Fund Manager Summary
The fund managers believe that Cleanspace Holdings Ltd (CSX) presents a significant investment opportunity due to its strong operating leverage and high gross margins of 70-75%. In their opinion, despite a tumultuous past, the company is shifting back to its industrial business model, which has shown a 37% annual growth rate. The recent restructuring and focus on distributors are expected to enhance profitability as excess costs are eliminated. While the first quarter sales were below expectations, management maintains a 30% growth target for the year, with signs of normal ordering patterns returning. The fund managers anticipate that if CSX achieves its growth targets, it could reach a $2m EBITDA by 2026, making it a compelling prospect despite inherent risks, thus positioning it as a medium-weight holding in the portfolio.
Source: Trading View
Commentary From The Managers
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Mereweather Capital
31 July 2025
$0.76
Summary
- Mereweather Capital continues to hold a positive outlook on Cleanspace Holdings Ltd (CSX).
- CSX reported a strong 26% revenue growth in the first half, which has been maintained into the second half.
- The US segment showed significant growth of 45%, although it is acknowledged this is from a low base.
- A refreshed sales team in the US with an industrial sales background is expected to drive further success in the upcoming financial year.
- Management's sales update did not include margin details, but if margins have remained steady, the second half is projected to be profit breakeven.
- This represents an impressive turnaround for a business that was previously burning over $7 million per half three years ago.
- Mereweather Capital's investment thesis for CSX remains on track, anticipating a sharp increase in profitability if current growth trends continue.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Mereweather Capital
31 July 2025
$0.76
- Mereweather Capital continues to hold a positive outlook on Cleanspace Holdings Ltd (CSX).
- CSX reported a strong 26% revenue growth in the first half, which has been maintained into the second half.
- The US segment showed significant growth of 45%, although it is acknowledged this is from a low base.
- A refreshed sales team in the US with an industrial sales background is expected to drive further success in the upcoming financial year.
- Management's sales update did not include margin details, but if margins have remained steady, the second half is projected to be profit breakeven.
- This represents an impressive turnaround for a business that was previously burning over $7 million per half three years ago.
- Mereweather Capital's investment thesis for CSX remains on track, anticipating a sharp increase in profitability if current growth trends continue.
Summary
Jencay Capital
30 June 2025
$0.52
- Producer of innovative powered air purifying respirators for industrial workplace safety.
- Significant losses were endured following a Covid boom.
- Breakeven result is expected in F25 due to strong revenue growth combined with cost reductions over the last two years.
- Anticipated future revenue growth of 20%+ p.a. combined with cost discipline.
- Should produce strong profit growth over coming years.
Summary
Jencay Capital
31 Mar 2025
$0.47
- Centennial Asset Management believes Zip has the potential to rally in the short term.
- Zip is well positioned to deliver further strong growth in revenues and profitability.
- The US buy now, pay later market remains relatively immature, allowing Zip’s US footprint to grow rapidly.
- New product launches are expected to contribute to the company’s transaction volumes and earnings growth in the coming year.
- Zip’s balance sheet strength and ongoing buyback are expected to support share price performance.
- Zip has surprised the market with better-than-expected earnings over the past year.
- The company has upgraded expectations post the most recent quarter, indicating potential for additional upside earnings risk.
Summary
Mereweather Capital
28 Feb 2025
$0.48
- CSX reported revenue growth of 26%, exceeding the AGM guidance of 15%
- Mereweather Capital initiated its position in CSX as noted in the November monthly report
- Strong gross margins indicate potential for significant profitability if revenue growth is maintained
- The latest result was close to profit breakeven
- There is a positive outlook supported by continued operating cost discipline with a 6% decline from last year
- Mereweather Capital expects CSX to report a profitable second half
Summary
Mereweather Capital
30 Nov 2024
$0.39
- CSX is categorized as a classic busted IPO, experiencing significant revenue growth during the pandemic due to government funding.
- Revenue surged from $11.2m in 2019 to $49.9m in 2021, primarily from healthcare customers.
- The management misinterpreted panic buying as a sustainable trend, pivoting towards a healthcare focus and dramatically increasing costs from $8.2m in 2019 to $24.9m in 2022.
- This shift resulted in a swing from $16m profit in 2021 to $15.1m loss in 2022, leading to a drastic drop in share price.
- Analysis reveals industrial segment revenue is growing at ~37% per year, while healthcare revenue has nearly collapsed.
- CSX is returning to its original business model, selling through distributors, which helps manage costs effectively.
- The company benefits from a high gross margin of 70-75%, with potential for 40% operating profit margins.
- CSX's product innovation, including lighter respirators and patented airflow technology, provides a competitive edge.
- However, the business remains sensitive to supply chain dynamics, causing potentially lumpy sales patterns.
- Mereweather Capital continues to hold due to the recent share price dip and management's guidance of 15% revenue growth and maintaining a 30% target for the year.
- The expectations for 2026 are optimistic as the company aims for breakout profitability.
- Current market capitalization is around $28m, with a strong cash position of $8.5m and no debt.
- The investment is viewed as medium-weight in the portfolio, with potential for increasing the position if the growth thesis holds.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"The path to profitability for CSX seems clearer as the industrial segment gains momentum, yet the market often overlooks such transformative potential. As the business model shifts back to its roots, investors may soon witness a resurgence in profitability that could surprise many."
Last Updated: 31 Jul 2025
Query The Data
Frequently Asked Questions
Who is investing in Cleanspace Holdings Ltd (ASX:CSX)?
Fund managers including Mereweather Capital and Jencay Capital have invested in Cleanspace Holdings Ltd (ASX:CSX).
Why do fund managers invest in Cleanspace Holdings Ltd?
Fund managers are investing in Cleanspace Holdings Ltd (CSX) due to its potential for strong operating leverage and a robust business model. Despite a tumultuous history marked by a pivot towards healthcare that inflated costs and led to losses, CSX's industrial segment has shown impressive growth at approximately 37% annually. The company boasts high gross margins of 70-75%, driven by innovative, lightweight respirator technology that outperforms competitors. With a clean balance sheet and a strategy to refocus on its industrial sales through distributors, CSX is poised for profitability, particularly as it aligns costs with anticipated revenue growth. The market often underestimates the potential of such business models, creating an opportunity for investors as CSX moves towards a profitability inflection point.
What happened to Cleanspace Holdings Ltd (ASX:CSX)?
Fund managers are optimistic about Cleanspace Holdings Ltd (CSX) due to its strong revenue growth of 26%, sustained into the second half of the year. Notably, the US segment showed a remarkable 45% increase, bolstered by a revitalized sales team. With expectations of breakeven profitability this financial year, following significant past losses, the investment thesis remains positive, anticipating further profitability if growth trends continue.