Top fund manager says this ASX small-cap stock could at least double

The LHC Capital Australia High Conviction Fund has said the Noni B Limited (ASX:NBL) share price can at least double over the next three to five years.

Writing in its May monthly report, the fund said its strong performance for the month was generated primarily from two positions.

The IPH Ltd (ASX:IPH) share price has recovered nicely in recent weeks, now 25 per cent higher since the beginning of May.

The intellectual property law attorney firm announced and implemented a $40m on market share buyback program, helping drive IPH shares higher.

In May, Noni B announced it was buying Specialty Fashion Group Ltd (ASX:SFH) brands Katies, Millers, Crossroads, Autograph and Rivers clothing chains for $31 million.

LHC Capital views this as a significant transaction, saying the brands are complimentary to the Noni B existing portfolio, highly financially synergistic, and will improve the broader market structure in which NBL operates.

LHC thinks Noni B has picked up the assets on the cheap, after taking into account expected cost saving initiatives, at just 2 times EV/EBITDA.

On top of that, LHC sees two additional sources of upside — the ability to negotiate better pricing terms from suppliers, and because the brands have been starved of capital, stock levels can be improved, leading to better sales outcomes.

How Noni B shares can at least double

With the Noni B management having successfully executed two similar opportunities over the last three years, LHC Capital believes that if management can again execute on this opportunity, the NBL share price can at least double over the next three to five years from current levels.

LHC Capital is not the only fund manager attracted to Noni B after its acquisition of the Speciality Fashion brands.

Earlier this month listed investment company (LIC) Cadence Capital Limited  (ASX:CDM) advised that underlying Cadence portfolios had lifted their holding in Noni B from 5.34 per cent to 6.78 per cent.

Cadence Capital was recently named as a dividend alternative to Telstra shares.

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Bruce Jackson is the founder of The Capital Club. He doesn't have a position in any of the companies mentioned above. This article was originally published here. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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