A large chunk of the total market capitalisation of the Australian Securities Exchange (ASX) is made up of billion-dollar companies (large cap) like BHP Billiton, Telstra, Woolworths, Wesfarmers, Commonwealth Bank..the list is long! These companies are renowned to offer good dividends, generate record profits and are consequently the talk of the trade town at all times.
Another noticeable element in the Australian business centres around Information technology, as the government is pacing up its Digital Transformation Strategy which promises to deliver world-leading digital services for the benefit of all Australians in its Vision 2025.
What most investors miss out on is the fact that even when large cap companies usually promise strong returns (sometimes a double-digit!), there are companies far more interesting and world-leading which should definitely be part of one’s investing portfolio.
Let us introduce small cap companies- companies that have a market capitalisation of less than USD $1 billion (on the ASX). Interestingly and historically, small cap stocks have witnessed long periods of outperformance compared to the larger indices. A huge section of investors believes that currently, small-cap stocks are in the higher growth period of their lifecycle.
An important aspect of the business world gaining traction in Australia is Information Technology, an industry growing at a rapid rate. According to the Australian Trade and Investment Commission (ASIC), Australia has a profound digital industry which generates over $23 billion per annum and offers ample opportunities.
Experts opine that the growth industries in Australia is largely centred on tech and the conversation of becoming a digital economy is part of every sector, as the society and government together acknowledge its importance.
Let us look at 4 small-cap IT stocks listed on the ASX and browse over their recent developments. We will look at their stock performance towards the end of the article:
LiveTiles Limited - Recent Acquisition, Growing addressable market
A global software company, LiveTiles Limited (ASX: LVT) offers intelligent workplace software for the commercial, government and education markets. It’s Intelligent Intranet Platform, the foundation of the Company, unravels crucial problems and prospects tackled by organisations globally.
Recently, the Company announced the completion of the acquisition of CYCL AG, a Europe-based intelligent intranet software business. The combination of MatchPoint, a CYCL product, along with LVT’s Wizdom is believed to create an Intelligent Workplace opening paths for enterprise opportunities.
In its AGM presentation held on 26 November 2019, the Company reported $42.9 million worth of annualised recurring revenue (ARR). The stated target of hitting $100 million of ARR is estimated for June 2021.
As at 30 September 2019, the Company had 919 paying customers across every major industry vertical and approximately 180 employees in the US, UK/Europe and Australia.
Catering to a large and rapidly growing addressable market of approximately 300,000 organisations, LVT is laying huge emphasis on product innovation including Artificial Intelligence. The company has an exclusive global relationship with Microsoft.
Dubber Corporation Limited- the world’s most scalable cloud call recording service
Dubber Corporation Limited (ASX: DUB) is a cloud-based call recording service and has been implemented as the core network infrastructure by leading telecommunications carriers in the APAC region, Europe and North America. Through a software-as-a-service (SaaS) model, the makes the need for hardware, capital expenditure or productization redundant. The main revenue streams for Dubber are call recording, AI and marketplace.
In the AGM address to shareholders, Steve McGovern, CEO, defined DUB’s fundamental philosophies - that call recording should be available for immediate activation as part of a telecommunications service and AI should be available on every phone, network driven, in the near term.
In FY19, DUB witnessed Cloud adoption and strategy across all key sectors and reported that it has 113 agreements on foot with a large pipeline to follow. DUB is likely to be providing service to the seven largest carriers in the USA. Moreover, through the $22 million capital raising in April 2019, the Company is fully funded to meet its current business aspirations.
On 10 December 2019, the Company notified that it is providing the call recording and data capture features for Sprint Smart UC, an affordable, full-featured UCaaS solution. The Company had recently announced that it is now live and available on Cisco Webex calling as well.
Audinate Group Limited- driving the transformation of the AV industry
Audinate Group Limited (ASX: AD8) offers professional digital audio networking technologies across the globe. The company has a Dante platform, which has been built to bring the advantages of Information Technology networking to the professional AV industry.
Since listing on 30 June 2017 at $1.22 per share, the Company’s market cap has soared from ~$72 million to over $500 million, an increase of more than 600%. The below image depicts the Company’s financial and operational highlights of FY19:
(Source: AD8’s Report)
Over the medium term, the Company aims to invest and double the engineering and R&D functions in the next two years and develop next generation Dante audio and video software implementations. AD8 also intends to make Dante AV the technology of choice for OEMs. With the addition of video & software products, the company plans to expand the Total Addressable Market.
Bigtincan Holdings Limited- New contract, positioned for future growth
Bigtincan Holdings Limited (ASX: BTH) aids sales and service teams to lift win rates and customer satisfaction via a mobile, AI-powered sales enablement automation platform. Prominent brands like ANZ Bank, AT&T and Merck depend on BTH to improve sales productivity and stimulate customer engagement.
On 2 December 2019, the Company notified that it has bagged a competitive bid for a retail deployment with Sephora USA Inc., a Paris-based multinational chain of personal care and beauty stores. The three-and-a-half-year contract, worth $2.8m, is for a multi-site global deployment commencing in the USA and further global expansion.
Bigtincan® Zunos software platform will be used by thousands of frontline retail staff in the USA and globally and create a modern, always current, personalised and mobile learning and content environment.
The Group demonstrated strong growth in FY19 in all areas of the business and the Annualised Recurring Revenue (ARR) hit a record of $23.4 million at June 2019, up by 52% from June 2018. There was expansion of sales capability and innovation in the information provided to shareholders. The company established unit economics around lifetime value of customers and separating out organic and acquisition growth to provide guidance on the way that BTH is scaling the business.
Share Price Information
The below table demonstrates the stock performance of the companies discussed, after the close of the market on 27 December 2019:
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