ICE Fund update – September Quarter 2025

ICE Fund update: September Quarter 2025

In this ICE Fund update, Roger Walling, Portfolio Manager of the ICE Fund, reviews the September quarter and highlights some outstanding Franchise investments including Baby Bunting, AP Eagers and the Port of Tauranga and why the team remains focused on identifying franchise businesses with pricing power, strong infrastructure, and sticky customer bases.

Watch/Listen to the September quarter 2025 ICE Fund update ⏬:

Transcript:

ICE Fund performance for the quarter

The ICE fund returned 5.1% for the September quarter, and 4.3% for the rolling year to the end of September, net of fees. August featured reporting season, and within that, the profit results for the ICE fund at large. We measure the median earnings per share or profit growth of stocks in the portfolio at just over 12%- a really healthy profit growth for the companies that the ICE portfolio invests in.

We are benchmark unaware, and we would highlight that the small cap industrial segment, the closest comparator to our fund, returned 11.2% for the quarter and 12.9% for the year. So while it’s pleasing to see small companies return to favor and outperform their large cap peers, we do note that the fund did lag the performance of the small industrials index.

So why was that? Well, again, pleasingly, we noted the performance of the small cap segment. But we would highlight how narrow the contribution to this return was. In fact, nine stocks that contribute to the small industrials contributed nearly 60% of this return for the calendar year. So, what we’re seeing is a number of stocks are being left in the shade with quite a bias to our portfolio. So, the positive there is that we see a lot of scope and a lot of juice within the stocks that we own.

Key drivers of performance for the ICE Fund

We had some excellent results for the August reporting season, and these tend to drive share price returns for the quarter.

Baby Bunting – a strong growth spurt

The first was Baby Bunting, a retailer in Australia with 40% market share of the baby goods category. We’ve followed this company for some time and not invested. We didn’t believe it was well managed and we didn’t believe they could build a moat, which would see Baby Bunting become a true category killer in its segment. However, new management who’ve been there nearly two years have demonstrated some profound improvement across their retailing footprint, improvements to gross margin improvements to store layout improvements to buying and supply deals, and improvements to the look and the feel in the store, which are really driving those young parents into shop. Baby Bunting returned nearly 70% for the quarter, noting that we invested earlier this year.

AP Eagers – driving performance

The second key driver was AP Eagers Auto Retailer in Australia, and noting that the company has recently expanded its footprint and now includes a retail president in the Canadian auto market. AP Eagers do act like a category killer in their space.

Their efforts to modernize retailing by aggregating dealer brands on one side, productivity improvements, and record levels of sales per car dealer continue to drive a higher than above profit margin for this company. AP Eagers has several growth drivers. These include its retailing footprint in secondhand cars, Easy Auto 123, its offshore potential, and again, the margin improvement, which the category are targeting. Both of these stocks are examples of franchises that are looking to leverage their footprint, expand their market, and grow their profits.

The ICE portfolio holds a basket of franchises with an economic moat. That’s been our strategy since day one. We look for these companies to grow profits at a very strong clip.

Within the top five stocks we own, I’d call out two names. Port of Tauranga. New Zealand’s largest deepwater port. This is the port that can take the biggest boats into New Zealand. Its asset is obviously its land mass.

Port of Tauranga – capturing potential

Port of Tauranga fully own the port facility, and two things have begun to occur in recent times. Firstly, Port of Tauranga is exercising its pricing power, putting up prices to shipping lines and customers. And secondly, Port of Tauranga is seeking to gain market share against Port of Auckland, which itself faces capacity constraints. So as a franchise growing market share and growing profits, we see strong potential for this business.

Catapult Sports – the performance edge

The second company I’d call out is Catapult Sports Performance Technology. Catapult have wearables and video device which support elite teams across the world. They’ve been winning business at an impressive rate across new sports, across existing sports, winning lots of sporting teams in women’s sports and expanding geographically. Asia, South America, and more. For sports performance technology, and every human’s willingness to want to measure themselves and do better, we think this journey is only starting and we note that Catapult recently have acquired another business in the space specializing in soccer or you know, world football.

The current fund positioning for the ICE Fund

So what positions are new to the fund in the quarter? We believe that Qoria are now the leading player globally in protecting children within schools. Their technology is a software filtering process supported by an online capability, which provides alerts to parents where, you know, children are at risk of harm.

It’s a hugely important concept, and again, the company’s presence in America, uk, Australia is expanding and they’re now thinking like the category leader. The fund took profits in several names. AP Eagers, which I’ve mentioned, Temple & Webster, and Catapult, which I’ve also mentioned.

Reasons to invest in the ICE Fund

So why should you invest in the ICE portfolio today?

Firstly, we can see that investor interest in small caps is returning. Secondly, and where we have in the past on three occasions, seen the ICE performance lag that of the small cap industrials to this extent. On each of those three occasions, we’ve seen that performance gap recover in 14 months, four months and nine months on each occasion. The profit growth of the ICE stocks within reporting season highlighted 12% median earnings per share growth, and yet on a rolling year basis, the total return net of fees for the fund was 4.3%.

As interest in small caps returns, and this broadens across the small cap universe, we believe our investments are really well positioned to capture this interest and hence why we think you should be considering an investment in ICE today.

*The text has been edited for clarity.

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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/.