Looking for additional ASX tech shares to add to your portfolio?
While you may be aware of the WAAAX tech consortium, which includes well-known ASX tech companies such as Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO), there’s a range of other emerging, smaller ASX tech shares that are worthy of consideration.
Here are 2 of my top picks of these smaller ASX tech shares:
Bigtincan Holdings Ltd (ASX: BTH)
Bigtincan focuses on a fast-growing niche in the IT software market called ‘sales enablement’. The company provides organisations and their sales teams with a platform to access, customise, present, and collaborate on content and improve customer engagement.
It also leverages artificial intelligence through features that include the ability for users to personalise and recommend content. Additionally, Bigtincan’s software neatly integrates with other leading customer relationship management solutions available on the market.
Although its core offering is accessible to users on a range of desktop and mobile platforms, the tablet market, in particular, through devices such as iPads, provides Bigtincan with strong market differentiation.
Through its software-as-a-service (SaaS) business model, Bigtincan is a capital-light and highly efficient business that has a subscription type model with attractive margins.
The advantage of a SaaS business model is that the business is highly scalable – as each new user comes on board, the addition to overall operating overheads is marginal and the business gradually becomes more efficient and profitable. Bigtincan also has high customer retention rates.
The company only listed on the ASX in 2017 and is yet to become profitable. So, it is a relatively risky investment. Bigtincan must continue to keep costs under control and maintain its high customer retention rate. However, I believe the company appears to be reasonably on track to reach profitability in the years ahead as it gains further scale, driven by fast-growing market opportunities.
Dicker Data Ltd (ASX: DDR)
I am attracted to wholesale IT distributor Dicker Data because of its proven track record and very attractive fully franked dividends. Dicker Data currently pays investors a lucrative grossed-up, forward dividend yield of 7.12%.
Dicker Data has seen a recent uplift in sales, recording its highest ever revenue month to date in March. This came as a huge number of employees were suddenly required to work from home due to the coronavirus crisis.
In fact, the crisis could actually change the long-term working habits of many Australian businesses as they see the benefits of remote working for a higher proportion of their employees. This could lead to further long-term demand for Dicker Data’s products. In a recent announcement, the company also detailed a plan to grow its dividend by 31% in FY2020.
Dicker Data also recently announced a capital raising, with the proceeds to be used to provide additional balance sheet flexibility and support the company’s long-term growth objectives. The proceeds will also be used partly to fund the construction of Dicker Data’s new distribution centre.
In contrast to a number of other ASX shares raising capital, Dicker Data was not under significant financial stress before the raising, which is reflected in its recent strong share price growth. While many ASX shares have only seen a partial rebound in their share price since the market bottomed in late March, Dicker Data has managed to regain all of its recent losses.
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More reading
- ASX 200 down 0.9%: Xero posts strong growth & Australian economy loses 594,300 jobs
- Why Beach, CBA, Qantas, & Xero shares are dropping lower
- Could these small cap ASX shares be the next Afterpay?
- 3 top ASX shares to buy now and hold for 10 years
- If you invested $10,000 in the Afterpay IPO, this is how much you’d have now
Motley Fool contributor Phil Harpur owns shares of AFTERPAY T FPO, Altium, and Xero. The Motley Fool Australia owns shares of and has recommended BIGTINCAN FPO and Dicker Data Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO, Altium, and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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