OC Funds trip to the USA

Our US trip reinforced our confidence in two of the Funds core holdings, namely Ardent Leisure (AAD) and Treasury Group (TRG). We toured one of AAD’s Main Event sites in Dallas, Texas with the management team and it confirmed our belief that this division is an outstanding growth engine that ought to underpin AAD for many years to come. Main Event offers customers entertainment in the form of bowling, laser tag, mini golf, arcade games, and multiple dining options. The concept resonates strongly with family, corporates and school groups and AAD has plans to significantly expand the Main Event footprint across the US from its current 20 centres with a minimum of a further seven new centres to open in FY16 and FY17. Importantly, the concept seems highly scalable and has mass market appeal. Management would not be drawn on the market potential, which we estimate could be several hundred sites, although they did concede that the opportunity was large, in its infancy and ought to be self funding.
OC Funds Management

AAD recently released a third quarter update which highlighted the potential of Main Event, with EBITDA up 63.7% year-on-year. The management of Main Event was experienced and knowledgeable and seem to operate relatively autonomously from Australian head office (which is pleasing given the recent change of CEO). Our modelling suggests that Main Event will contribute more than half of AAD’s earnings within two years and is the key reason we remain shareholders, notwithstanding the current issues with the health clubs.

We were also impressed by the new Treasury Group management team, led by MD Tim Carver, whom we met at the Northern Light’s head office in Seattle. Tim Carver and fellow executive director, Paul Greenwood, founded Northern Lights in 2006 and have built it into a multi-boutique asset management group representing 13 associated funds management businesses and with over $24b in assets under management. Since announcing its merger with Northern Lights in August 2014, it has been clear that Treasury Group is morphing into a geographically diversified asset management group with global aspirations. Our site visit taught us two important things. Firstly, it gave us confidence that Northern Lights appears to have strong cultural alignment and has similar values to the existing TRG team, which is critical given the people orientated nature of asset management. Secondly, our discussions on the strategic direction of the combined business gave us confidence that Tim and his team are indeed the right people to build a globally relevant asset management house and that they have ample experience and capability to execute on their vision.

OC Funds Management
OC Funds Management

OC Funds Management (OC) is a boutique small cap specialist which was founded by its investment staff and non-executive directors. OC commenced operated in December 2000 with the launch of two long only small cap Australian equity funds, the OC...


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