Investing in the small side of the share market carries significantly more risk than other areas. However, if your risk tolerance allows for it, having a bit of exposure to this side of the market could be a good thing for a balanced portfolio.
With that in mind, here are three small cap ASX shares that could be worth watching closely:
Adore Beauty Group Limited (ASX: ABY)
The first small cap to watch is Adore Beauty. It is Australia’s leading online beauty retailer. Adore Beauty has been growing strongly during FY 2021 and recently revealed that it expects to report full year revenue growth of 43% to 47%. And while its growth is likely to moderate in FY 2022 as its cycles significantly strong sales growth during the pandemic, its future remains very positive. This is thanks to its leadership position and the structural shift online for beauty sales. Online penetration rates are still much lower than other categories and compared to other Western markets.
BlueBet Holdings Ltd (ASX: BBT)
BlueBet is a mobile-first online wagering provider. It allows users to bet on all Australian and international racing and sports through its website and app. BlueBet has been growing very strongly thanks to the increasing popularity of mobile sports betting. This led to the company doubling its customer numbers to ~90,000 over the last 12 months, underpinning a 63% increase in wagering turnover to $266.3 million in 2020. This is forecast to grow a further 47% to $390.3 million in 2021. Positively, management is confident that this trend can continue and believes it is well positioned to substantially grow its current ~1.2% share of the market in Australia. It is also on the verge of expanding into the massive US market.
A final small cap to watch is this online travel booking and expense management provider. While times have been hard because of the pandemic, the company recently revealed significant improvements in its performance. And while it isn’t anticipating a full recovery for another year, management believes it is well-placed to benefit when it does. This is due to the increasing popularity of its offering, its game-changing Booking.com deal, and favourable industry trends brought about by the pandemic. The latter is supported by its Zeno product, which has a number of product capabilities to address the challenges of post-pandemic business travel.