Can You Be a Millionaire by Investing in Small-cap stocks? Look at Four Small-Cap Stocks

  • Jan 04, 2020 AEDT
  • Team Kalkine
Can You Be a Millionaire by Investing in Small-cap stocks? Look at Four Small-Cap Stocks

It may sound silly if someone says investing in small-cap stocks can make you a millionaire, but it is not. The growth potential of small-cap stocks is exceptionally well relative to medium-cap and large-cap stocks. As they enjoy a bigger room for future growth, they are usually considered as more attractive options by investors.

But do you know how can we identify small-cap stocks? The stocks of those companies whose market value is between USD 300 million to USD 2 billion are referred to as small-cap stocks. These stocks hold significant potential to offer explosive returns and provide considerable opportunity to beat institutional investors.

Some other reasons that induce investors to invest in small-cap stocks, include:

  • Potential to become double or triple in size.
  • Vast opportunities offered by small-cap stocks for investors to leverage the inadequacies in the market.
  • Chances of the stock price going artificially up are significantly lower.

Let us make you familiar with some small-cap stocks listed on the ASX that are grabbing investors’ attention for different reasons:

Nearmap Acquired Roof Geometry Technology from Primitive LLC

A next-gen digital content leader evolved from a small online startup, Nearmap Ltd (ASX: NEA) has recently announced the acquisition of a technology and intellectual property for USD 3.5 million from Primitive LLC (Pushpin).

Deep learning and analytics technology firm, Pushpin extracts data to deliver insights into roof geometry. The addition of Pushpin’s geometry extraction technology is a notable milestone in Nearmap’s approach to continue adding fresh content types for its clients.

Below are the advantages associated with the acquisition of technology:

  • It allows the Company to offer a new kind of location intelligence to clients and quickly extract and disperse roof geometry from its widescale 3D content.
  • Pairing of 3D geometry extraction technology with the Company’s rich data brought both worlds together at a remarkable scale.
  • The new technology enables the Company to provide an extracted representation and semi-automated calculation of any roof geometry within a lower time (an hour).

The latest acquisition is consistent with the Company’s commitment to speed up growth opportunities through selective and targeted acquisitions.

Nearmap’s Financial Performance in FY19

The Company released its FY19 results for the year ended 30th June 2019 in August last year, reporting solid portfolio growth over the year.

The Company observed a growth of 36 per cent in its Group annualised contract value (ACV) to $90.2 million and a rise of 45 per cent in its statutory revenue to $77.6 million in FY19. The global subscriptions and average revenue per subscription (ARPS) improved by 11 per cent and 23 per cent to 9,800 and $9,208, respectively.

NEA settled the day’s trade at $2.52 on 3rd January 2020, with a rise of 0.4 per cent relative to the last closed price. Having a market cap of $452.46 million, the stock has delivered a negative return of about ~4.56 per cent on a YTD basis.

OMH to Recommence In-Pit Mining Operations at Bootu Creek Manganese Mine

An integrated manganese and silicon firm, OM Holdings Limited (ASX: OMH) has recently notified that its 100 per cent owned subsidiary OM (Manganese) Ltd has received approval for it to recommence in-pit mining operations at the Bootu Creek Manganese Mine. The mine is located near Tennant Creek in the Northern Territory and mines manganese ore.

The Company informed that the Northern Territory Department of Primary Industry and Resources has given the approval to recommence in-pit mining operations in a staged manner, with each stage subject to independent review and approval by nominated parties. Independent reviews have been conducted for discovered pits and approval has been given to commence mining in such pits. Mining has also begun in line with such approvals.

The mining operations were suspended at the Bootu Creek Manganese Mine in August 2019, subsequent to a fatal accident leading to the tragic death of a mining employee, Mr Craig Butler. Currently, the Company does not have any proposal for in-pit mining operations at the place where the accident took place, the Tourag Pit.

OMH’s Financial Performance in 1H 2019

In August this year, the company reported a fall in Profit after tax for the half-year ended 30 June 2019 from $106.4 million in prior corresponding period (pcp) to $50.0 million. The fall in profit after tax was driven by weaker ore and ferroalloy prices, particularly ferrosilicon, which dropped by 23 per cent, with an estimated impact of ~ $43.6 million.

The Company’s revenue also dropped by 35 per cent from $828.3 million in pcp to $534.6 million, predominantly due to a global market softening of ore and alloy prices and lower total volumes of products traded.

Moreover, the company achieved an EBITDA of $109 million with even contribution from mining, smelting, and strategic investments.

OMH closed the trading session at $0.495 on 3rd January 2020, with a rise of 4.2 per cent relative to the last closed price. With a market cap of $738.62 million, the stock has delivered a negative return of about 45.4 per cent on a YTD basis.

Bravura Delivered Strong Operating and Financial Performance in FY19

Bravura Solutions Limited (ASX: BVS) delivered robust operating and financial performance across the business in FY19, continuing its trend of excellent full year results for four years.

In FY19, the Company’s business observed a revenue growth of 16 per cent over FY18 to $257.7 million and an EBITDA growth of 27 per cent to $49.1 million. The Company’s NPAT rose by 21 per cent to $32.8 million relative to $27 million in the prior corresponding period.

The Company raised $165 million for organic growth and acquisition opportunities during the period. It was in a robust financial position with net cash of $194.8 million as at 30th June 2019. The Company’s net cash puts its business in an excellent position to take advantage of a pipeline of fascinating investment opportunities, both organic and acquisitive.

Moreover, the Company declared a final unfranked dividend of 4.8 cents per share, delivering a full-year dividend payout ratio of 70 per cent of FY19 NPAT.

Below are some key operational highlights of the Company for FY19:

  • Announced the acquisition of cloud-based SaaS provider Midwinter Financial Services for a total consideration of $50 million in August 2019.
  • Announced the acquisition of leading microservices provider FinoComp for a total consideration of $25 million.
  • Successfully implemented clients across all of its key regions and enjoyed growth across both its Funds Administration and Wealth Management business units.

The Company is well placed to continue its growth trajectory, supported by a broad suite of products complemented by enhanced digital solutions and several compelling acquisition opportunities.

On 3rd January 2020, BVS ended the day’s trade at $5.33, with a rise of 0.95 per cent relative to the last closed price. The stock has delivered a negative return of 1.12 per cent on a YTD basis.

AMI Announced Receipt of Key Water Approval at Peak

Exploration and mineral development player, Aurelia Metals Limited (ASX: AMI) has recently informed that the Peak Mines near Cobar in NSW has received the necessary Work Approval under the Water Management Act 2000 for the commencement of groundwater extraction.

The approval follows the previous conditional approval received by Peak from the Cobar Shire Council to build and run a water pipeline that will supply groundwater to Peak’s existing operations from famous Great Cobar Copper Mine.

The Natural Resources Access Regulator has given the approval, allowing applications for the last two remaining administrative approvals to be commenced.

Aurelia operates two gold, silver, lead, zinc and copper mines at Peak and Hera. During the financial year 2019, Hera produced 58,025 oz at an AISC/oz of $809/oz while Peak produced 59,496 oz at an AISC/oz of $1,143/oz.

The Company’s stock (AMI) has delivered a return of 80.39 per cent over the last ten years. AMI closed the trading session at $0.43 on 3rd January 2020, with a rise of 1.17 per cent relative to the last closed price.

It is worth noting that the discussed companies are on track to tap tremendous opportunities in their respective areas. The companies are well-positioned to deliver decent performance over the period of time.


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