Moving on

At the time the brewery closed, it was likely losing money, or making a minimal return on capital and the core of the business was the ownership of the pubs. The Young family continue to be meaningful shareholders to this day, with Torquil Sligo-Young previously working in the business, and now a member of its board of directors. Whilst now a professional pub operator, this connection has arguably been a key to business success. It has facilitated a focus on high quality operations, investing in the pubs it owns and maintaining a conservative financial structure. This contrasts with some of the large UK pub owners, without controlling shareholders, who have used immense financial leverage to grow their businesses and have hurt non-associated shareholders. This financial strength shone through across the covid-affected period, allowing the company to keep going with only the addition of modest debt, well below its full debt capacity.

That is not to say that Young’s won’t buy pubs. They have actively rotated and grown their portfolio of pubs, achieving solid returns on capital. Most recently, Young’s completed the acquisition of fellow listed pub owner, The City Pub Group, which added 51 pubs to the portfolio, predominantly in London and the South of the UK. This was a win-win transaction, with City Pub’s small size leading it to be undervalued by the market. Young’s as a larger organisation can achieve greater returns from the portfolio with easy wins, such as combining two sets of listing and board costs into one and achieving discounts on product sourcing. As a well-capitalised organisation, Young’s will likely be able to invest more capital into the pubs making them more attractive to patrons. The combination has progressed well, with staff onboarded and profit margins for the pubs beginning to show expansion.

More recently, as sentiment around UK pubs has soured, so too has the price of Young’s shares, particularly the voting A shares. The management team and board have shown capital allocation discipline, undertaking a buyback at discounted prices. This option is only available to the company because of its financial discipline.

The value

Given the quality of management and the pubs owned, one may expect Young’s to trade at a premium valuation. That is not the case today. Young’s values its property at market value on its balance sheet, allowing for a simple calculation of its net asset value (NAV). As at the end of December 2025, the company’s Voting A shares traded at more than a 40% discount to this value. The assumptions used in these valuations are also likely to be conservative and significantly undervalue the freehold estate when compared to similar Australian properties, which can trade at capitalisation rates below 5.0%.

But wait there’s more! In 2005, Young’s simplified its capital structure to maintain two classes of shares (down from three) and moved to the Alternative Investment Market (AIM) from the main listing segment of the London Stock Exchange. Young’s lists both its voting A shares and its non-voting shares (under code AIM:YNGN). Its non-voting shares have traded at a meaningful discount to the voting shares for a long time. Over the past 8 years the discount has averaged 33% and was as wide as 50% in 2021. This discount has somewhat closed, and ended the period just over 20%, aided by the fact the aforementioned share buyback is taking place solely amongst the non-voting shares. The portfolio has only ever invested in the non-voting shares, which has cushioned some of the pain of Young’s weaker share price performance, as the discount has closed.² We are more than happy to relinquish this voting power as management, the board and the Young family have done a very good job in charge of the business for a long time. We would only ever vote with management and see no need in telling some of the best operators in the sector how to do their job. The discount we receive for giving up these voting rights is also extremely attractive. At period end the non-voting shares traded at a 54% discount to the readily assessable NAV of Young’s. At that valuation we are happy to keep a watchful eye on the cyclical factors affecting the industry and hopefully enjoy the returns created by a best in class management team with a well-positioned portfolio.

Footnotes

A “small breakfast” of a fried egg, bacon, sausage, beans and a hash brown can cost as little as £2.99 at Weatherspoons!
The Young’s non-voting shares ended the period at a small discount to the portfolio’s cost base.

Cromwell Global Opportunities Fund Performance

For more in-depth performance commentary on select undervalued international securities, sign up to the Cromwell Global Opportunities Fund quarterly update!

Sign up

November 27, 2025

Stock in Focus – Alkane Resources

Jordan Lipson, Portfolio Manager, Cromwell Phoenix Global Opportunities Fund

Sitting on a Gold Mine

The Cromwell Phoenix Global Opportunity Fund’s mandate is simple but wide: to seek out attractive opportunities across the small-cap universe where securities trade at discounts to readily assessable net asset values (NAVs), or where special situations create strong risk-adjusted return potential. This allows us to go wherever opportunities may present. Towards the end of 2024 an opportunity presented to invest in gold miners. A fast-rising gold price and a muted response from gold miners led to a compelling investment opportunity. These purchases, along with a timely addition in May this year, meaningfully contributed to returns over the period.

“Across 2023 and 2024 the price of gold rose 43% (in USD), whereas gold miners only rose ~17%.”

As can be seen above, across 2023 and 2024 the price of gold rose 43% (in USD), whereas gold miners only rose ~17%. This is the opposite of what would be expected to happen. Some of this relates to a more challenged cost environment, but that alone can’t explain this outcome. What happened next is shown in Figure 3. It expands on from Figure 2, beginning in 2023 and continuing until the end of the September 2025 quarter.

As can be seen, the environment for gold has been extremely conducive since the end of 2024. The gold price continued to rise, and gold miners have finally seen the upside leverage to the gold price reflected in their own share prices.

Figure 3

Alkane Resources

Alkane Resources has long been listed on the Australian Stock Exchange and has been a holding of the domestically focused Cromwell Phoenix Opportunities Fund for many years. In April 2025, Alkane announced a transformational merger of equals proposal with Canadian-listed Mandalay Resources. The transaction was structured to have Alkane acquire Mandalay Resources and for shareholders of Alkane to end up owning 45% of the combined business with Mandalay shareholders owning the remaining 55%. This provided an opportunity for this portfolio to purchase a position in Mandalay, which was trading at a small discount to the merger price implied by Alkane’s Australian share price, and more importantly a meaningful discount to the merged company’s NAV and our assessment of valuation. The merger was highly likely to close as the transaction was recommended by both sets of board members and supported by major shareholders.

The merger represented an attractive proposition for both sets of shareholders. Mandalay had struggled for market relevance, as a closely held stock, listed in Canada, with assets in Australia and Sweden. For Alkane, the merger transforms the business from a single-mine producer into a multi-mine company, reducing asset-specific risk and improving production and earnings resilience. Furthermore, Alkane’s operating results have been burdened by legacy hedging contracts, whereas Mandalay is unhedged, providing the combined group with more direct exposure to movements in the gold price. The increased scale of the combined company has facilitated greater investor interest and attracted meaningful passive investment inflows. Alkane was added to the ASX 300 Index in late September and also received an upweighting in the US$8 billion VanEck Junior Gold Miners ETF (GDXJ), reflecting its enhanced market capitalisation and improved free float. Furthermore, the combined company is being run by long-time Alkane CEO Nic Earner, for whom we have a great deal of respect.

The merger was approved and successfully closed in early August. The portfolio’s holding in Mandalay until August marginally detracted value relative to indices, however since August, the holding (in what is now the merged Alkane Resources) has returned almost 66% in CAD. The position has been trimmed as it has risen, however remains 3.0% of portfolio assets at period end.

Current positioning

With the recent rally in the price of gold miners, it is reasonable to wonder if they still represent an attractive investment opportunity. The answer in our view is broadly yes. The same biases that led to undervaluation in the past are still prevalent today as the gold price climbs higher. The portfolio has however been a net seller of these stocks for risk management reasons, as we do not wish to have too large an exposure to this one specific theme. The price to (spot) NAV of many gold stocks remains near 0.5, despite the strong performance. If current gold pricing holds, gold miners should produce strong profitability, cash flow and returns in the future.

As at period end, direct exposure to gold miners represents approximately 9.5% of the portfolio.

Footnotes

In reality, a strong gold market would lead to tighter labour market conditions and other factors that would increase the cost of mining, but this is small in comparison to the increase in profitability. There may also be a royalty associated the gold mined, which is a variable cost based on the gold price.
This is merely a market where a participant agrees to buy or sell a commodity at an agreed price at a point in the future. It can be used to speculate (or hedge) on the future price of the commodity. All things equal, a futures price should be the spot price adjusted for the time value of money and storage costs.

Cromwell Global Opportunities Fund Performance

For more in-depth performance commentary on select undervalued international securities, sign up to the Cromwell Global Opportunities Fund quarterly update!

Sign up

November 27, 2025

CEO Update

Jonathan Callaghan, Chief Executive Officer, Cromwell Property Group

We recently held our Annual General Meeting, where we reflected on a transformative year for Cromwell. FY25 marked a turning point as we simplified our business, strengthened our balance sheet, and laid the foundation for sustainable growth. I am pleased to share some of the key achievements and strategic initiatives that position us for an exciting future.

Operational highlights

Our Investment Portfolio continues to perform exceptionally well. Occupancy sits at a sector-leading 97.6%, and our weighted average lease expiry remains strong at 5.0 years. During the year, we leased over 51,000 square metres, including a landmark 15-year pre-lease to the Commonwealth Government at our Barton, ACT development—a future flagship asset for our Investment Management business.

Financial performance

We delivered an operating profit of $108.6 million and funds from operations of $105.7 million, equating to 4.0 cents per security. While these figures reflect the impact of our European exit and prior-year one-off fees, they underscore the resilience of our Australian earnings base. Importantly, we reduced Group gearing from 38.9% to 28.2% through $1.6 billion in non-core asset sales, and we now have $504 million in deployable liquidity. This strong position enables us to provide distribution guidance for FY26 of 3.0 cents per security—the first time in several years—supported by secure income streams, 69% of which come from Government and other blue-chip tenants.

Strategic direction

Our strategy is clear: transition toward a capital-light investment management model while maintaining a high-performing portfolio. Recent initiatives demonstrate this approach in action.

Landmark Barton, ACT development

We have commenced development of a fully electric, 6-star rated office building in Barton, ACT, for a Commonwealth Government tenant. This project, due for completion in 2027, will be a prime opportunity to attract capital partners when the time is right.

Growth in AUM through strategic industrial portfolio acquisition

We have entered into a conditional agreement to acquire a 19.9% interest in Straits Real Estate’s Australian Industrial portfolio and its management platform, Terre Property Partners. The portfolio comprises seven high-quality industrial assets with total value of $470 million, located in key logistics hubs across Victoria and South Australia.

The acquisition will cost $47.6 million for the portfolio stake and $2 million for the Terre Property Partners platform. It will be funded from existing group liquidity and is expected to deliver stable, recurring income to the Group through distributions from our partial portfolio ownership and fund management fees. This transaction will grow assets under management by approximately $540 million, which includes two single assets also currently under Terre Property Partners’ management.

This strategic acquisition aligns well with Cromwell’s existing portfolio, enhancing asset and income diversification while strengthening our position through new capital partnerships.

Looking ahead

Cromwell will continue to expand its Funds Management platform through organic growth, scaling existing products, and strategic acquisitions. We will leverage our strong capital position and improving market conditions to accelerate growth, drive recurring fee income, and deliver long-term value for our investors.

November 14, 2025

Turning operations into strategic advantage: Cromwell’s Facilities Management Team leads the way

Cromwell’s Facilities Management (FM) team has been named FM Organisation of the Year by the Facilities Management Association of Australia — a recognition that reflects not just operational excellence, but strategic value. The FM unit consistently outperforms industry benchmarks, proving that focused leadership and smart execution can drive enterprise-wide impact. For investors, this signals Cromwell’s ability to deliver the deep expertise and capability typically associated with large-scale organisations, while maintaining the agility, responsiveness, and personalised service of a boutique team. Below is an overview of the team’s key achievements that contributed to this national recognition, along with insights into how a high-performing FM function supports investor outcomes through enhanced asset performance, tenant satisfaction, and operational resilience.

The role of Facilities Managers

Facilities Managers oversee the day-to-day operations of Cromwell’s buildings, ensuring they are safe, efficient, and aligned with tenant needs. Their responsibilities span maintenance, compliance, sustainability, and service delivery — all of which directly influence tenant satisfaction and asset performance. At Cromwell, the FM team plays a pivotal role in translating strategic objectives into operational outcomes, working closely with Asset Managers to ensure every decision supports long-term portfolio value.

Elevating industry standards

Beyond internal performance, Cromwell’s FM team contributes to sector-wide advancement. They actively participate in:

Property Council of Australia working groups
NABERS stakeholder panels
Industry events such as the Queensland FMA’s World FM Day, where Head of Facilities Management, Chris Eske presented on “Thriving in a World of Change”

Internally, quarterly FM forums distil site-level insights into technical guidelines and procurement frameworks, driving consistent performance uplift. Externally, Cromwell shares learnings through Insight magazine, LinkedIn, and its website — offering replicable models for peers seeking to improve sustainability and service delivery.

Conclusion

Cromwell’s FM team exemplifies how operational capability can be transformed into strategic value. Through leadership, innovation, and a relentless focus on tenant experience and sustainability, the team continues to deliver outcomes that exceed industry benchmarks. Their achievements support Cromwell’s organisational goals and contribute to raising the standard of facilities management across the sector.

Update: The awards concluded on 4 December, and we’re proud to announce that Cromwell’s Facilities Management team has been named FM Organisation of the Year. Congratulations to the entire team on this outstanding achievement!

More insights from our property team

08/08/2025

Cromwell Unveils Landmark Project and Debt Refinance

Cromwell Property Group (ASX:CMW) (Cromwell or The Group), today announces it has entered into an agreement for lease with a Commonwealth Government e…

Discover More

08/08/2025

Strategic Asset Enhancement: Unlocking Long-Term Value at 400 George Street

With a lobby transformation underway, 400 George Street is entering a new phase of strategic enhancement—one designed to elevate its market position…

Discover More

14/05/2025

An inside look: Transforming office spaces

Cromwell combines a unique blend of tenant focus and expertise, backed by a strong track record of managing and delivering complex refurbishments and …

Discover More

August 8, 2025

Stock in Focus – BWP Trust

No More Bunnings Snags!!!

Phoenix Portfolios Managing Director, Stuart Cartledge

Phoenix has long discussed the importance of assessing governance in its investment process. The much-repeated Charlie Munger quote “show me the incentives and I will show you the outcome,” rings as true today as when he first said it. As such, we have maintained a preference for internally managed vehicles over those managed externally by fund managers focused on growing their funds under management. In June, BWP Trust (BWP) announced a major transaction, comprising the internalisation of management, along with a lease reset for many of the Bunnings tenanted properties owned by the trust. These interlinked transactions removed two of the key “snags” that were holding back our investment in the stock.

Snapshot

Key update
In June, BWP Trust announced two major changes:

Internalisation of management – Ending its external management by Wesfarmers, BWP paid $142.6 million (10.6x FY26 EBIT) to take control.
Lease reset – Extended lease terms on 62 Bunnings properties, increasing the WALE from 4.6 to 9.5 years, boosting property value by an estimated $50 million.

Why it matters

Better alignment: Internal management means decisions now serve unitholders directly, as opposed to serving the dual interests of unitholders and the external manager.
Cost savings: Expected to save over $5 million annually, with 2% dividend accretion in FY26.
Improved asset quality: Longer leases make properties more attractive and saleable.
Capital investment: $86 million committed to property upgrades, with $56 million rentalised and $30 million co-funded with Bunnings.

Valuation and outlook

BWP now trades at $3.52/unit, a 7% discount to its pro-forma NTA of $3.79/unit.
Historically traded at a premium due to strong tenant (Bunnings) and reliable dividends.
Due to the above changes, Phoenix has started buying BWP units again.

A brief history

BWP conducted an initial public offering (IPO) in 1998, initially comprising 16 hardware retail properties tenanted by Bunnings Warehouse and 4 properties under development, to be tenanted by Bunnings. These properties were vended into the trust by Wesfarmers, the owner of the Bunnings Warehouse business. 99 million units were to be issued to public shareholders, with 33 million units subscribed to by Wesfarmers, all at an offer price of $1.00 per unit. Of the 20 initial properties, 15 are still owned by BWP. Their valuation has increased from $133.1 million to $644 million today, representing growth of 6% per annum. The IPO portfolio was vended to BWP at an initial yield of ~9.0%, whilst the most recent valuation showed a capitalisation rate of 5.4%. Despite this, much of the value appreciation has been driven by rent growth, with increases in rental payments growing 4.3% per annum for the properties held since IPO. Returns to shareholders have also been solid, with BWP producing a total return of 11.8% per annum since IPO.

It is not only per share metrics that have grown. The units on issue have grown to 713.5 million, increasing more than 4x when compared to 1998. Much of this equity issuance did occur in capital raises above, or near net tangible asset backing. This growth may well have served BWP unitholders well, diversifying the portfolio and creating a more relevant entity, but it is worth acknowledging that on a per share basis, unitholders would have done perfectly well merely holding onto the initial portfolio. It is not questionable that the external manager of BWP, Wesfarmers, has very clearly benefited from this growth, as the recent transaction proves.

These interlinked transactions removed two of the key “snags” that were holding back our investment in the stock.

What to do about it?

For much of its history, BWP has traded at a premium to its net tangible asset backing. A strong, prominent covenant and steadily growing dividends attracted a large retail shareholder base to the stock, supporting valuation over time. Given elevated share prices, along with an awareness of negative optionality and an external management structure with poor incentives, Phoenix has very rarely held any position in BWP¹. As at the end of June, BWP traded at $3.52 per unit, approximately a 7% discount to the pro-forma net tangible asset backing of $3.79 per unit. The capitalisation rate used to deduce this value compares favourably to recent transactions. All told, this transaction removes two “snags” with investing in BWP. Namely, a relatively short WALE, creating a large degree of uncertainty in the short to medium term and perhaps more importantly, aligns incentives between BWP’s management and those of independent unitholders². Phoenix has also been impressed with the quality of BWP management and board members and the transactions they have undertaken.

Given this and the stock’s reasonable valuation, the portfolio has begun purchasing BWP units for the first time in a long time. Owning a rock solid portfolio of properties leased to one of the strongest tenants in Australia, with a strong, efficient and aligned management team, at a discount to somewhat conservative independent valuations, seems like a worthy investment.

¹ Phoenix has briefly held positions in BWP in times of temporary weakness, but quickly reduced the position as it returned to fair value.

² The proposed remuneration framework laid out in the meeting booklet is top quartile for property companies under coverage, with remuneration outcomes closely linked to shareholder returns.

August 8, 2025

Stock in Focus – Hammond Manufacturing

Jordan Lipson, Fund Manager, Cromwell Phoenix Global Opportunities Fund

More than 100 years ago, Oliver Hammond was on the way to supporting a nine-person family in a small house behind train tracks in Guelph, Ontario, Canada. Seeking to improve the family’s life, Oliver set up a pedal-powered lathe in a backyard shed. Oliver and his two sons worked in the business until Oliver’s early death, at which point his wife, Lillian, continued the business with her sons and daughters. Foot power soon gave way to electricity, and the company, then known as O.S. Hammond and Son began producing radio sets, battery chargers and related devices.

Snapshot

Background

Founded over 100 years ago in Guelph, Ontario, Hammond Manufacturing (HMM) started as a family-run business making radio sets and battery chargers. Today, it focuses on electrical enclosures, racks, and cabinets. In 2001, the company split into two:

HMM (enclosures) with Robert Hammond as Chair and CEO and controlling shareholder of HMM
Hammond Power Solutions (HPS) (transformers) with William Hammond as Chair and controlling shareholder of HPS

Both are listed on the Toronto Stock Exchange and serve similar markets, but their valuations differ significantly.

Valuation gap: HMM vs. HPS

HPS: Market cap over $1.5 billion¹, trades at 17x earnings, with strong investor relations and analyst coverage.
HMM: Market cap just over $100M, trades at 6x earnings, with minimal investor outreach and limited public float (40% owned by CEO Robert Hammond).

Despite HMM’s solid growth (10% revenue and 25% EBIT CAGR over 7 years), it remains undervalued.

Strengths of HMM

Conservative, long-term focus: CEO Robert Hammond emphasizes security and stakeholder value.
Customer-first approach: High inventory levels and custom solutions ensure fast delivery and strong relationships.
Property ownership: Owns over 500,000 sq ft of facilities, held at depreciated cost—adding hidden value.
Clean financials: Transparent reporting and disciplined capital allocation.

Valuation potential

Comparable company: Nvent (owner of Hoffman, HMM’s main competitor) trades at 18x EBITDA.
Recent deal: Nvent bought Trachte (similar business) for 12x EBITDA.
If HMM were valued similarly, its share price could be 4x higher.

Outlook

HMM trades at a deep discount to both earnings and book value.
While a takeover is unlikely (due to Robert Hammond’s conservative approach), the business is well-positioned for long-term value creation.
Investors may need patience, but the current price offers a compelling opportunity.

1 All currency in this commentary refers to Canadian Dollars unless otherwise noted.

A tale of two Hammonds

HPS has unequivocally delivered great results in recent times, with growth driven by demand from data centres as well as other industrial applications. HPS also has a highly professional investor relations function, with detailed quarterly results presentations, slick ESG reporting and analyst coverage by major Canadian investment banks. HPS has been rewarded with a fair valuation. It has a market cap above $1.5 billion¹ and trades on a price to earnings ratio above 17x. While HMM’s business hasn’t quite kept pace with HPS’s eye watering growth, over the past seven years it has grown revenues at approximately 10%
per annum and earnings before interest and tax (EBIT) at a rate of approximately 25% per annum. For all this good work, HMM has been “rewarded” with a price to earnings ratio of approximately 6x. HMM’s market capitalisation is just above $100 million, and shares are almost 40% owned by Robert Hammond leaving limited free float, partly explaining the cheap valuation. Furthermore, HMM’s investor relations function is almost non-existent, with a website out of the early 2000s and major updates from the Chairman limited to concise yearly letters in a mostly black and white annual report. As an example,
the entirety of the most recent letter can be seen here.

The lack of shiny presentations is not of concern. The financial statements are remarkably clean and understandable, and capital allocation priorities are clear, reasonable and focused on long term stakeholder outcomes. This is preferable to well marketed presentations, with highly adjusted earnings figures, which do not resemble the earnings power of the business. Despite this, it may in part explain some of HMM’s cheap valuation.

A comparison

The largest competitor to HMM’s electrical enclosure business is Hoffman, which is wholly owned by US-listed business Nvent. The enitre company has a market capitalisation of more than USD$12 billion and owns related businesses such as those that produce cable management and power management products. Nvent recently acquire Trachte, a business that manufactures control buildings, for USD$695 million, or a price of 12x its forecast earnings before interest, tax, depreciation and amortisation (EBITDA). The company was at pains to equate the quality of this business to its enclosures business, with the CEO stating, “these control buildings are essentially larger enclosures.” If HMM were to be valued at Trachte’s acquisition multiple its share price would be four times higher (without adjusting for HMM’s property ownership). Nvent itself is valued at an enterprise value to EBITDA ratio of approximately 18 times. Valuing HMM at this multiple produces silly outcomes for HMM’s potential equity returns. Nvent’s enclosure business does have higher earnings margins and return on assets than HMM, but much of this is attributable to the fact this segment does not include apportioned centralised costs. In addition, Nvent runs with a leaner inventory profile and does not own its property.

Nvent has refined its portfolio acquiring new businesses and selling those it that no longer fit into its “connect and protect” businesses. In Nvent’s most recent earnings call, its CEO stated, “And on the acquisition M&A pipeline question, I would like to say that where we play in this Connect and Protect space, it’s about a $100 billion opportunity. And remember, at $3-plus billion, we’re one of the larger players. So it’s very fragmented. And I think there’s a lot of opportunities.” HMM’s business would fit perfectly for Nvent’s desires, as there would no doubt be an abundance of synergies to extract. It is highly likely that this would be anathema to Robert Hammond, who prefers to run a more secure, but less efficient business focussed on all stakeholders, including customers and employees. However, it is likely that Nvent would pay many multiples of today’s share price to acquire HMM.

May 14, 2025

Stock in Focus – Nam Cheong Limited

Jordan Lipson, Portfolio Manager of the Cromwell Phoenix Global Opportunities Fund

The Cromwell Phoenix Global Opportunities Fund added 2.1% in absolute terms over the March quarter, outperforming global indices large and small. Nam Cheong Limited (NCL) was the biggest contributor, rising meaningfully as investors become more comfortable with its post-bankruptcy future. This article delves into NCL’s journey, its strategic partnerships, and the factors contributing to its compelling risk/reward opportunity.

Almost 70 years ago, a 14-year-old Tan Sri Datuk Tiong Su Kouk (Tan Sri) was given 3.40 Malaysian Ringgit (less than AUD 2) to start a career as a fishmonger. A hard work ethic and a focus on customers ensured early success. In his 20s, Tan Sri saw the benefits of technology from Japan, in particular the newly discovered food freezing technology. Malaysians were initially unwilling to trust that frozen food would be edible, so Tan Sri gave out frozen food for free to convince customers to buy his produce. This innovation led to the creation of CCK Consolidated, a vertically integrated leader in frozen foods in Malaysia, which is still in business, controlled by Tan Sri and listed on the Malaysian Stock Exchange. Staying close to the seas, Tan Sri subsequently partnered with Chinese shipbuilders to start a business known as Nam Cheong Limited (NCL).

NCL today is the owner of 36 offshore support vessels (OSVs) which service the Malaysian offshore energy sector. Running NCL has been anything but smooth sailing. The company built and acquired as many boats as it could during the last offshore drilling boom, heavily relying on debt, much like others in the industry. This business is exceptionally cyclical and NCL was forced to initially restructure its debt in 2018 to meet payments to creditors. Whilst business was hardly thriving, things somewhat steadied, until the COVID-19 pandemic caused oil prices to retreat and cripple the OSV business.

This led to NCL declaring bankruptcy. Share trading was halted, and negotiations began with lender banks. With a recovery on the horizon, after meaningful negotiations, the final restructure agreement was signed and approved on 1 March 2024. Under the terms of the deal, much of the debt would be converted to equity, Tan Sri would provide more capital to the business in return for new equity, and the remaining debt would be converted into “equity friendly” liabilities, to be repaid over an extended period at below market interest rates.

Phoenix in the Market

Phoenix has followed the OSV market for some time, with the domestic Cromwell Phoenix Opportunities Fund initially investing in MMA Offshore (MRM). This investment was a significant contributor to performance as it eventually received a takeover bid at a robust valuation. This portfolio has also successfully invested in industry leader Tidewater (NYSE:TDW) previously. Both these investments provided relevant background for assessing NCL upon its restructure and eventual relisting on the Singapore Stock Exchange. In particular, valuations could be more precisely assessed using the independent expert’s report associated with MRM’s takeover.

Cromwell Global Opportunities Fund

Value of $100 invested at inception

Past performance is not a reliable indicator of future performance

Conclusion

At period end, NCL remains a top 5 holding as it continues to trade at a substantial discount to NAV. Recent market updates have been mixed, with the global OSV industry somewhat slowing due to the decline in the oil price. However, Malaysian competitor Keyfield Services recently released a strong result and provided an optimistic outlook statement. In particular, Keyfield stated “based on supply and demand analysis of OSVs in Malaysia, there will be a critical shortage of AHTS < 80MT beyond 2030, unless owners acquire new vessels”. These vessels represent the majority of NCL’s NAV. There is no doubt NCL operates in a cyclical industry which has seen countless bankruptcies over time, so an investment is not without risk. However, with a young fleet, market tailwinds, extremely shareholder friendly debt and an aligned controlling shareholder, NCL still represents a compelling risk/reward opportunity.

February 10, 2025

Celebrating five years: Cromwell Phoenix Global Opportunities Fund

The Cromwell Phoenix Global Opportunities Fund marks five years of disciplined management and strategic investments in attractive, yet overlooked, global securities. Over this period, the Fund has consistently delivered strong returns, outperformed benchmarks, and navigated diverse market conditions with agility and expertise. Each milestone reflects the Fund’s commitment to uncovering value in unique opportunities, fostering long-term success for its investors.

Explore the key moments and achievements that have defined its journey below.

YEAR 0

Created to meet investor demand for global diversification

The Cromwell Phoenix Global Opportunities Fund (Fund) is launched to provide access to overlooked international securities.

YEAR 1-2

Focused on building a strong, risk-adjusted track record
(closed fund)

15.7%p.a.* _{Total returns}

Outperforming Vanguard Total World Stock ETF benchmark by 0.3% p.a.

_{*As at 31 December 2021. Past performance is not indicative of future performance}

YEAR 3

Opened to retail investors

Ensures strategic advantage by enabling investments in small-cap stocks and diverse listed structures.

8.8%p.a.* _{Total returns}

Outperforming Vanguard Total World Stock ETF benchmark by 3.6% p.a.

_{*As at 31 December 2022. Past performance is not indicative of future performance}

YEAR 4

Outperforming market benchmarks

10.3%p.a.* _{Total returns}

Outperforming Vanguard Total World Stock ETF benchmark by 1.0% p.a.

_{*As at 31 December 2023. Past performance is not indicative of future performance}

YEAR 5

Five year milestone

13.5%p.a.* _{Total returns}

Outperforming Vanguard Total World Stock ETF benchmark by 0.7% p.a.

_{*As at 31 December 2022. Past performance is not indicative of future performance}

About Cromwell Phoenix Global Opportunities Fund

Read more about Cromwell Phoenix Global Opportunities Fund, including where to locate the product disclosure statement (PDS) and target market determination (TMD). Investors should consider the PDS and TMD in deciding whether to acquire, or to continue to hold units in the Fund.

Learn more

Cromwell: where our future lies post-European exit

On 15 May 2024, Cromwell announced the sale of the Cromwell Polish Retail Fund for €285 million ($465 million) to Star Capital Finance, a diverse real estate investor based in Prague.

Later that month, Cromwell informed the market that we had entered into a binding agreement for the sale of our European fund management platform and interests – including the Cromwell Italy Urban Logistics Fund and Cromwell European REIT – for a total consideration of €280 million ($457 million) to a Geneva-headquartered, multi-strategy real estate investment manager, Stoneweg SA Group.

Speaking on the European platform sale agreement at the time, Cromwell Chair Dr Gary Weiss said, “this is a turning point for Cromwell to focus on leveraging the exceptional team we have in Australia; to drive value from our local asset and funds management business.”

“In the current operating environment, numerous options were considered to simplify and de-risk the business, and we believe that this transaction will provide the debt reduction and working capital needed to move forward in a focused and value-accretive way.”

Now, with the sale of the European fund management platform sale finalised, Cromwell is completing the simplification of the business, and entering the next exciting phase of our strategy.

We are continuing to refocus on traditional property sectors primarily in Australia – a market in which we have a proven record of active asset management, driving value through enhanced leasing activities, asset upgrades, and ESG repositioning.

In this article, we will examine some of the property sectors that have been identified for future investment, following the settlement of the European platform. Our investment approach is guided by both top-down and bottom-up analysis, with consideration given to a number of cyclical, structural, and secular drivers of performance – such as behavioural shifts, demographic demands, economic factors, market fundamentals, and investor requirements.

This is a turning point for Cromwell to focus on leveraging the exceptional team we have in Australia; to drive value from our local asset and funds management business.

Dr Gary Weiss – Chair, Cromwell Property Group

Office building investment

In Australia, Cromwell manages an investment portfolio of $2.2 billion and funds management platform of $1.5 billion. Central to our business success has been, and will remain, office buildings in large metropolitan centres. We view several segments of the sector as favourable for investment, including Core/Core+ Value Add, Creative Fringe, and ESG Rejuvenation.

Core/Core+ Value Add

The ‘core’ category of office property investments includes a focus on high-quality, stable properties located in prime markets – particularly capital city CBDs. The hallmark of core investments is their ability to generate consistent, long-term income through different cycles and market conditions. These properties form the foundation of Cromwell’s current Australian investment portfolio.

While the office sector continues to face challenges due to global market pressures, there are nuances across and within markets regarding vacancy rates and rental growth outlooks. In Brisbane, for example, the CBD vacancy rate is at the lowest level since 2012, and occupied space has increased since the onset of the pandemic, contributing to higher rents¹. Similarly, the majority of Australian CBD buildings remain well-occupied, with real estate investment research company CBRE estimating more than half of all office buildings have vacancy of less than 5%². This disconnect between sentiment and actual market conditions presents opportunities for investors to acquire quality office assets at attractive prices.

At this point in the cycle, we also see substantial opportunity to generate additional value for investors by leveraging the skills and expertise of our in-house property and project management teams. Delivering carefully considered capital improvements, space fit-outs, and a targeted leasing strategy, can reposition an asset’s appeal to potential occupiers. This process has been successfully repeated by Cromwell across our assets in recent years.

Creative Fringe

Fringe markets are adjacent to major CBDs and provide a number of the same agglomeration and accessibility benefits as CBD precincts, while offering proximity to diverse amenity and a unique cultural feel. In particular, non-traditional and difficult-to-replicate office assets within fringe markets, such as converted warehouses or heritage buildings, often strongly appeal to growing technology and creative industries and support the cultural and brand identity of a firm. This is increasingly important as providing an engaging and dynamic workplace and employee experience becomes more of a central focus.

A key advantage of targeted opportunities in the ‘Creative Fringe’ is the ability to better cater to smaller occupiers. These tenants have been exhibiting a stronger propensity for in-office, face-to-face work, and have been growing most strongly over the last five years in terms of both headcount and office space³. This trend is contributing to the performance of fringe markets, which have ranked first, second, and third for net space demand since the onset of the pandemic⁴. Given their location, they can also be a more affordable option for tenants, reducing the risk of financially induced downsizing and providing a runway for rental growth if demand conditions remain conducive.

ESG Rejuvenation

To ensure that Cromwell maintains optimal returns for investors over the longest possible duration – that the assets we manage generate the returns expected – we need to ensure that Environmental, Social, and Governance (ESG) practices are genuinely integrated and brought to life across all the activities we undertake, across all our investments.

Given the current delays in commercial building construction across Australia, refurbishing existing assets to meet ESG requirements has the potential to be a more , time-efficient – and simultaneously the “greener” option – as opposed to constructing new buildings for tenants. Indeed, preserving original buildings as much as possible will be critical to achieving our net zero targets.

We have the opportunity to identify buildings that are lagging in ESG specifications and apply our collective knowledge to implement strategies and initiatives to enhance ESG ratings and performance. Such improvements can expand the pool of potential tenants, increase net income (via higher rents or lower operational expenses), and support a stronger asset valuation.

Cromwell has already made progress in this space over the past two years, including the McKell building electrification project in Sydney; completion of our solar programme installation; and replacement of HVAC facilities at other locations.

By identifying and modifying existing properties to align more effectively with the long-term sustainability goals of our tenants; our investors’ expectations; and changing market demands, we can create assets that provide long-term, ‘future proof’ returns for investors.

Large format retail (LFR) property

Large format retail currently accounts for approximately 24% of all retail sales in Australia⁹– or an estimated $102.3 billion – according to June 2024 data from the industry’s peak body, the Large Format Retail Association. Large format retail now makes up more than 35% of all retail floor space in Australia¹⁰.

The sector emerged in the 1970s with the development of stand-alone retail stores that sold homemaker products, including furniture, floor coverings, homewares, or whitegoods – a consumer need that had been previously met by traditional department stores.

Why target for investment?

As an investment, large format retail property can offer a more attractive yield and lower capex requirements compared to other sectors, given the simplicity of the property type’s physical structure and associated infrastructure.

In addition, large format retail has faced competition from industrial uses for new sites, constraining supply and contributing to one of the lowest vacancy rates on record¹¹.

Like healthcare property, increases in demand for large format retail shopping centres are closely linked to strong population growth, particularly within the ‘household formation’ lifestyle stage – the period of time that couples or families are establishing a place to live. By extension, high migrant-driven population growth at present is increasing demand for these resources, as these people find and fit-out their new homes.

Urbanisation and smaller households provide another source of demand. The number of occupied dwellings is growing faster than the overall population¹², meaning there is a need for more rooms to be furnished and greater demand for the shopping centres that primarily cater to home-oriented retail categories.

Importantly, the sector has proven to be relatively resilient to online shopping – with consumers preferring to ‘touch and trial’ homewares in easy-to-navigate shopping centres with substantial convenient parking.

Small lot industrial property

Industrial property has been the top-performing real estate sector over the past decade¹³, propelled by strong rental growth as demand for space outpaced development of new supply.

‘Small lot’ industrial refers to industrial assets that are typically smaller than 8,000sqm; support a variety of occupier uses; can be multi-tenanted; and are often located in urban ‘infill’ areas. These assets differ from ‘big box’ assets, which are larger; often logistics-oriented; usually single-tenanted; and situated further from the heart of metropolitan areas, given their size.

Why target for investment?

In 2024, customer demand, scarcity of supply, along with a diverse tenant base, are key drivers for rental growth in this sector. Small lot industrial properties’ proximity to customers is a significant benefit for tenants – occupiers are able to provide customers with products faster, and more flexibly, at the time promised and with lower delivery costs. Being in proximity to customers has the potential to provide stronger rental growth – given that transport is the biggest cost for logistics operators, a location that reduces transport costs is worth paying more in rent for.

The small lot industrial sector caters to an array of industries and uses, from warehousing through to manufacturing. As different industries have different demand drivers and can thrive at different points of the property cycle, having a diverse tenant pool provides leasing optionality.

Often overlooked by institutional capital due to a lack of scale, and by passive private investors due to escalating active management requirements, small lot industrial offers compelling total return opportunities for those with the expertise and capability to identify and improve underappreciated assets.

Footnotes

Cromwell analysis of JLL data (Sep-24)
Source CBRE, Australian CBD Office Occupancy Brief (Sep-23)
Cromwell analysis of JLL (Sep-24) and ABS (Jun-23) data
Cromwell analysis of JLL data (Sep-24)
National Accounts, ABS (Dec-23)
Labour Force, ABS (Feb-24)
Constant prices. Cromwell analysis of AIHW data (last updated October 2023)
Exploring Australian healthcare opportunities, JLL (Jun-22)
Large Format Retail Association
Large Format Retail Association
Cromwell analysis of JLL data (Jun-24)
Cromwell analysis of ABS data
The Property Council of Australia/MSCI All Property Digest, Jun-24
Cromwell analysis of The Property Council of Australia/MSCI All Property Digest, Jun-24

Cromwell annouces HY26 results

Cromwell announces HY26 results

Key Highlights

Financial performance

Investment portfolio performance

Strategic growth initiatives

Investment Management update

Outlook

Related articles

December 2025 direct property market update

December 2025 quarter ASX A-REIT market update

Stock in Focus – Young & Co.’s Brewery PLC

Learn

Stock in Focus – Young & Co.’s Brewery PLC

Jordan Lipson, Portfolio Manager, Cromwell Phoenix Global Opportunities Fund

Old business in a modern world

Looking back

“In this tough environment, Young’s grew like-for-like sales by 5.7% in the previous financial year and has grown that figure by more than inflation for over a decade.”

Moving on

State of the market

The value

Footnotes

Explore the Stock in Focus series

Stock in Focus – BWP Trust

Stock in Focus – Hammond Manufacturing

Stock in Focus – Nam Cheong Limited

Learn

Stock in Focus – Alkane Resources

Jordan Lipson, Portfolio Manager, Cromwell Phoenix Global Opportunities Fund

Sitting on a Gold Mine

Gold vs Gold Miners

“Across 2023 and 2024 the price of gold rose 43% (in USD), whereas gold miners only rose ~17%.”

What happened?

Alkane Resources

Current positioning

Footnotes

Explore the Stock in Focus series

Stock in Focus – BWP Trust

Stock in Focus – Hammond Manufacturing

Stock in Focus – Nam Cheong Limited

Learn

CEO Update

Operational highlights

Financial performance

Strategic direction

Landmark Barton, ACT development

Growth in AUM through strategic industrial portfolio acquisition

Looking ahead

Read more about the latest strategic developments

Learn

Turning operations into strategic advantage: Cromwell’s Facilities Management Team leads the way

The role of Facilities Managers

Performance that drives value

Key milestones

Learning experiences driving service excellence

Elevating industry standards

Conclusion

More insights from our property team

Cromwell Unveils Landmark Project and Debt Refinance

Strategic Asset Enhancement: Unlocking Long-Term Value at 400 George Street

An inside look: Transforming office spaces

Learn

Stock in Focus – BWP Trust

No More Bunnings Snags!!!

Snapshot

Key update In June, BWP Trust announced two major changes:

Why it matters

Valuation and outlook

A brief history

These interlinked transactions removed two of the key “snags” that were holding back our investment in the stock.

Coming to today

What to do about it?

Related posts

Three years after COVID lockdowns: The evolution of the office workplace

What’s coming for commercial property in 2025?

December 2024 direct property market update

Learn

Stock in Focus – Hammond Manufacturing

Snapshot

Background

Key update
In June, BWP Trust announced two major changes:

Focused on building a strong, risk-adjusted track record
(closed fund)

15.7%p.a.* _{Total returns}

8.8%p.a.* _{Total returns}

10.3%p.a.* _{Total returns}

13.5%p.a.* _{Total returns}