets those eyeballs, continues to expand. Although the current revenue is quite modest, there are many precedents for apps scaling that advertise revenue and profits materially. And we do see the early indicators there that they can build an advertising-focused profit stream from this huge number of eyeballs. That’s why we have continued to invest, even though the stock is up nearly 17-fold since we first invested.

Monash IVF – exiting after a difficult quarter

Monash IVF was a key detractor for the fund across the June quarter. The share price weakness was triggered, following what’s best described as an incident at their Brisbane clinic, where, tragically, the embryo of one patient was incorrectly transferred to another patient, resulting in the birth of a child. This is a particularly stressful and emotional period for all those involved, and we do recognise that. At the time, our considered view was that a business with a strong brand and reputation, such as Monash, would survive the potential brand damage of such a mistake.

This proved incorrect, as Monash experienced a second embryo error later in the quarter. Not quite the same, but a second error. And on that basis, we elected to sell our position. We believe the franchise’s strength was considerably weaker.

Franchise focus – assets, stickiness, and strong management

The fund is now in its 20th year, and we always seek investment opportunities, predominantly in the small industrial segment of the market, that meet our franchise criteria. ICE seeks companies with assets that are difficult to replicate, customers who are sticky, and a business that is well-managed, such that those customers remain loyal. Critically, we seek a strong internal rate of return, which stresses the importance of paying the right price for those assets.

Examples of key holdings within the ICE Fund

Within the fund, some examples of those business franchises:

EBOS, a wholesale distributor in the Australian healthcare market, has critical infrastructure. They’ve been operating for nearly a hundred years, serving pharmacists, hospitals, and doctors.

Catapult is the industry leader in sports performance software. We still hold a very healthy position in Catapult. The product is becoming increasingly entrenched. Sport is expanding, and it attracts eyeballs and revenues that come with it from an advertising perspective. Elite sport is growing everywhere, whether it be by region, with more women’s teams entering the professional sphere, or in the number of sports. Even in the last two years, Catapult has begun to win business in baseball, a sport where it had previously had only modest success.

And finally, Port of Tauranga is New Zealand’s largest deep-water port. A third of the cargo tonnage that comes into and leaves New Zealand passes through this port. It’s a physical asset, located in deep water, and it carries the associated infrastructure that makes the Port of Tauranga a critical piece of New Zealand’s assets and infrastructure. The Port of Auckland, located nearby, is facing capacity constraints and congestion issues. And this is not only increasing the value of the Port of Tauranga to importers and exporters, but also their pricing power, which they’re able to extract.

Quarterly activity – new additions and trims

During the quarter, we made some adjustments to the portfolio. Early in April, for example, we were very active when volatility peaked and markets fell. Principally, we added to existing positions at the time, including Pinnacle, Port of Tauranga and ResMed. Across the quarter, we added new positions, including Australian Ethical, SRG Global, and Auckland Airport.

Auckland Airport is, of course, a virtual monopoly. It’s the major aeronautical entry point to New Zealand and Auckland. Over the coming years, the airport plans considerable expansion of both the terminal and its freight and warehouse capability. This is expected to result in increased volumes of cargo and people, as well as considerable profit growth, as the infrastructure is expanded.

We took some profits in the quarter in Catapult, as I’ve discussed, and we exited our investments in both Monash IVF and Amotiv.

Why now – long-term alpha through selective investing

So, why should investors consider the ICE fund now? It’s certainly not new news. However, it remains true that small caps have continued to underperform the broader market in Australia over the last three and a half years.

This is an extensive period, and we believe that the stars are aligning for this to unwind. With our fund, we have recently experienced a period of underperformance compared to the small industrials. Again, the fund is benchmark-unaware; however, over the 20-year life of the fund, if you had chosen to invest in the fund at periods when underperformance occurred, these would have driven some of the better periods of outperformance over that period. We have data that supports this over 1, 3, 5, and 10 years. In fact, over time, the ICE fund has delivered some 5% alpha against the small industrial segment of the market.

Outlook – eyes on earnings and AI exposure

In terms of outlook and expectations for the coming quarter, at ICE, we have a strong bias towards observing what happens in the world of investments rather than predicting, particularly in the short term.

That said, August marks the reporting season for the bulk of Australian listed companies, and we always look forward to it. We look forward to engaging with the management teams of the franchise companies in which the fund is invested.

What are we excited about? We look forward to updates from companies regarding how they’re using AI. Temple and Webster, Life360, MA Financial, and others. We’re expecting to hear some fascinating insights there. Macquarie Technology, who sell data centre capacity, well, we’re certainly looking forward to updates on how their pipeline continues to evolve. AI companies will need to utilise data centres more and more, and we believe that the demand and supply imbalance favours Macquarie Technology.

For small companies, we continually follow several investments and potential investments, and we look forward to the next update to confirm our views on management, the company’s growth rate, customer stickiness, and whether the company is franchise-worthy. Ideally, we look forward to making a few new investments that will drive returns for the ICE fund in the years to come.

 

*The text has been edited for clarity.

For more information about the ICE Fund, click HERE. Follow us on LinkedIn.

 

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Disclaimer

This fund update has been prepared by SG Hiscock & Company (SGH) to provide general information only and is not intended to take the place of professional advice. It does not take into account the investment objectives, financial situation or particular needs of any particular person.

Equity Trustees is the responsible entity for the ICE Fund. Neither SGH, Equity Trustees nor any of its related parties provide any warranty of accuracy. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product. Follow the link for the full disclaimer: https://sghiscock.com.au/podcast-disclosures-and-disclaimers/.