3 super-cheap small-caps for the falling Aussie dollar

Promising small-caps CPT Global Limited (ASX:CPT), SDI Limited (ASX:SDI) and ICS Global Ltd (ASX:ICS) all stand to gain from a lower Australian dollar. So will the share prices stay this low for long?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Over the last several months I've increased my exposure to companies that earn foreign currency because the long overdue reversion to mean suggested the Australian dollar would weaken. That and the fact that my favourite macroeconomic forecaster George Soros had shorted the Australian dollar, and my favourite fund managers at Pie Funds were positioning for a lower dollar too.

The recent drop suggests my trust was well placed in these indicators, but it is not too late to position your portfolio to benefit from a falling dollar. Indeed, it would appear that there are still cheap stocks with foreign currency exposure available.

For example, you could buy shares in CPT Global Limited (ASX: CGO) at a lower price than I did, and roughly the same price they were purchased by Pie Funds. The tiny IT consulting company's business is to test, tune and improve the systems set up by other (usually larger) IT businesses, with the aim of reducing operating costs for clients. 

Revenue from North America almost doubled in 2014, growing to $12.3 million from $6.8 million in 2013. However, revenue from Australia decreased by over $4 million to $19.9 million – though margins were actually improved. The expected jump in profit did not eventuate, largely because of a sharp increase in "Other Expenses" of over 50%. If this increase in other expenses contines, I will have to admit my buy thesis is largely defeated, although a falling Australian dollar should at least boost earnings in Australian dollar terms. The company trades on a trailing P/E ratio of 12 and a trailing dividend yield of 6.4%. I consider it likely earnings will grow, but I doubt the dividend will.

Another little company slated to benefit from a falling Australian dollar is ICS Global Ltd (ASX: ICS), an Australian company that owns a medical billing and collections business in the UK. Essentially, the operating business provides a service to medical practitioners, and demand for its services is therefore likely to grow, as long as the company does a good job. The company has a market capitalisation of $10 million and just over $1 million cash in the bank. It earned over $600,000 in FY 2014, and reported that it had signed its biggest customer in the first quarter of FY 2015. The company trades on a trailing yield of 3.3% and earns its revenue in pounds.

Finally, there is SDI Limited (ASX: SDI), a manufacturer of dental products that Motley Fool analyst Andrew Page covered thoroughly in this article. The company benefits from a falling silver price, because silver is one of its input costs, as well as a falling Australian dollar because the majority of revenue received is in a foreign currency. A number of new products are expected to grow revenues on a constant currency basis in FY 2015. The company trades on a trailing P/E ratio of 11, and a paltry 1.3% dividend yield. However, the 2014 dividend was up 40% in comparison to 2013, and as new products begin to gain traction, there are good reasons to expect further increases.

Motley Fool contributor Claude Walker (@claudedwalker) owns shares in CPT Global, SDI and ICS Global.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »