I believe there are a good number of shares at the small end of the Australian share market that have the potential to grow into much larger entities in the future.

Three small cap shares which I think ought to be on your watchlist are listed below. Here’s why I think they have very promising futures:

Bigtincan Holdings Ltd (ASX: BTH)

Bigtincan is a fast-growing provider of enterprise mobility software. Its software allows businesses to increase their sales win rates, reduce costs, and improve customer satisfaction. This is achieved through improvements in mobile worker productivity. Demand for Bigtincan’s software has been growing strongly in recent years and this has continued to be the case during the pandemic. As a result, the company advised remains well-placed to deliver on its 30% to 40% organic revenue growth target in FY 2020. I expect more of the same in FY 2021.

Mach7 Technologies Ltd (ASX: M7T)

Mach7 is a medical imaging data management solutions provider which offers software that helps inform diagnosis, reduce care delivery delays and costs, and improve patient outcomes. Its software is being used by healthcare institutions across the world, including in markets such as Hong Kong and Qatar. Demand for its software has been very strong in FY 2020, leading to Mach7 reporting a 158% increase in first half revenue to $9.1 million. Since then the company has announced the acquisition of Client Outlook. The acquisition of this leading provider of enterprise image viewing technology increases Mach7’s total addressable market from US$0.75 billion to US$2.75 billion.

MNF Group Ltd (ASX: MNF)

A final small cap to watch is MNF Group. It specialises in Voice over Internet Protocol (VoIP) technology, which is used to convert analogue audio signals into digital data that can be sent over the internet. Demand for its services has been very strong during the pandemic. This is because as more people work or study from home, the demand for information and connectivity through technology has increased. In fact, demand has been so strong, in April MNF Group was able to reaffirm its full-year guidance for earnings before interest, tax, depreciation and amortisation (EBITDA). It expects EBITDA of between $36 million and $39 million in FY 2020, which represents 32% to 43.4% year on year growth.

More reading

• Add these ASX small cap shares to your watchlist immediately
• Why Nearmap and 2 other ASX tech shares are surging higher today
• How to get rich by investing in small cap ASX shares
• Bubs and 1 other exciting small cap ASX share to buy
• 4 top small cap ASX shares to watch in FY 2021

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends BIGTINCAN FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MACH7 FPO. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended BIGTINCAN FPO and MACH7 FPO. 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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Yesterday, the Australian Government announced an $86 billion budget deficit. Just 12 months ago the government was forecasting a $5 billion budget surplus in FY20.

Well, the coronavirus pandemic has hammered ASX shares lower and thrown those plans out of whack.

Let’s unpack Treasurer Josh Frydenberg’s budget update and what it means for your favourite ASX shares in 2020.

What were the key budget takeaways?

To be honest, it makes for some grim reading. The government’s deficit for FY20 is forecast to be $85.8 billion. That’s a big turnaround from a forecast $5 billion surplus in the pre-pandemic world.

Not only that but the FY21 deficit is forecast to grow to $184.5 billion the following year. These are some big numbers that reflect both a slowdown in government revenue (i.e. taxes) and increase in government expenditure.

The unemployment rate is expected to hit 9.25% by Christmas, despite an extension of the JobKeeper program, and Australia’s net debt is forecast to reach $677.1 billion by the end of June 2021, or 35.7% of GDP.

It’s important to note that budget deficits are not necessarily a bad thing. In fact, more government spending and strong fiscal policy can help drive economic growth. There’s been an obsession with surpluses over the last decade or so but budget deficits can actually be good for ASX shares and the economy.

What does all of this mean for ASX shares?

I don’t think there’s much good news for hard-hit industries like travel or hospitality in the budget update. Treasury is forecasting an easing of border restrictions by January but that seems very optimistic. That would be good for travel shares like Webjet Limited (ASX: WEB), but also residential REITs like Stockland Corporation Ltd (ASX: SGP), both of which benefit from immigration. However, that forecast appears at odds with what we’re seeing in the market, so I’d take it with a grain of salt.

I think infrastructure could be one sector that benefits from the current conditions. The pandemic has forced a re-think of working and living arrangements. It’s also given cities a chance to see how impact well-planned infrastructure is for everyday life.

More government infrastructure spending seems like a real possibility to boost economic growth. Multi-billion-dollar government contracts provide: a) big dollars, and b) reliable work for chosen companies.

That could boost economic activity and future-proof our cities, which could in turn help boost ASX infrastructure shares higher. If that’s the case, I’d be watching Transurban Group (ASX: TCL) and Atlas Arteria Group (ASX: ALX) shares in 2020.

In the end, much of the impact of the budget deficit on ASX shares will really come down to how the ballooning government debt will be deployed. 

More reading

• Which ASX 200 shares are the safest?
• 4 trends to invest in before August earnings season
• Warning: Investors are betting against these 3 ASX shares
• Why the Transurban share price could be a buy today
• TPG and 1 other quality ASX 200 share to buy right now

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia owns shares of Transurban Group. 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.

The post What the budget deficit means for ASX shares like Webjet appeared first on Motley Fool Australia.

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If you are looking to add some dividend shares into your portfolio, then you might want to consider the two listed below.

Both of these ASX dividend shares offer generous yields which smash the interest rates currently being offered on savings accounts and term deposits. Here’s why I like them:

Dicker Data Ltd (ASX: DDR)

The first dividend share I would buy is this wholesale distributor of computer hardware and software. Dicker Data has consistently grown its dividend at a solid rate over the last few years and this trend will continue in FY 2020. During the first half, Dicker Data continued to experience strong demand for its offering. So much so, its half year revenue broke through the $1 billion level for the first time. As a result of this, the company advised that it plans to increase its dividend by 31% to 35.5 cents per share this year. Based on the current Dicker Data share price, this represents an attractive fully franked 4.7% dividend yield.

National Australia Bank Ltd (ASX: NAB)

If you don’t have exposure to the banking sector, then I think NAB could be worth considering. The banking sector has come under significant pressure this year due to the impact of the pandemic and the spike in bad debts that this is likely to cause. While a decline in the NAB share price was appropriate, I think the selling has been overdone and has left the banking giant’s shares trading at a very attractive level. Especially for income investors on the lookout for a source of income. Based on the latest NAB share price, I estimate that the bank’s shares currently offer investors a generous fully franked ~5% FY 2021 dividend yield. This is significantly better than the interest rates you’ll get on its savings accounts and term deposits.

More reading

• ASX 200 rises 0.3%, investors bet on Tabcorp
• One leading investment bank predicts CBA won’t pay a final dividend
• Dicker Data share price surges 6% on strong half year update
• Why I would buy these fully franked ASX dividend shares
• ASX 200 drops 1.1%: Big four banks fall, Resolute rockets, Afterpay tumbles

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. 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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ASX lithium shares. It’s been some time since the Orocobre Limited (ASX: ORE) share price was all the hype, even as far back as 2018.

What’s been happening to ASX lithium shares?

The March bear market hit ASX lithium shares like Orocobre particularly hard. However, their share price recovery has lagged that of the S&P/ASX 200 Index (ASX: XJO).

The Orocobre share price hit a new, 52-week low of $1.82 per share on 14 May. Meanwhile, the Galaxy Resources Limited (ASX: GXY) share price hit a 52-week low back in mid-March.

For starters, global lithium prices have been volatile and trending lower for years.

That price decline has been both supply and demand-driven. A Fastmarkets report back in February laid out some of the challenges and opportunities on both sides.

On the one hand, there is a significant oversupply in the market right now. Demand has lagged supply for some time now with an expected uptick in electric vehicle production failing to materialise.

That has seen the Orocobre share price slide 55.9% lower since January 2018.

Falling demand for imported battery raw materials into China has also challenged commodity and share prices.

Over time, the hype around ASX lithium shares has died down. While some investors are still bullish, I think many are starting to lose faith in the long-term growth story.

Is the Orocobre share price worth buying at $3.19?

According to Geoscience Australia, Australia controls 18% of the world’s known lithium supply. That means Orocobre and Galaxy are well-placed to capitalise if the market booms.

I really think buying ASX lithium shares right now is pretty speculative.

Pilbara Minerals Ltd (ASX: PLS) expects the lithium market to triple in the next five years. Once again, it’s electric vehicles that are expected to be the main catalyst.

That would be good news for the Orocobre share price given the company’s status as a major lithium producer. However, it could also be a case of the Boy Who Cried Wolf as investors turn their backs on the potential upside.

I think I’d personally like to see Orocobre’s August full-year result before buying. I have no doubt that there will be potential winners among ASX lithium shares in the future.

The real trouble is picking a long-term winner and I wouldn’t bet on the Orocobre share price at $3.19.

Foolish takeaway

As you can see, picking winning ASX lithium shares is a challenging business. The Orocobre share price surged 3.2% higher yesterday but I think it’ll remain volatile rather than climbing higher in 2020.

More reading

• Why the Polynovo share price could climb in August
• 5 things to watch on the ASX 200 on Friday
• Which ASX 200 shares are the safest?
• Why this fund manager is preparing for a massive market crash
• ASX 200 rises 0.3%, investors bet on Tabcorp

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

The post Up 38% in July! Is the Orocobre share price a buy? appeared first on Motley Fool Australia.

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The Tabcorp Holdings Limited (ASX: TAH) share price shot up by 4.93% on Thursday to $3.62 as the company announced a succession plan for replacement of its CEO and managing director, in addition to its chair.

What was in the announcement?

Tabcorp announced that it had selected existing non executive director Steven Gregg to succeed its current chair, Paula Dwyer. The transition will take place on 31 December 2020.

The company also announced that its CEO and managing director David Attenborough would retire in the first half of the 2021 calendar year. Tabcorp stated that a global search was underway to find a replacement. 

In the announcement, Tabcorp’s current chair Paula Dwyer said:

With the integration of Tatts nearing completion, the time is now right for a new Chairman to lead the Tabcorp Board into the future. The appointment of Steven Gregg will provide continuity of leadership and an orderly transition as the company identifies and transitions to a new Managing Director and CEO.

Steven’s contribution to the Tabcorp board has been significant, and his track record in stewarding complex companies navigating change, including CEO transitions, positions him well for success as the next Chairman of Tabcorp.

The company’s current CEO and managing director David Attenborough also commented on the succession plan, stating: 

The combination with Tatts is now largely complete and, as such, now is the right time to start the process to appoint the new CEO who can work with the board and management team to take the company forward. Until then, I am totally committed to steering Tabcorp through the COVID-19 pandemic and ensuring that our businesses are best positioned for the future.

About the Tabcorp share price

Tabcorp is a gambling entertainment company providing lottery products, wagering, Keno and gaming products. The company operates a number of household name services including Keno, TAB, The Lott, George, Max, TGS, eBet and Sky Racing. Tabcorp is Australia’s leading gambling provider with more than 5,000 employees.

In June, Tabcorp announced that its bank lenders had agreed to waive covenants on leverage and interest cover as the company works through the impact of the coronavirus pandemic. The company had liquidity $820 million available in cash and undrawn facilities in May. It resolved not to pay a final dividend for the 2020 financial year as part of the agreement with its lenders.

In the second half of 2019, Tabcorp earnings before interest, tax, depreciation and amortisation of $596.5 million, and revenue was up by 4.4% to $2,913.9 million.

The Tabcorp share price is up 73.2% from its 52-week low of $2.09, but is still down 20.61% since the beginning of the year. The Tabcorp share price has fallen 26.80% since this time last year.

More reading

• ASX 200 rises 0.3%, investors bet on Tabcorp
• Why Coca-Cola Amatil, Newcrest, QBE, & Tabcorp shares are pushing higher
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• Broker warns Afterpay and these ASX stocks are caught in an overcrowded trade
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Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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The Polynovo Ltd (ASX: PNV) share price could be set to push higher in 2020.

Here’s why I see some tailwinds behind the Aussie biotech ahead of its August earnings result.

How has the Polynovo share price performed recently?

The Polynovo share price jumped 0.45% higher yesterday and is now up 21.0% in 2020. That’s a strong result given the S&P/ASX 200 Index (ASX: XJO) is down 8.9% over the same period.

However, that performance pales in comparison to Polynovo’s 5-year track record. Shares in the Aussie biotech are up 1,945.5% in the last 5 years despite being down 31.4% from their all-time high.

It’s been a bullish run in recent years but investors want to know what sort of growth they can expect in the future.

What’s been driving these share price moves?

July has been a busy month for Polynovo announcements despite the company’s share price falling 14.1% lower.

Polynovo received formal feedback from the United States Food and Drug Administration (FDA) on its Pivotal trial protocol. The Pivotal trial program is assessing the use of NovoSorb BTM in the treatment of full thickness burns.

The FDA has requested further information from the company which Polynovo Managing Director, Paul Brennan, described as ‘positive’.

Polynovo also received US$15 million in funding from the Biomedical Advanced Research and Development Authority (BARDA) to support the Pivotal trial program.

The company provided a trading update on 10 July which contained some more positive signs for shareholders. This was highlighted by June 2020 being a new record US sales month for the Aussie biotech company.

Sales for the June quarter climbed 33% compared to the March quarter with FY20 product sales ‘likely to at least double FY19’. It’s yet another strong milestone that has supported the recent Polynovo share price growth.

There was also a solid breakthrough in the United Kingdom as the company announced its first sale. Positively, there have also been ‘numerous applications’ of the NovoSorb BTM product across Germany, Austria and Switzerland.

What am I expecting from the August result?

I’m quietly confident about Polynovo’s August full-year results.

The strong sales trajectory has been maintained by the company for quite some time now.

Polynovo continues to explore new and innovative applications of NovoSorb BTM. That says to me that there is plenty of potential growth left in the Polynovo share price in 2020.

All in all, I think we’ll see some strong earnings numbers next month. That could propel the company’s value even higher and fuel further outperformance.

More reading

• Up 38% in July! Is the Orocobre share price a buy?
• 5 things to watch on the ASX 200 on Friday
• Which ASX 200 shares are the safest?
• Why this fund manager is preparing for a massive market crash
• ASX 200 rises 0.3%, investors bet on Tabcorp

Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of POLYNOVO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. 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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