Investors often turn to small cap ASX shares for hidden gems or significant growth opportunities. While navigating through smaller, more volatile companies can be challenging, here are 3 small cap ASX shares poised for a blockbuster FY21.
1. SelfWealth Ltd (ASX: SWF)
SelfWealth is Australia's fastest-growing share trading platform for retail investors. It leads the market on price and simplicity, with $9.50 flat-fee ASX trading and no monthly account fees.
In its FY20 results, the company highlighted a 313% increase in revenue to $8.6m. Active traders were up 235% to 45,445, and $147,000 cash burn down from $3.4m. The company notes that ultra-low interest rates have turned wealth creation on its head as term deposits are no longer attractive. This is transforming a generation of savers into a generation of investors.
COVID-19 has further accelerated tailwinds for broker platforms, and SelfWealth is well-positioned to capture the uptick. Looking ahead, SelfWealth will launch US trading in the December quarter. The US market is the most popular international market with Australian investors. At a market capitalisation of just $155m and significant growth tailwinds at hand, SelfWealth is the small cap ASX share to watch in FY21.
2. BetMakers Technology Group Ltd (ASX: BET)
BetMakers is involved in data and analytic products for the wagering market and production of racing content. Its clients include racing bodies, racing rights holders and wagering operators such as Pointsbet Holdings Ltd (ASX: PBH), William Hill and Sportsbet. Its FY20 results highlighted a 34% increase in revenue to $9.2m, $31.6m in cash and zero debt.
Sports betting is undergoing a significant growth opportunity with its legalisation in the US. BetMakers sees racing as a key component of the US sports betting market. It believes operators will need a racing solution to fit alongside its sports offerings.
The company has already signed an exclusive 10-year deal to manage Fixed Odds betting on horse racing in New Jersey. It's also working with other horsemen groups and regulatory bodies. ASX shares in the sports betting space have seen significant price gains in the last 12 months. I believe BetMakers is positioned to benefit. However its share price may need some time to cool off following its recent surge.
3. 5G Networks Ltd (ASX: 5GN)
5G Networks is a telecommunications carrier engaged in the supply of cloud-based solutions, managed services and network services. The company's success has been underpinned by a number of strategic acquisitions. These include new data centre locations and data centre sales providers. Its FY20 performance was solid, with an earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 96% on FY19.
One of the main takeaways from its FY20 report was its significant infrastructure capacity. Services including metro-fibre network, national/international data, data centres and managed services have a utilisation of less than 50%. There is a significant revenue opportunity given its capacity. 5G Networks sits in the same boat as BetMakers where investors should watch closely for a buying opportunity.
