2 small cap ASX shares that are 'exciting': fund manager

These two small ASX shares could be big opportunities.

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Key points

  • Fund manager WAM has named two of its favourite small-cap ASX shares
  • One is a mining engineering business called Austin Engineering
  • MMA Offshore, the marine vessel and offshore services business, is the other pick

Fund manager Wilson Asset Management (WAM) has identified two top small-cap ASX shares in one of the portfolios it manages that could be investment 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 focuses on 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".

These are the two small-cap ASX shares the fund manager outlines in its recent monthly update.

Austin Engineering Ltd (ASX: ANG)

WAM described Austin Engineering as a business that partners with mining companies, contractors and equipment manufacturers to create engineering solutions such as truck bodies, trays and buckets. The company's headquarters are in Perth.

Last month, the business announced it was buying Australian mining equipment manufacturer Mainetec for $19.6 million.

The fund manager believes that the acquisition will allow Austin Engineering to grow its excavator mining offering for international markets such as the United States at a reduced cost.

August also saw the business release its result during reporting season. FY22 net profit after tax (NPAT) beat the previous guidance provided. Total revenue increased to $203.3 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) was in line with the upgraded forecast of $32.5 million.

Concluding the optimistic case for the small-cap ASX share, WAM said:

With an enlarged order book, strong cash position and increasingly efficient operating base, we believe Austin Engineering is well-positioned to continue to deliver on what has been achieved during FY22.

MMA Offshore Ltd (ASX: MRM)

The other pick is a specialist in providing high-specification marine vessels. It also offers a suite of marine and subsea services to the offshore energy sector, government defence, and wider maritime industries.

In August, the company announced its FY22 result which showed a 19.5% rise in revenue to $283.8 million.

It also improved its balance sheet by reducing its net debt during the year.

The fund manager explained its positivity about this small-cap ASX share:

We remain positive on MMA Offshore as the company continues to trade at a discount to its net tangible asset value despite continuing to see positive market momentum returning to the oil, gas and renewables. Further, we believe the company is well-positioned to take advantage of the exponential growth in offshore wind power developments.

Motley Fool contributor Tristan Harrison has positions in WAM MICRO FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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