ASX tech shares could be the right place to look for ideas in August 2021.
Businesses in the tech space are capable of achieving high profit margins and can produce good shareholder returns.
These two investments could be opportunities:
Betashares Asia Technology Tigers ETF (ASX: ASIA)
This is a leading exchange-traded fund (ETF) that provides access to a portfolio of technology companies that are listed in Asia, outside of Japan.
It’s not just the West that has compelling technology businesses. This portfolio has 50 tech companies that are leading operators in their respective industries. These businesses are (hopefully) improving the lives of their consumers, users or clients.
This ASX tech share has a fairly concentrated portfolio. The biggest 10 positions makes up 67.8% of the portfolio. Readers may have heard of some of those names: Taiwan Semiconductor Manufacturing, Samsung Electronics, Alibaba, Tencent, Meituan, Sea, Infosys, JD.com, Pinduoduo and Netease.
They have strong market positions.
Taiwan Semiconductor Manufacturing is the world’s largest independent semiconductor foundry, with most of the world’s leading semiconductor companies as customers.
Alibaba is a huge Chinese digital business that has things like e-commerce and cloud computing.
Samsung is a leading global player in the smartphone and home appliance space.
However, it may be important to know that three countries make up a large portion of the portfolio: China (50%), Taiwan (21.7%) and South Korea (17.7%).
Its annual management fee is 0.67%, but that hasn’t stopped the net returns being strong. However, don’t forget that past performance is not an indicator of future performance.
Since inception in September 2018, the Betashares Asia Technology Tigers ETF portfolio had produced an average return per annum of 29.3%.
Class Ltd (ASX: CL1)
Class is currently rated as a buy by the broker Ord Minnett. It has a price target on Class of $2.40, which suggests an increase of around 40% over the next 12 months if the broker is right.
It’s an ASX tech share which provides software for the self-managed super fund (SMSF) sector. Class also has other relatively new products for clients such as Class Portfolio and Class Trust.
The company has been working on increasing the number of services it can offer to clients. Cross-selling is a useful tactic. Class says it’s accelerating growth through strategically aligned acquisitions in the document and corporate compliance space. NowInfinity, Smartcorp and ReckonDocs are three examples it has chosen to achieve market leadership here – it already has a market share of more than 14% by revenue.
For FY21 it’s targeting overall revenue growth of 22% and an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 40%.
According to Ord Minnett’s projection, Class is valued at 27x FY22’s estimated earnings.