2 small-cap ASX shares the market hasn't woken up to yet

Ask A Fund Manager: Red Leaf Securities' John Athanasiou picks a pair of little guys that are set to take off in the next few years.

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Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Red Leaf Securities chief executive John Athanasiou explains why he loves the themes driving his 2 favourite ASX shares.

Hottest ASX shares

The Motley Fool: What are the 2 best stock buys right now?

John Athanasiou: Well, the two best buys are Singular Health Group Ltd (ASX: SHG) and Mad Paws Holdings Ltd (ASX: MPA). 

I'll kick off with Mad Paws, which is actually raising equity now as we speak. The reason why we love Mad Paws is it's the leading online participant in Australian pet care. And we expect them to make significant earnings over the medium term. 

We all know tailwinds in the industry of increased levels of pet ownership. Everyone bought a pet during lockdown to have some company. And they're not shy about spending a dollar when it comes to pets.

Now, Mad Paws has got a growth-by-acquisition strategy and they're currently in the process of buying a business as we speak that we believe is very value creative. They're acquiring Pet Chemist, which happens to be Australia's leading online supplier of pet health care products. They're raising $5.5 million at 18 cents as an SPP [share purchase plan] attached to that. So we'll be telling existing shareholders to participate in that.

There are not many pet service companies out there and that's why we really like it, because it's one area we think is going to really grow.

MF: It only listed March last year, didn't it?

JA: Yeah. The reality is, it hasn't done anything. It IPOed at 20 [cents]. It fluctuated around 25, 18, 17. It hasn't done too much. But we do believe that the market will come around.

MF: Did your team buy during the initial public offer?

JA: Yeah, we participated in the IPO. When it pulled back, we picked up more, so we've been big supporters of it.

And Singular Health Limited, we believe that metaverse is a long-term trend. Now, obviously, that gained investor attention thanks to [Meta Platforms Inc (NASDAQ: FB) chief] Mr Zuckerberg. There are only about half a dozen of these metaverse companies on ASX. Obviously, that'll probably grow.

Singular Health is our preferred company in this space, given its low market cap and its disruptive radio technology, which converts 2D medical images into 3D models that you can view on your mobile desktop, virtual reality devices. So very clever technology with plenty of upside there. We all know that the health sector will continue to grow, so it benefits from that as well.

MF: So Singular Health is using the metaverse to perform diagnosis?

JA: Correct. Correct.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Meta Platforms, Inc. The Motley Fool Australia has recommended Meta Platforms, Inc. 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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