I think there are plenty of investment opportunities with ASX shares right now with $20,000.
Regular readers would know that one of my favourite ideas over recent weeks has been Citadel Group Ltd (ASX: CGL), which has just received a large takeover offer. It would have been a pick today for me at last week’s prices.
Now that Citadel isn’t really an option, I think these top ASX growth shares could be worth buying instead:
Pushpay Holdings Ltd (ASX: PPH) – $8,000
Pushpay is an electronic donation payment business. It facilitates digital donations to sectors such as the large and medium church sector in the US.
Management believe there is a large, long-term opportunity, the company is aiming for annual revenue of US$1 billion per year. It has plenty of growth potential because in FY20 it ‘only’ generated US$129.6 million of revenue (up 32% from the prior year) with the huge level of donations given to churches each year.
I think it’s the ASX shares with long-term revenue growth potential and rising profit margins that are likely to deliver outsized returns to investors.
Pushpay is very scalable. Over the 12 months of FY20 it grew its gross profit margin from 60% to 65%. That suggests its gross profit margin could be materially higher as it reaches milestones like US$250 million and US$500 million of revenue.
As a long-term bonus, the ASX share could grow into new countries or new industries (such as other religions) to further increase its addressable market in the future.
At the current Pushpay share price it’s trading at 33x FY21’s estimated earnings. I don’t think the market yet appreciates how much Pushpay’s profit could grow over the next five years.
Bubs Australia Ltd (ASX: BUB) – $5,000
Bubs is a business that could really take off if it manages to capture good market share of the infant formula market in Asia.
The company produces and sells a variety of nutritional products, with a focus on goat milk items like infant formula.
The FY20 result was solid from the ASX share with full year revenue growth of 32% to $62 million, infant formula sales increasing by 58% to $30 million, direct Chinese sales growing by 32% to $13 million and the normalised gross margin improving from 21% to 24%.
What particularly impressed me was that export revenue outside of China grew by five times, and represented 10% of total revenue.
China is a higher-risk country for consumer product exporters at the moment – just look at what’s happening with Treasury Wine Estates Ltd (ASX: TWE). Shifting to China-made Bubs products could be a way to de-risk its Chinese division whilst still reaching Chinese customers. I like the move to buy a stake in the Beingmate Chinese manufacturing facility.
However, I would feel (even) better about Bubs if it can grow its ex-China export revenue, as places like Vietnam are large markets that the ASX share can tap into, with less regulatory risk.
In five years I think Bubs could be a much bigger business. At the current Bubs share price of $0.79, I think the potential rewards are worth the risks.
City Chic Collective Ltd (ASX: CCX) – $7,000
I think City Chic has proven itself to be a formidable ASX retail share during this COVID-19 period.
The company managed to grow revenue by 31% to $194.5 million during FY20 thanks to its strategy of having a strong online offering as well as its targeted acquisitions.
City Chic, which is a retailer of plus-size women’s apparel, accessories and footwear, saw online website growth of 113.5% over FY20. Online sales made up 65% of total sales, compared to 44% in FY19. I think this shows the business can thrive in the 2020s despite COVID-19 impacts and the disruption caused by store closures.
US retail is having a tough time at the moment. So it’s a great time for City Chic to use its capital raising money to buy competitors at cheap prices and turn them into online-only offerings by utilising City Chic’s e-commerce abilities. Online sales also come with lower operating costs.
At the current City Chic share price it’s trading at 22x FY22’s estimated earnings. I think that looks very reasonable. I think it could generate good shareholder returns over the shorter-term and longer-term, particularly as it could start paying a good dividend by FY22.