You may be aware of the WAAAX tech consortium, which includes well-known ASX tech companies such as Afterpay Ltd (ASX: APT), Xero Limited (ASX: XRO), and Appen Ltd (ASX: APX). However, what you may not be aware of is that there’s an exciting range of other emerging ASX tech shares.
Here are 2 of my top picks in this category: Bigtincan Holdings Ltd (ASX: BTH) and Dicker Data Ltd (ASX: DDR). I am confident that both have exciting long-term growth prospects.
Bigtincan’s platform enables organisations to access, collaborate on content, and improve customer engagement. It operates in a fast-growing IT software niche commonly referred to as ‘sales enablement’.
The company operates under the software-as-a-service (SaaS) business model. Bigtincan is, therefore, a capital-light, scalable and highly-efficient business through its subscription-type model. It also benefits from high customer retention rates.
For 1H FY 2020, Bigtincan posted annualised recurring revenue (ARR) of $32.4 million. This was a very strong 55% increase on the prior corresponding period. This ASX tech share continues to win new deals and expanded its customer base.
Bigtincan was only listed on the ASX in 2017 and is yet to become profitable. So it, therefore, could potentially be viewed as a risky type of share investment, compared to more established technology companies listed on the ASX, such as Carsales.Com Ltd (ASX: CAR) and REA Group Limited (ASX: REA). It will need to keep its operating costs under control and maintain its high customer retention rate moving forward.
However, I am confident that the long-term future shines bright for Bigtincan. It currently appears to be on track to reach the breakeven point as it gains further scale. This hopefully will then lead to growing profitability in the years ahead.
Another ASX tech share that I would consider adding to your ASX share portfolio is Dicker Data. This IT company is a wholesale distributor of computer hardware, software and cloud-based solutions. In addition, it’s the largest Australian-owned hardware distributor in the Australia and New Zealand markets.
Dicker Data has transformed and evolved its business over the past 40 years. It started out as just a family-run business and now is a corporation with a market capitalisation of around $1.2 billion today.
Dicker Data recorded its highest-ever revenue month to date in March. Its FY 2020 first-quarter net profit before tax (NPAT) increased by 36.3% to $18.4 million. The trend of working from home during the coronavirus pandemic has also benefitted the company.
I believe that Dicker Data is well placed to capitalise on the growing demand for IT services connected with cloud computing over the next decade.
Dicker Data also currently pays a forward fully franked dividend yield of around 4.36% at the time of writing.
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Phil Harpur has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BIGTINCAN FPO and Xero. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO and Appen Ltd. The Motley Fool Australia has recommended BIGTINCAN FPO, carsales.com Limited, and REA Group 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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