Debt down $130m, earnings ahead. Why this fundie is still buying this ASX small cap

This wsa first published on Livewire Markets on 8 May 2026.

“How can you not be romantic about baseball?” One of the great lines from Moneyball, a movie and a lesson in finding undervalued assets in an inefficient market.

After engaging with Phillip Hudak, Co-Portfolio Manager of Australian Small Companies at Maple-Brown Abbott, I now find myself asking a new question.

“How can you not be romantic about small caps?”

Phillip has dedicated his career to this corner of the market and, like Billy Beane in Moneyball, spends his time – in his own words – “digging for the story behind the story” to consistently add value over the market.

His latest investment thesis is a perfect example. Pricing tailwinds, an adjacent division gaining momentum, a balance sheet ahead of schedule, and a trading update that has already proved him right.

In this Q&A, Phillip shares his latest buy, a new AI infrastructure watchlist addition, a position he has recently trimmed, and why he believes Australian small caps could be quietly setting up for a meaningful catch-up trade.

What’s your most recent investment and why?

Nufarm (ASX: NUF) has been a recent stock investment following the outbreak of the Iran/US conflict – I see a cyclical setup for crop protection products (driven by supply chain challenges lifting pricing) and rising fish oil prices (boosting their Omega-3 seeds business) driving material earnings upgrades and rapid balance sheet deleveraging.

The subsequent recent company trading update shows the thesis starting to play out – 1H earnings came in ahead of consensus, net debt fell ~$130m versus guidance for flat, and management announced an additional $50m cost-out program for FY27, giving greater confidence in the earnings and balance sheet trajectory from here.

Which investment did you add to your watchlist this week?

This week Maas Group (ASX: MGH) was added to the watchlist, drawn by Australia’s structurally strong data centre build-out – driven by hyperscaler investment, cloud migration, and AI workloads.

MGH has lagged the recent strong share price performance of its data centre-exposed contractor peers given governance concerns and as the market digests its strategy reset following the recent divisional sale – including its potential emerging role supplying the ‘power cubes’ that connect Firmus Technologies to the grid.

The company is worth adding to the watchlist given the potential to play catch-up with other contractors, including Southern Cross Electrical (ASX: SXE) which is a current holding.

What is the most recent investment you have trimmed or sold and what drove this decision?

Sims (ASX: SGM) has been a core holding since last year, being an idiosyncratic way to play the AI capex boom.

Hyperscalers are refreshing data centre hardware at an accelerated pace, and surging memory prices are lifting the resale value of decommissioned servers and components flowing through Sims Lifecycle Services (SLS).

However, the position has been recently trimmed as memory pricing and resale margins appear to be coming back from a short-term cyclical peak, raising downside risk if pricing normalises, even as volumes remain strong.

While the metals and other divisions are recovering, their improvement is more gradual, meaning near-term group earnings momentum remains highly exposed to any easing in memory pricing rather than the broader operational recovery.

What’s your favourite chart or data point from this week?

The Australian small cap market has underperformed both the larger end of the domestic equity market and major offshore equity markets – there is upside risk at the smaller end of the market playing catch-up following any US/Iran resolution.

Source: MBA, FactSet, US – S&P500, Europe – Euro Stoxx 50, Japan – Nikkei 225, Australian Small Caps – S&P/ASX Small Ordinaries (101-500), Australian Large Caps – S&P/ASX50 (1-50), Australian Mid Caps – S&P/ASX Mid Caps (1-100), 30 April 2026.

What was your weekly high – a standout market moment or highlight?

My highlight was Codan’s (ASX: CDA) stellar profit update last week, with faster-than-expected margin expansion in the Communications division.

It’s a great example of why I love small cap investing and going on the journey with companies – what began as an Adelaide-based metal detector maker has quietly evolved into a global provider of advanced communications solutions across military, unmanned systems, broadcast and law enforcement, and is now well on its way to ASX 100 status.

What was your weekly low – a market disappointment or challenge?

The lacklustre performance bounce we have seen in Australian small caps relative to both the larger end of the domestic equity market and offshore markets since markets bottomed in late March 2026.

Despite some macro headwinds, including a rising domestic interest rate cycle and elevated energy costs, the smaller end of the market offers investors some exciting thematic exposures, including defence, AI capex and energy transition.

What first drew you to markets and what continues to keep you inspired today?

What first drew me to Australian small caps was the ability to make a difference – it’s an inefficient, under-researched segment of the market where being genuinely inquisitive and digging for the story behind the story can consistently add value over the market.

What keeps me inspired is the privilege of discovering companies in their early chapters, knowing that some of today’s overlooked small caps can become tomorrow’s market leaders – being part of that journey never gets old.

What’s one piece of advice you’d give to new investors?

Being humble when investing in markets – avoid overconfidence and stay inquisitive.

Focus on controlling the controllables, with research effort spent on discovering company-specific insights that are yet to be priced in by the market, rather than on macro drivers which are harder to reliably predict.

How do you unwind when you’re not thinking about the market?

I enjoy watching most types of sport, notably rugby league, and am a long-time avid Sydney Roosters supporter.

Rapid fire!

Favourite investing book?

‘The Seven Deadly Sins of Investing: How to Conquer Your Worst Impulses And Save Your Financial Future’ – is a great reminder of the common behavioural traps – overconfidence, impatience, herd-following and the like – so you can sidestep them and keep your investment strategy on track.

It’s also worth being aware of long-term investment cycles – favourite reads here include ‘Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better’ and ‘The Fourth Turning Is Here: What the Seasons of History Tell Us about How and When This Crisis Will End’.

Favourite investing or finance/markets-related podcast?

‘Forward Guidance with Felix Jauvin’ is a high-quality podcast offering key weekly macro and industry insights on what is driving offshore equity markets – not just the narrative – and surfaces some great investment ideas that eventually flow through to the Australian equity market.

The first thing you read each morning?

Usually check X (formerly Twitter) for overnight updates, the CNBC app for overnight market and stock moves, and the key headlines in the AFR.

Favourite restaurant?

My favourite restaurant is Vitaly Italian Pizza Restaurant – a great place to take a young family, and the Vitaly Special Pizza with hot salami, rocket, ricotta, and hot honey is my top menu pick.

Something people are surprised to learn about you?

Before joining the buy-side in 2007, I worked as an investment consultant – sitting on the other side of the table gave me a valuable perspective on what end investors are really looking for and how to manage a portfolio better, and that lens still shapes how I engage with clients today.

Disclaimer
This communication is prepared by Antipodes Partners Limited ABN 29 602 042 035 AFSL 481 580 as the investment manager of the Maple-Brown Abbott Australian Small Companies Fund (ARSN 658 552 688) (the Fund’). Maple-Brown Abbott Limited (‘MBA’) ABN 73 001 208 564 AFSL 237296 (‘MBAL’) is the product issuer and Responsible Entity of the Fund. MBAL is not licensed to provide financial product advice. MBAL and Antipodes are subsidiaries of Antipodes Partners Holding Limited (ABN 91 602 828 526). Please read the Product Disclosure Statement (PDS’) and Target Market Determination (TMD’). Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.   Any views expressed on individual stocks or other investments, or any forecasts or estimates, are not a recommendation to buy, sell or hold, they are point in time views and may be based on certain assumptions and qualifications not set out in part or in full in this document. Information derived from sources is believed to be accurate; however, such information has not been independently verified and may be subject to assumptions and qualifications not described in this document. To the extent permitted by law, neither MBA, nor any of its related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of this information, or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on this information. Units in the Fund mentioned in this presentation are issued by MBA. Before making a decision whether to acquire, or to continue to hold an investment in the Fund or any other securities, investors should obtain and consider the current PDS and Target Market Determination (TMD) or any other relevant disclosure document of those products. For the Fund, the PDS, AIB and TMD are available at maple-brownabbott.com/document-library or by calling +61 2 8059 7671.  This information is current as of 31 March 2026 and is subject to change at any time without notice. © 2026 Maple-Brown Abbott Limited.