2020 Outlook for Small Cap Stocks in ASX

  • Feb 14, 2020 AEDT
  • Team Kalkine
2020 Outlook for Small Cap Stocks in ASX

If invested correctly, small-cap stocks can help investors to expand their wealth substantially in a short span of time. While hunting the emerging small-cap stocks one needs to look at several important factors like a company’s historic performance, sector outlook, management team, product and services, and outlook. For the current batch of stocks, the outlook for 2020 is a very important criterion for investors in selecting stocks for their portfolio.

We have screened some best small-cap stocks on ASX which have already updated the market regarding their expectations for 2020. Let us a close look at these stocks and their expectations of 2020.

The Citadel Group Limited (ASX: CGL)

Software and service company, The Citadel Group Limited currently has a market cap of around ~$271.68 million on ASX. The company is engaged in the provision of software and services, product sales and installation, and consulting and professional services in the technology sector across Australia.

For the financial year 2020 (year ended 30 June 2020), the company expects to achieve low double-digit organic revenue growth with margins broadly consistent with FY19, excluding Noventus. The company is expecting a revenue of ~$18 million from Noventus and an EBITDA of $2 million in FY20.

The company was recently awarded two contract extensions by the Department of Defence, reflecting the quality work that Citadel has delivered to the Department over many years and continued trust that Citadel’s clients place in the Company, and the strong products and services proposition Citadel provides in its key verticals.

By AEDT 1:12 PM on 14 February 2020, CGL stock was trading at a price of $5.650.

Image Resources NL (ASX: IMA)

Mining and exploration company, Image Resources NL recently reported a record monthly production of heavy mineral concentrate in December 2019 at 31.4kt and again in January 2020 at a new high of 35.3kt.

In 2020, the company intends to priortise the addition of new Ore Reserves from existing and new Mineral Resources. It is also focused on the outcome of new Mineral Resources and Ore Reserves under project MORE.

In 2020, the company expects to process 3,000kt -3,300kt of ore and is anticipating moderation in average monthly production of HMC to achieve the production guidance of 300-330kt. The company also expects to sell 300-330 kt of HMC in FY21. The C1 cash costs for HMC sold are expected to be in between $290/t to $320/t.

IMA currently has a market cap of $210.91 million on ASX.

OceanaGold Corporation (ASX: OGC)

Multinational gold mining company OceanaGold Corporation recently provided the production and cost guidance for FY20 wherein it stated that it expects to deliver additional 25% of gold ranging between 360 to 380 koz and anticipates organic growth opportunities at Macraes. For the year, the company expects All-In Sustaining Costs to be in between USD 1,075 to USD 1,125 per oz sold.

 

Consolidated 2020 Production and Cost Guidance Summary (Source: Company Reports)

 

The company has recently released its unaudited fourth quarter 2019 results wherein it stated that it produced 108,151 ounces of gold over the quarter and its AISC for the fourth quarter was $980 per ounce on sales of 107,330 ounces of gold and no copper sales.

Synlait Milk Limited (ASX: SM1)

Synlait Milk Limited, a leading high value dairy products company, currently has a market cap of around $1.17 billion.

With regards to its FY20 outlook, the company recently informed that it is expecting growth in consumer-packaged infant formula sales volumes over the full year and expects its FY20 earnings to be in the range of $70 million and $85 million net profit after tax. Factors contributing to this performance include:

  • incremental costs of the new Pokeno facility impacting standard manufacturing costs;
  • higher SG&A costs due to increased business size and the continued focus on investing in future growth opportunities;
  • lower sales of infant base powders due to the China infant nutrition market consolidation;
  • a positive impact of a full year of operation of the expanded lactoferrin facility, albeit with more pricing volatility.

The company has also informed that its HY20 results will be impacted by:

  • increased incremental interest, manufacturing and SG&A costs associated with the Pokeno and advanced liquid dairy packaging facilities;
  • lower sales volumes of ingredient products than anticipated due to sales phasing and product mix impacts;
  • lower sales of infant base powders due to the China infant nutrition market consolidation.

SM1 currently has a market cap of around $1.17 billion with stocks trading at a price of $6.170 per share.

Bega Cheese Ltd Ordinary (ASX: BGA)

Australian cheese product manufacturer, Bega Cheese Ltd Ordinary recently provided an update on bushfires in Bega region and informed that the fire has not directly impacted its sites in Bega but has impacted a number of its employees and dairy farm suppliers in the region.

With regards to its FY20, the company expects its normalised EBITDA to be in between $95 million – 105 million, compared to $115 million in FY2019.

The company has been reviewing its supply chain and overhead cost to remain competitive and will continue to manage its supply chain for domestic and international trade to mitigate further downside risk.

Nearmap Ltd (ASX: NEA)

Digital content leader, Nearmap Ltd (ASX: NEA) expects its FY20 Group annualized contract value to be in the range of $116 mn-$120 mn. It is scaling growth and is investing in automation and analytics to identify new customers and upsell opportunities.

The company is also expecting its first enterprise sales of AI content in Australia and North America in 2H20 with commercialization in MapBrowser.

The company recently acquired technology and intellectual property from Primitive LLC for a consideration of US$3.5 million which is allowing it to extract and disseminate roof geometry from widescale 3D content along with the new type of location intelligence to customers.

NEA currently has a market cap of around $882.29 million with a stock price of $1.975 per share.


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There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

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