Dear Shareholder,

 DMXCP’s NAV decreased 3.7% (after all accrued fees and expenses) for March 2025. The NAV as at 31 March 2025 was $2.4328, compared to $2.5265 as at 28 February 2025. March was a tough month for Australian equity markets with the All Ordinaries down 3.7%, the Small Ordinaries falling 3.6% & the Emerging Companies Index decreasing 2.0%.

March Developments

The volatility experienced in the second half of February continued during March with the global economic and geopolitical uncertainty contributing to a particularly risk-off investment sentiment. This uncertainty has accelerated into April as investors attempt to digest the implications of the United States’ proposed new tariff regime.

While there were a handful of positive contributors during the month including our largest position Energy One (ASX:EOL, +7%) and Smartpay (ASX:SMP, +50% on the back of a potential takeover), for the most part, the portfolio tracked the weak market and risk-off sentiment down. EDU Australia (ASX:EDU, -17%) gave up some of its gains having increased 50% in February, while Findi (ASX:FND) and Medadvisor (ASX:MDR) fell 21% and 35% respectively as they undertook capital raises, which we discuss below. Aside from the two raises, after a busy February where we saw our companies report their half year results, March was much quieter in terms of news flow.  

After a strong period of execution and positive share price movement, FND undertook a substantial $45m capital raise. With markets and sentiment subsequently declining sharply post-raise, in hindsight this raise has proved to be well timed. We were supportive of the raise (and modestly increased our position), with the raise being accompanied by three pieces of positive news for FND:

• Confirmation of FND’s FY25 EBITDA and revenue guidance.
• The renegotiation of FND’s existing convertible notes, saving FND ~$6m annually in interest expense. As a result of the higher conversion value (A$500m) under the new convertibles notes, FND’s interest in its Indian subsidiary in the event the new notes convert increases to ~78% from 70%, reducing potential dilution.
• The increase in Indian ATM interchange fees from 17Rs to 19Rs – FND expects these changes to drive >$5.5m/>$10m of EBITDA improvements in FY26/FY27.

In aggregate, these developments saw substantial upgrades to FND’s FY26 and FY27 profit expectations, with FND on track to deliver $50m+ free cash flow in FY27. We believe significant upside exists from these levels, particularly if FND can deliver on its plans and position its Indian subsidiary for a $1b+ IPO in 2026.

MDR was the other holding that announced a capital raise.  Following its last capital raising in 2022 at 16c, MDR’s share price had been performing strongly on the back of an impressive turnaround in EBITDA from -$11m in FY22 to +$7m in FY24, with strategic player, EBOS, paying $14m at 50c to increase its position in MDR to 10%  in July 2024. However, while MDR’s ANZ business has continued to grow,  FY25 will see MDR report a very poor overall result as its US customers defer spending on vaccine and other medical programs. MDR’s FY25 revenues are expected to fall back to FY23 levels, resulting in MDR generating an EBITDA loss for the year. This has put pressure on MDR’s balance sheet, resulting in the need for a $5m capital raise.

MDR’s ANZ business – generating ~$25m of high gross margin revenue (~90%) – is expected to grow a further 10-15% next year. MDR are potential sellers of this business as part of their ongoing strategic review to realise value, noting publicly they have received strong interest in the ANZ business as part of this process to date, including several conditional, non-binding proposals. We think there is a good chance that the value of MDR’s ANZ business exceeds MDR’s current EV of ~$70m, meaning that little value is being priced in for MDR’s US business that will generate $75m revenue this year at 60% gross margin. Significant cost cutting in OPEX is expected to see the US business return to profit in FY26. After a painful past 6 months holding MDR, we think at this level the odds look attractive and we doubled our position from 1% to 2% through its recent raise.

Ten years of investing and volatility

DMXCP commenced investing 10 years ago, on 1 April 2015. Our aim on forming DMXCP was to establish a vehicle that would provide investors with exposure to a broad portfolio of genuinely mis-priced under-the-radar opportunities that were difficult for investors to otherwise access  – investing in a part of the market that we are passionate about and that is very much under-owned by most investors. 10 years later, we continue to act consistently with this strategy, having recorded a ~15% annual return, after fees, over the period. We are strong supporters of under-the-radar growing companies, with DMXAM currently a substantial shareholder in 10 nano/micro-cap companies. We have led and/or supported dozens of capital raisings for portfolio companies, while we have also been shareholders in around 20 companies that have been taken over.  

What has also been a regular feature of this past 10-year period, is the volatility that we have experienced, whether related to individual stocks or market driven. We have been invested through significant market volatility associated with Trump’s first tariff regime, the COVID shock and then the post COVID inflation and rising interest rate cycle that particularly impacted small-cap companies. At a stock level, this volatility is often magnified, and we are used to seeing large price movements, in both directions, across many stocks.

However, amongst this volatility, our investment approach has been stable and consistent – owning mispriced, small, profitable, growing companies predominantly exposed to the Australian economy. This has seen us navigate through each of these periods of volatility and, importantly, emerge over time with a stronger portfolio. While not perfect, Australia has a robust and resilient economy with a well-functioning stable democratic system generally supportive of business & is a market that we understand well. Last month we discussed our top 10 holdings at the end of February, and how they are growing more into more valuable companies (included this as Appendix 1 below). Strong earnings growth (100%+ increases in NPAT) in the first half was delivered by EOL, EDU, PPL & KME (all organic) and from AHC & CUP (benefitting from acquisitions).  In addition to the strong earnings momentum, there is also clear value upside, with the likes of CUP, EDU, EVO, SEQ, PFG & KME all trading on ~10x NPATA or cheaper. As these fundamentals suggest, we remain absolutely focussed on owning a portfolio of growing, profitable, mis-priced small companies.

We understand that market volatility and uncertainty is disconcerting.  While it is too early to understand where tariffs and global trade policies will settle, or make a confident assessment of the economic consequences or second order effects of a global trade war, we have strong conviction in our long term investment strategy and that the growth and value characteristics across the portfolio remain very attractive. As we have throughout the various previous periods of market turmoil, we are confident we will again emerge on the other side with a more valuable portfolio.

We thank you for your continued support and look forward to updating you next month.

Appendix 1