There are a number of smaller businesses on the ASX that aren’t well known but may be able to make good returns for investors.
It is usually easier for a business to double from $500 million to $1 billion than it is to go from $5 billion to $10 billion because of the difficulty of doubling bigger and bigger numbers.
That’s why these ASX growth shares could be worth thinking about:
City Chic Collective Ltd (ASX: CCX)
This business is a global retailer of plus-size clothes, footwear and accessories for women. Not only does City Chic have a large network of retail stores across Australia and New Zealand, but it also has wholesale agreements in the northern hemisphere and a website in the US.
City Chic is liked by brokers such as Macquarie Group Ltd (ASX: MQG) and Morgan Stanley.
Macquarie thinks that City Chic is going to report that it’s had a solid period of operating over the last few months. Macquarie thinks that it has good growth potential over the long term.
Morgan Stanley thinks that domestic sales in ANZ may have been solid in the first half when looking at other ASX retail shares. Other acquisitions could be on the cards with its healthy balance sheet.
The ASX growth share recently acquired Evans in the UK. City Chic plans to turn it into an online-only offering, with lower costs.
Audinate Group Ltd (ASX: AD8)
Audinate is a business that owns the Dante platform which replaces traditional analogue audio cables by transmitting synchronised audio signals across large distances to multiple locations at once using just a ethernet cable.
It’s used in the professional live sound, commercial installation, broadcast, public address and recording industries.
COVID-19 has impacted some of the industries that Audinate helps, but it is recovering. In the first half of FY21, Audinate said that it had generated US$11.1 million of revenue – this was in-line with the first half of FY20. It represented an increase of 19.3% from the revenue made in the second half of FY20.
Audinate also announced in the same update that it has been able to attract and establish an experienced video development team of 11 employees in Cambridge, in the UK. Audinate is looking to develop the next generation of Dante audio and video software implementations. It wants to make Dante video the technology of choice. This will help increase the company’s total addressable market.
Bailador Technology Investments Ltd (ASX: BTI)
Bailador describes itself as a technology expansion capital fund. In other words, it invests in private technology businesses.
It’s invested in a few different businesses right now including Instaclustr, Stackla and Straker Translations Ltd (ASX: STG).
Bailador says that its portfolio of companies are well capitalised with no liquidity concerns. It has a portfolio of 10 investments which have a gross margin of more than 75%. Bailador has disclosed 86% of the company revenue is recurring. Excluding travel, its portfolio is generating revenue growth of 25%.
It recently reported its FY21 half-year result which showed a net profit of $13.1 million and the pre-tax net tangible assets (NTA) per share increased by 12.3% to $1.39.
Bailador expects 2021 to be a significant year for profitable realisations.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended AUDINATEGL FPO and Macquarie Group Limited. The Motley Fool Australia has recommended Bailador Technology Investments Limited and Straker Translations. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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