Small-cap ASX share ‘well-funded’ with ‘good growth’: fund manager

Small-cap ASX share Silk Logistics Holdings Ltd (ASX: SLH) has been tipped as a top pick by Cyan Investment Management co-founder Dean Fergie.

In its most recently reported financial results, the warehousing and logistics company saw its FY22 revenue increase by 22% to $394 million. The small-cap ASX share also reported a whopping 45% increase in net profit after tax (NPAT), which reached $15.8 million.

At the current share price of $2.22, Silk Logistics has a market cap of $175 million and pays a fully franked trailing dividend yield of 3.9%.

Small-cap ASX shares emerging from tough year

The past 12 months weren’t particularly kind to most of the smaller ASX shares.

Commenting on the headwinds facing small-caps, Fergie said (courtesy of The Australian):

There was a lot that happened last year in terms of geopolitical activity, and certainly inflation, that really came out of left field for investors. It was a terrible year (for small caps), it was really a place that no one wanted to be in.

To give you some idea, over the past 12 months the S&P/ASX 200 Index (ASX: XJO) has gained 9.8%. The S&P/ASX Small Ordinaries Index (ASX: XSO), on the other hand, dropped 2.4% over that same period.

But, as Fergie noted, “certainly so far this year, we’ve already seen a very, very strong rebound”.

Indeed, the Small Ordinaries has gained 8.9% since the opening bell on 3 January, outpacing the 8.1% gains posted by the ASX 200.

And Fergie believes that strength could lead to some extra tailwinds for small-cap ASX shares moving forward.

 â€œI think that might prompt more people to get involved,” he said. “As it goes up, people start to have a little bit of FOMO and so they put money in, which ticks the market up further.”

Which brings us back to Silk Logistics.

Explaining why Silk is a top small-cap ASX share pick for Cyan, Fergie said (quoted by The Australian):

We’re still seeing some companies in the online space and the like bring in a lot of goods from overseas. They want warehousing transportation and Silk now has a really good, domestic-wide footprint in Australia. They’re well-funded and seeing good growth.

He added that the ASX share is “reasonably defensive too”.

Silk Logistics share price snapshot

As you can see in the chart below, the Silk Logistics share price is up 3.7% since the opening bell on 3 January.

Over the past 12 months, the small-cap ASX share has gained 6.2%.

The post Small-cap ASX share ‘well-funded’ with ‘good growth’: fund manager appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. 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 recommended Silk Logistics. 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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