2 ASX small-cap shares I think could make huge returns by 2030

Small technology businesses could be a great place to hunt.

| More on:
Two kids in superhero capes.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX small-cap shares in the technology space could be capable of making really good returns in the long-term, particularly at the low valuation point that we're seeing.

Higher interest rates are meant to hurt asset prices, but there seems to be a bit of a disconnect between ASX small-cap shares and the large businesses in the tech space.

I really like the look of these two stocks because of their potential for growth.

Frontier Digital Ventures Ltd (ASX: FDV)

The Frontier Digital Ventures share price is down 44% over the past year and it's down around 75% since November 2021. It's been a heavy fall, as we can see on the chart below.

This business invests in, and owns, leading online 'classifieds' marketplaces in emerging regions. It's largely focused on property and automotive portals in places like Latin America, the Middle East, North Africa, and Asia.

We've seen plenty of success from ASX shares that operate in similar sectors, including REA Group Limited (ASX: REA) and Carsales.com Ltd (ASX: CAR), though there's no guarantee there will be remotely anywhere as much success with this stock.

In these emerging market regions, there is still a lot of digital adoption to occur to reach the level seen in Australia. Growth of revenue is very helpful for profitability because of the businesses' strong gross profit margins – how much does it cost to deliver a digital service?

The ASX small-cap share seemingly has strong operating leverage potential and it recently reached profitability at the earnings before interest, tax, depreciation and amortisation (EBITDA) level. It made $2.2 million of operating EBITDA and achieved positive operating cash flow in the three months to September 2023. Yet, the Frontier Digital Ventures share price is much lower than it was before. By 2030, I think this company could be making a lot more profit and be valued much higher.

Bailador Technology Investments Ltd (ASX: BTI)

This is a company that invests in unlisted technology businesses that have global addressable markets, international revenue generation, usually generate recurring revenue, have good unit economics and are in the 'expansion stage' of growth.

At the moment, it has businesses like Siteminder Ltd (ASX: SDR), Rezdy, Access Telehealth, Rosterfy, Nosto and Mosh as investments. There have been plenty of other investments, but these have typically been sold for huge profit compared to the investment cost. One recent example was the sale of InstantScripts to Wesfarmers Ltd (ASX: WES).

The Bailador share price is currently at a 23% discount to its post-tax net tangible assets (NTA), which is a large discount considering the underlying businesses are growing strongly.

Until the market recognises the potential, Bailador is paying a sizeable dividend yield.

I think this ASX small-cap share can deliver good capital growth and dividends to 2030, and this is a good time to invest while the market is uncertain.

Motley Fool contributor Tristan Harrison has positions in Bailador Technology Investments. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bailador Technology Investments, Frontier Digital Ventures, REA Group, SiteMinder, and Wesfarmers. The Motley Fool Australia has positions in and has recommended SiteMinder and Wesfarmers. The Motley Fool Australia has recommended Bailador Technology Investments, Car Group, Frontier Digital Ventures, and REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Opinions

A young woman wearing a red and white striped t-shirt puts her hand to her chin and looks sideways as she wonders whether to buy NAB shares
Opinions

The pros and cons of buying Wesfarmers shares in May

Is this retail giant an appealing opportunity?

Read more »

Smiling man sits in front of a graph on computer while using his mobile phone.
Opinions

2 ASX 200 shares that I think are still bargains after the market rally

These businesses look like attractive opportunities. Here’s why…

Read more »

A young woman looks at something on her laptop, wondering what will come next.
Opinions

Worried about another stock market sell-off?

Market declines don’t need to be too scary.

Read more »

An evening shot of a busy Times Square in New York.
Opinions

The pros and cons of buying US-focused ASX ETFs in the current environment

In a short amount of time, the US share market has erased the declines that it went through at the…

Read more »

I young woman takes a bite out of a burrito n the street outside a Mexican fast-food establishment.
Opinions

Time to cash in your gains? Brokers say sell on these 3 ASX 200 shares

Experts say these stocks are overvalued and it may be time to take some profits off the table.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Opinions

Here's what I'd do after the big ASX stock market rally

The US and China are working towards a trade deal.

Read more »

Two hands being shaken symbolising a deal.
Opinions

2 ASX 200 shares I'd buy after the US-China tariff deal

These stocks look appealing to me right now.

Read more »

A businessman hugs his computer and smiles.
Opinions

2 ASX 300 shares I plan to own forever

Both of these businesses have good ultra-long-term outlooks.

Read more »