The technology sector has gone gangbusters this year, so many fear most of those success stories are now overvalued.
But there are still some bargain ASX tech shares to be snapped up, according to one fund manager.
Prime Value portfolio manager Richard Ivers told The Motley Fool that he's currently high on 3 particular stocks.
His Prime Value Emerging Opportunities Fund already owns all 3, and he's excited to see how they will fare.
City Chic Collective Ltd (ASX: CCX)
City Chic is a retailer that sells plus-size women's clothing.
The chain used to be part of Specialty Fashion Group, which also had brands like Millers and Katies that were bleeding cash.
SFG sold off the loss-makers to Noni B two years ago, and kept City Chic for itself.
And now the company is flying with 70% of sales coming online, Ivers said.
"It's got a really great management team. A guy called Phil Ryan is the CEO, and he's been there for years," he told The Motley Fool.
"Now he's got the chains off him and he can just run this business properly."
Last year, City Chic acquired a US competitor called Avenue. This year, it's in the process of buying out another US rival, Catherines.
And Ivers reckons more deals will be coming.
"They've got a balance sheet with about $100 million in cash. And there's other opportunities to acquire online bits of other distressed assets," he said.
"Online is growing faster than bricks-and-mortar [sales]… and it's also higher margin for them."
News Corporation (ASX: NWS)
While most people would not think of Rupert Murdoch's media business as a tech company, Ivers disagrees.
"A lot of the focus is on 'old world' assets – the Foxtels and the newspaper, which are low quality assets… No one would debate that.
"But where the real value is in their holding of REA Group Limited (ASX: REA) and cash."
Ivers calculates that News' stake in the real estate classifieds website plus its cash represents about $19.30 of value per share.
And News Corp is currently trading at $20.69.
According to Ivers, the other "exciting" part of News' business is the publishing company Dow Jones.
That subsidiary includes The Wall Street Journal, a publication that has a paywall for a wealthy readership receptive to paying for financial news.
"Historically [Dow Jones] has been reported as part of newspapers. So analysts have struggled to understand what sort of [price-to-earnings] multiples you should put that on," said Ivers.
"But for the first time, in their results just gone, they've actually split out Dow Jones."
And those numbers showed a healthy subsidiary with earnings increasing 13% in the COVID-affected fourth quarter.
Taking its rival New York Times Co (NYSE: NYT)'s 25-times multiple, Ivers said Dow Jones alone could be worth US$6 billion ($8.2 billion).
Redbubble Ltd (ASX: RBL)
Redbubble is an online marketplace for artists to sell printed forms of their work.
The site acts as a middle man between artists and printers, who put the art on coffee mugs, clothing, manchester and the like.
Despite its shares rising more than 9-fold since March, Ivers still sees tremendous upside.
"They did $350 million of revenue last year… Of that $350 million, about 30% of any dollar of growth falls through to EBITDA."
That means if Redbubble experiences 50% growth, that's about $50 million of earnings. Ivers said that would take the company to about a 15-times price-to-earnings multiple.
This compares favourably to other businesses like Temple & Webster Group Ltd (ASX: TPW) and Kogan.com Ltd (ASX: KGN), which are selling at far higher multiples.
"What's interesting about Redbubble is that it's a global business. Only 5% of its revenues are in Australia. So the opportunity set is much bigger."
