The fund manager Wilson Asset Management (WAM) has recently identified two top small cap ASX shares that it owns in its portfolio that could be ideas.
WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Capital Limited (ASX: WAM).
There's also one called WAM Microcap Limited (ASX: WMI) which targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.
WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.
The WAM Microcap portfolio has delivered gross returns (that's before fees, expenses and taxes) of 25.2% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 12.2%.
These are the two small cap ASX shares that WAM outlined in its most recent monthly update:
Superloop Ltd (ASX: SLC)
WAM described Superloop as a leading telecommunications provider that owns and operates metropolitan fibre networks in Australia, Singapore and Hong Kong, connecting the regions' key data centres and bandwidth intensive buildings.
During the month of October 2021, it announced the sale of its Hong Kong business and certain Singapore assets for $140 million, a 30% premium to the carrying value of the assets.
The fund manager said that this sale will allow the company to redeploy the proceeds generated from the sale in acquisitions that can add to earnings or capital management initiatives.
Superloop also said that in connection with the sale, it will maintain operations in Singapore and Hong Kong and enter into a 15-year indefeasible right of use on the existing or future expanding networks. This will allow the company to continue to participate in these markets and provide end-to-end connectivity services to Superloop's INDIGO submarine customers in the region.
Praemium Ltd (ASX: PPS)
Praemium was described as a global leader in the provision of technology platforms for managed accounts, investment administration and financial planning.
The fund manager pointed out that the small cap ASX share services 300,000 investor accounts and manages over $170 billion in funds globally for more than 1,000 financial institutions and intermediaries.
In October, Praemium reported a record inflow of $1.7 billion for the three months ending 30 September 2021. That was 37% higher than the previous quarter. It also achieved record total funds under administration (FUA) of $45.6 billion.
Then, in early November 2021, the fintech company announced that it had received a takeover merger proposal from the financial services and technology business Netwealth Group Ltd (ASX: NWL).
If the takeover goes ahead, Praemium shareholders would be entitled to receive one new Netwealth share for every 11.96 Praemium shares, or receive a cash alternative.
The fund manager believes that the proposed merger, if implemented, will create substantial value for Praemium shareholders due to the compelling synergies it will produce.
