Looking to top up your share portfolio? I think ASX tech shares provide plenty of choices.
Australia's tech sector is growing rapidly, despite being quite small compared to the US market.
Here are two of my top picks right now: Carsales.com Ltd (ASX: CAR) and Bravura Solutions Ltd (ASX: BVS).
Carsales
Carsales has grown strongly over the past few years. In Carsales FY20 half-year report, it showed that between H1 FY16 and H1 FY20, the company managed to grow revenues at an impressive compound annual growth rate (CAGR) of 12%. Earnings before interest, tax, depreciation and amortisation (EBITDA) also grew strongly. EBITDA increased at a CAGR of 9% over the same period.
In its most recent trading update, it revealed that during mid-March to mid-April, car lead volumes were down 25% on normal levels. However, with lockdown restrictions easing, it is more than likely that lead volumes are now picking up.
This tech share has successfully built on its entrenched and dominant position in Australia over the past decade. This has helped to create a protective moat against market competition. This is despite slowing growth in the maturing online auto classifieds market locally.
Most of Carsales' new growth is now coming from its overseas operations. These divisions now represent 23% of look-through revenue and 18% of look-through EBITDA. I believe that its overseas operations will fuel further strong growth over the next 5–10years. This positions the ASX tech share well for above-average share price growth during that time.
Another ASX tech share to consider: Bravura
Another ASX tech share worth considering is fintech operator, Bravura. It provides mission-critical enterprise software solutions. It services both the wealth management and funds administration industries.
The company provides software solutions for a range of financial products. These span from wrap platforms, superannuation and pension products to life insurance and portfolio administration offerings.
The company's main operating markets are Australia, New Zealand, the United Kingdom, and South Africa. An impressive blue-chip client list includes the likes of Mercer, JPMorgan, Prudential, and Citi.
What really attracts me to this tech share is that it is a capital-light business model. It is also underpinned by a strong balance sheet.
The company's flagship offering in Sonata is a next-generation wealth management administration platform. Its market appeal is that it enables users to interact with their clients through a range of devices. Demand for this flagship product continues to grow strongly.
Bravura has not seen a significant decline in demand during the coronavirus pandemic. In addition, the company recently reaffirmed its earnings guidance for FY 2020.
I believe that Bravura is well positioned for strong growth over the next 5–10 years.
