We believe that the east coast economic recovery will be slower than consensus expectations and expect that the AGM commentary from most domestically focussed...

We believe that the east coast economic recovery will be slower than consensus expectations and expect that the AGM commentary from most domestically focussed small-cap companies will flag a subdued start to FY15. Our meetings with a raft of cyclical stocks during the August reporting season, including numerous retailers and economically sensitive media stocks, reinforced our views that the first half of FY15 will show little improvement in the operating environment. While the domestic environment remains challenging, we remain bullish on stocks exposed to either a global growth recovery or a US recovery. In the former category, serviced office provider, Servcorp, remains a key exposure with occupancy and margins starting to improve in key regions of America, Japan, UK and the Middle East. In the latter category, the US operations of both Sirtex Medical and Ardent Leisure are expected to be the major drivers of earnings expansion in FY15.