DKCI Fund commentary for the month ended June 30, 2025.
The DKCI Fund was up 9.36% in June (-3.52% YTD & +45.33% trailing twelve months).
In June we sat down and got updates with a majority of our large investments, and we'll highlight their short-term developments as well as the long-term outlooks below. We also have a couple upcoming IPOs that should provide a good return for the fund.
From a macro perspective, the day-to-day market volatility has been tied to the political environment. However, we see a strong second half of the year that carries into 2026 because company earnings are strong; consumer and company balance sheets are strong; and inflation is going in the right direction, which means interest rates should continue to go in the right direction, which will support stock market multiples.
If you run the numbers on increasing inflation due to tariffs against declining house/rental rates and continued decline in services, the overall inflation rate is still set to decline. Imports are important, especially for certain industries, but they are not as important to the overall economy as the headlines would make it seem.
The November 2026 mid-terms are important, and Trump and the rest of the Republicans will need to shift focus away from tariffs to more appealing initiatives like tax cuts and deregulation. But, we still don’t want to invest in businesses with tariff exposure.
When we go though our investments one by one, the amount of growth and opportunity over the next 6-12 months is extremely attractive. We’ll discuss a few of the companies below that have had recent notable developments.
Enterprise Group Inc (TSE:E)
- Enterprise closed their acquisition of Flex Energy Canada on May 8th. Their next quarter will include roughly 2/3rd of Flex’s quarter, which will give investors a glimpse into the profitability of the ~60 service contracts and 17 turbines in operation.
- Now Coastal GasLink and the LNG Canada export facility in Kitimat are operational, and the first ever shipment of Canadian LNG was sent to Asia at the end of June. The inaugural cargo comes nearly 15 years after the first application for a licence to export LNG from the West Coast was submitted to federal regulators. This includes 7 years of construction and estimated $48B in costs. Canada LNG is the lowest cost natural gas in the world, which supports significant demand during a time of constrained power supply.
- Last newsletter, we highlighted one of Flex’s permanent installations in Alberta where the turbines are used to power and heat a community center. These turbines save the building from drawing on the electrical grid and save the building energy costs (good ROI). There are also case studies where the turbines are used to power and heat large condo buildings.
- During our recent meeting with Enterprise most of the discussion was around expanding their power solutions in permanent installations. They plan on targeting the design & build companies like Stantec, where they’ll be involved early in the construction process.
- We expect the business to show significant strength in the second half of this year with strong Q3 and Q4 earnings in 2025.
Zedcor Inc (CVE:ZDC)
- Zedcor stock continues to perform well as the business continues to execute their strategy. They are nearing Amazon certification, so of they win that business, we would significantly boost our forecasts.
- Raymond James made a good point in their, that Blackline Safety (BLN) which is growing at ~20% with ~10% EBITDA margins, trades at 23x EBITDA, while Zedcor is growing at 70% with 35% EBITDA margins, trades at HALF the multiple.
- This is just one example of why Zedcor has significant upside from these levels. Based on our model, if Zedcor hits 2027 targets, it will generate $48M in cash earnings. At that level we’d expect the stock to be above $9/share compared to trading at $4/share today.
- The above scenario doesn’t factor in enterprise wins, like the potential Amazon deal or success of their new higher margin product Z-Box.
Vitalhub Corp (TSE:VHI)
- We met with VHI management in June, and the focus of the discussion was on growth, margins, and outlook. They just announced the acquisition of Novari Health for $44M which matches their stated focus of growing their patient referral software. 90% of patient referrals are still done by fax/phone. Novari and VitalHub’s Strata software are seeing strong growth as this part of the healthcare system digitizes. Just like VitalHub’s past acquisitions, they will be able to cross-sell Novari, as well as quickly improve their profitability. During our meeting, VHI noted how quickly they believe their recent Induction acquisition will reach their profitability targets.
- They have three AI products in R&D due to client demand. It will probably be in 2027 when these products are being rolled out in scale, but they have a significant amount of data to train off of.
- We asked management about the recent shelf prospectus they filed. The amount ($200M) is just a placeholder, and they don’t plan on using it anytime soon, but it gives them the flexibility to raise quickly and efficiently if a large acquisition comes across the table. If they acquire another $35M in revenue over the next year, that will cost them roughly $100M and they are currently sitting on $40M of cash, no debt, and generating ~$30M of cash per year.
- The Novari acquisition gets them to $120M in revenue and they probably do another $35M in acquired revenue within a year which gets them to $175M in sales including organic growth.
- Based on the above, they should get to $200M in revenue within 2-3 years and streamline acquired companies’ profit margins to ~35% EBITDA margins (probably even higher). This equates to ~$70M of EBITDA which leads to a market cap of ~$1.6B, or about $28/share which is 130% more than where the stock is trading today.
- If you believe the 2-3 year outlook and strategy, then these numbers above would be at least 100% higher than where analysts currently sit.
MDA Space Ltd (TSE:MDA)
- MDA closed their acquisition of Satixfy at the beginning of July and recent news supports significant government funding for the Lunar Gateway, where MDA constructs the Canadarm.
- The space-based industry is accelerating and MDA still trades at a relatively cheap valuation when factoring in their growth and profitability.
Tantalus Systems Holding Inc (TSE:GRID)
- We have had a small investment in Tantalus since they reached commercialization of their TruSense Gateway technology, which is used by utilities to monitor their electrical grid. It provides granular access to critical data which improves resiliency and reliability.
- The recent news from Tantalus, is that they have their first large order for their TruSense product which supports a fairly significant growth outlook and comes with recurring revenue. We will add to our position as their TruSense offering gains more momentum.
GoEasy Ltd (TSE:GSY)
- We recently met with the new CEO of GoEasy and came away with confidence that the long-term growth trajectory is still intact.
- In June they reached their $5B loan book target, which was 6 months ahead of schedule. They have now shifted discussions to attaining a $10B loan book.
- In their words, “demand for our products is exceptional.” They keep diversifying their product set and will be launching a card product later this year. One of the main takeaways was that there is a lot of potential growth still in front of them.
- Their late-stage delinquencies are coming down month over month and their revenue yield should continue to improve through the year based on increases in ancillary products, improved collections and overall efficiency.
Final Thoughts
We see the main factors of inflation, rates, and earnings growth driving the market higher. The fund remains concentrated in a handful of high growth compounders that should have strong returns in the second half of the year and into 2026.
If you have any questions or comments, please feel free to reach out.
Regards,
J.P. Donville & Jesse Gamble
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