Wilson Asset Management (WAM) loves finding undervalued ASX growth shares where there's a catalyst that could send the share price higher.
WAM runs various listed investment companies (LIC) that target different market areas, including WAM Capital Limited (ASX: WAM), WAM Leaders Ltd (ASX: WLE), and WAM Active Limited (ASX: WAA).
The WAM Active portfolio focuses on finding and taking advantage of "mispricing opportunities in the Australian equity market."
In the latest WAM Active monthly update, the investment team talked about two ASX growth shares that they like the look of.
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Nuix Ltd (ASX: NXL)
WAM described Nuix as a technology company that provides investigative software used by banks, audit firms and government agencies.
The Nuix share price rose by approximately 38% in September after the company launched a new product and recently announced medium-term growth initiatives.
When Nuix held its investor day, it announced its expansion into deep learning and integration with options in public AI platforms, which accelerates search and processing performance.
Another recent highlight for WAM was that the ASX growth share appointed Peter McClelland as chief financial officer. McClelland has more than 25 years of experience in this field.
Concluding the optimistic case about Nuix, the fund manager said:
We believe Nuix's advancement in AI integration will add to the existing growth profile of the business as they continue to expand their global market share.
Codan Ltd (ASX: CDA)
The other ASX growth share that WAM highlighted was Codan, a manufacturer and supplier of communications, metal detection and technology.
The fund manager suggested that Codan's recent rise was helped by the company's acquisition of Kagwerks, a US-based provider of leading tactical communications.
Kagwerks provides lightweight communications equipment to the United States Department of Defense through its DOCK-branded solutions. According to WAM, the benefit of this acquisition is that the technology allows "superior situational awareness and strategic advantage in field operations by optimising real-time battlefield intelligence".
More than 30,000 DOCK products have been fielded to date across the US Amry.
The investment team then said:
We view this acquisition as positive to Codan's radio communications segment as it is complimentary to Codan's long-term growth strategy and should drive further earnings growth.
The deal comprises an upfront cash payment of around $33.6 million and royalty payments for five years after the acquisition is completed. In the short to medium term, the ASX growth share expects the royalty rate to be between 1% and 2%.
Under Codan's ownership in the first 12 months, it expects revenue from this business to be between $49 million and $57 million. Assuming that level of revenue is achieved, Codan estimates its operating profit (EBITDA) will be between $8 million and $11 million.
