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ASX tech shares: 2 exciting small caps to watch closely

The ASX has a fast-growing tech sector. No doubt you’re aware of ASX tech share success stories such as SEEK Limited (ASX: SEK), Afterpay Ltd (ASX: APT), and Xero Limited (ASX: XRO). However, there are number of smaller and less well known small-cap ASX tech shares that are starting to gain momentum.

Two, in particular, that I think are worthy of taking a closer look at are: Bigtincan Holdings Ltd (ASX: BTH) and Audinate Group Ltd (ASX: AD8).

These companies operate under very different business models in their respective tech niches. However, I believe both offer investors strong growth potential over the next five years.

Bigtincan

This small-cap ASX tech share focuses on a fast-growing niche in the IT software market commonly referred to as ‘sales enablement’. The company provides organisations and their sales teams with a platform to access, present, and collaborate on a range of content, thereby improving customer engagement.

Bigtincan is a capital-light and highly efficient operation through its software-as-a-service (SaaS) business model.

The company has an established business presence in the large North American market and an emerging presence in the United Kingdom and European markets.

Bigtincan was able to generate a 178% increase in customer cash receipts to $14.9 million during the third quarter of FY 2020. This places the ASX tech share on track to achieve its revenue guidance target of between 30% to 40% growth for FY 2020.

Key customers continue to expand their usage of Bigtincan’s sales enablement platform. These include organisations such as Nike and AT&T.

On 20 May, Bigtincan announced a $35 million equity raising to assist the company with accelerating its growth. The funds will enable Bigtincan to take advantage of the SaaS sector tailwinds and capitalise on any strong merger and acquisition opportunities that may arise in FY2021 to FY2022.

Audinate

Audinate’s audio networking solutions are used in the production of a range of professional audio equipment. These include everything from microphones and speakers to amplifiers and mixers. These networking solutions improve audio quality by converting audio signals into digital data which can then be more easily distributed via computer networks.

This ASX tech share generates its revenues from sales of equipment manufacture and also from royalties and software licensing fees.

Recent revenue growth has also been strong for Audinate. Unaudited revenue for its most recent quarter rose by 14% on the prior corresponding period to US$5.3 million. Audinate believes it is currently in a reasonably strong position to combat any further challenges arising out of the COVID-19 pandemic, with a strong balance sheet and $30.9 million cash on hand.

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Phil Harpur owns shares of AFTERPAY T FPO, SEEK Limited, and Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO, BIGTINCAN FPO, and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended AUDINATEGL FPO, BIGTINCAN FPO, and SEEK Limited. 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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