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Respected fund manager Wilson Asset Management (WAM) has recently identified two small cap ASX shares that it owns in its portfolio.

WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Capital Limited (ASX: WAM).

There’s also one called WAM Microcap Limited (ASX: WMI) which targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.

WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.

The WAM Microcap portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 24.5% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 11.5%.

These are the two small cap ASX shares that WAM outlined in its most recent monthly update:

DGL Group Ltd (ASX: DGL)

DGL was created over 20 years ago and listed onto the ASX and NZX a month ago in May 2021.

WAM Microcap explains that DGL is a specialty chemicals and dangerous goods solutions provider servicing over 1,300 customers across Australia, New Zealand and internationally. It operates across 26 sites, with 140,000 tonnes of manufacturing capacity, 126,000 tonnes of chemical storage and 174,000 tonnes of waste processing capacity.

The small cap ASX share’s initial public offering (IPO) was oversubscribed. It issued $100 million at $1 per share. The share price has since risen to $1.21.

Wilson Asset Management said that the company has reported strong financial performance, with FY20 pro forma revenue of $180.1 million forecast to increase to $209.7 million in FY22.

The fund manager is still positive on the company’s industry position and outlook for organic growth and earnings-accretive acquisitions.

Ardent Leisure Group Ltd (ASX: ALG)

WAM Microcap described Ardent Leisure as a business that services more than 3 million customers annually as the owner and operator of theme parks, indoor entertainment centres and attractions in Australia, including Dreamworld, WhiteWater World and SkyPoint and a growing portfolio of family attractions in the US.

The fund manager pointed out that after a positive trading update in April, the small cap ASX share announced in May the continuation of strong revenue momentum in its US bowling alley operations, Main Event Entertainment, with revenue up 23% in March, 40% in April and 8% in the first week of May against the corresponding period in 2019.

WAM Microcap continues to see upside to earnings, as coronavirus related restrictions ease. It also sees strong optionality existing through portfolio optimisation and asset sales.

The post Wilson Asset Management thinks these 2 small cap ASX shares are a buy appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you’re looking for some growth shares to add to your portfolio next week, then the two listed below might be worth considering.

Here’s why these ASX growth shares have been rated as buys recently:

Afterpay Ltd (ASX: APT)

This buy now pay later (BNPL) focused payments company has been growing at a rapid rate in recent years. This has been driven by the increasing popularity of BNPL with consumers and merchants and its global expansion.

After dominating the ANZ market, the company successfully launched in the United States in the middle of 2018. Three years later it has 9.3 million active customers in the North American market. This equates to almost two-thirds of its total active customers of 14.6 million.

Pleasingly, this is still only a fraction of its market opportunity in North America, giving it a long runway for growth in the region. This should be supported by the company’s recent expansion onto mainland Europe and its probable entry into the Asian market in the future.

Morgan Stanley is a fan of the company. It currently has an overweight rating and $145.00 price target on Afterpay’s shares.

Breville Group Ltd (ASX: BRG)

Breville is one of the world’s leading appliance manufacturers. It has been growing its sales and profits at a strong rate over the last few years and has continued this in FY 2021.

For example, during the first half, Breville reported a 28.8% increase in revenue to $711 million and a 29.2% increase in net profit after tax to $64.2 million.

This was driven by a combination of favourable tailwinds brought about by COVID-19, such as working from home and more dining in, and its global expansion.

One broker that appears confident that its strong growth can continue is UBS. Its analysts recently put a buy rating and $35.70 price target on its shares.

The post 2 excellent ASX growth shares tipped as buys appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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ASX shares, it would seem, weren’t overly worried about the sharp spike in inflation reported by the United States Labor Department on Thursday.

In Friday’s trade, the All Ordinaries Index (ASX: XAO) closed up 0.24%. The All Ords is now up 8.97% so far in 2021.

Biggest US inflation leap in 13 years

ASX shares were up on average despite the world’s largest economy reporting a 0.6% rise in the consumer price index (CPI) in May. Year-on-year that brings the US inflation rate to 5%. That’s the biggest 1-year inflation leap in the US since 2008.

On the surface that may sound rather alarming. But dig a little deeper and you’ll find some rather unique reasons for the year-on-year price spike that could well mean it’s a short-term issue.

eToro market analyst Josh Gilbert told the Motley Fool he expects the spike in most prices to be transient.

According to Gilbert:

Many of the drivers are one-offs, such as US inflation being at 0.1% in May 2021. Or supply disruptions, such as semiconductor chips or shipping rates due to the blocking of the Suez Canal.

We’re also seeing dramatic year-over-year swings in oil, which went from near zero to US$72 a barrel, as well as broader commodity prices rises. Many of these will work themselves out in the coming months as economies and supply chains normalise. In the case of commodities, they’re too small to have a large impact, as economies and inflation baskets have become a lot less commodity-dependent.

eToro is expecting US headline CPI to come in at a little over 3% in 2021 and fall back to around 2.5% next year.

Which ASX shares will struggle with higher inflation?

Gilbert points out that the news flow around inflation is leading to higher volatility in US markets. As the ASX tends to take its lead from US markets, we won’t be immune here in Australia.

“Investors should expect periods of volatility over the next few months as uncertainty sweeps through the market,” Gilbert told us. “Global markets see US inflation pressure as a view that rates will rise across the world sooner than expected.”

So which ASX shares will face strong headwinds in a higher inflation environment?

According to Gilbert:

Growth and tech stocks are most at risk from inflation. These sectors have been the stocks in focus for the last few years. With bond yields low, we see that investors are willing to pay a premium for these stocks, as they look to capitalise on returns over several years rather than settling for lower rates with bonds. 

When bond yields rise, as we are currently seeing, investors rotate into cyclical sectors and expect much faster returns from these growth stocks. The environment we are in highlights more than ever that investors should have a diversified portfolio. Big tech is currently being supported by clean balance sheets and strong earnings that support high valuations. 

Which ASX shares could benefit with higher inflation?

The underlying concerns about inflation aren’t so much that prices may rise a bit above the 2–3% annual target rate set by the Reserve Bank of Australia. It’s that commercial banks will lift lending rates to at least match the pace of inflation.

If the cost of money goes up, ASX shares that have been in favour for their potential to deliver large gains down the road, even though they’re unprofitable today, could find investors turning to shares that are already turning smaller profits.

Gilbert told the Motley Fool:

The focus across the broader market would be to continue to look at value stocks. Areas such as consumer discretionary, financials and energy will lead the market performance through 2021. They have more room for earnings growth, cheaper valuations and provide upside to the re-opening of economies.

The post How will ASX shares respond to rising US inflation? appeared first on The Motley Fool Australia.

More reading

• 2 excellent ASX growth shares tipped as buys
• Here’s why the Pushpay (ASX:PPH) share price could be a buy
• These were the best performing ASX 200 shares last week
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• Next Science (ASX:NXS) share price swings on lowered earnings update

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Pushpay Holdings Ltd (ASX: PPH) share price might be interesting to think about right now.

Pushpay is a leading business in the digital donation space. Specifically, Pushpay provides church management tools and donation tools.

But there are a few reasons why the ASX share could be a good one to keep an eye on:

Growing profit margins

A business with growing profit margins has the potential to deliver faster profit growth over time.

Pushpay is seeing operating leverage across the business.

FY21 saw the gross profit margin improve from 65% to 68%.

The earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin improved from 22% to 34% thanks to revenue growth and limited expense growth. 

Pushpay deliberately chose software that was scalable and it chose the best tools so that it would offer its clients the best service. Management say that when combined with strong financial discipline, these investments will allow significant operating leverage to be achieved as revenue grows.

Strong offering for churches

Pushpay offers a number good tools for its large and medium US churches.

It offers a livestreaming service so that churches can stay connected with their congregations. This has been useful over the last year and a half during the pandemic.

Pushpay’s tools also allow churches to track the donations of different givers. It offers many other administrative tools.

The best offering of Pushpay is called ChurchStaq, which is the combined offering of both Pushpay and Church Community Builder (which it acquired not too long ago). It combines Pushpay’s giving and engagement solution with Church Community Builder’s church management system functionality.

ChurchStaq is proving popular after a sizeable uptake by clients. ChurchStaq sales as a percentage of total sales have increased after its launch in September 2020 across all customer segments. Pushpay has also seen an increase in cross-selling its donor management system and church management system products to existing customers.

The ASX share continues to look for acquisitions that can improve its offering to clients and potentially capture more market share.

Catholic expansion

Pushpay has allocated an initial investment of resources into developing and enhancing the customer proposition for the Catholic segment of the US faith sector.

The Catholic segment of the US faith sector comprises 196 dioceses and archdioceses who represent an estimated 17,000 individual parishes. This will form part of Pushpay’s plan to become the preferred provider of mission critical software to the US faith sector.

During FY21, Pushpay has entered into a pilot with the Archdiocese of Chicago in Illinois, US, and welcomed a number of new Catholic parishes and dioceses to the Pushpay platform.

In FY22, Pushpay is going to invest between US$6 million and US$8 million to grow in the Catholic segment. Of this total, two thirds will be for product design and development expenses. The rest is in sales and marketing.

The company expects the benefits of this Catholic segment to be realised incrementally over the course of the following financial years. It has set a goal of acquiring more than 25% of the Catholic church management system and donor management system market over the next five years.

The Catholic church is closely associated with many education providers and non-profit organisations, which presents further opportunities within the US and other international jurisdictions.

Pushpay share price valuation

According to Commsec, the Pushpay share price is valued at 27x FY23’s estimated earnings.

The post Here’s why the Pushpay (ASX:PPH) share price could be a buy appeared first on The Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) continued its impressive run and pushed higher again last week. The benchmark index added 0.2% or 16.9 points to end the period at 7,312.3 points.

While a good number of shares pushed higher with the market, some climbed more than most. Here’s why these were the best performers on the ASX 200 last week:

Altium Limited (ASX: ALU)

The Altium share price was the best performer on the ASX 200 last week with a massive 28.6% gain. Investors were scrambling to buy the electronic design software provider’s shares after it announced the receipt of a takeover approach from US software giant Autodesk. It made a formal, non-binding, indicative and unsolicited proposal of $38.50 per share to acquire the company, which represented a 41.5% premium to its last close price. However, it was also a 4.2% discount to its 52-week high. The Altium Board believed it undervalued the company and rejected the proposal.

Iress Ltd (ASX: IRE)

The Iress share price wasn’t far behind with a 20.4% gain over the five days. Investors were buying the financial technology company’s shares amid speculation that it could be a takeover target as well. However, Iress shot down the rumours, confirming that it has not received any direct approach.

Whitehaven Coal Ltd (ASX: WHC)

The Whitehaven Coal share price was on form and charged 19% higher last week. This appears to have been driven by a broker note out of Ord Minnett on Tuesday. That note reveals that its analysts have upgraded the coal miner’s shares to a buy rating with a $3.00 price target. It made the move on the belief that its shares had been oversold and also due to the rising thermal coal price.

Mesoblast limited (ASX: MSB)

The Mesoblast share price was a strong performer and jumped 16.2% over the five days. This was despite there being no news out of the biotechnology company. Though, this could have been driven by a delayed reaction to a broker note out of Bell Potter from a week earlier. Its analysts put a buy (spec) rating and $3.60 price target on the company’s shares after looking through its remestemcel-L in COVID related acute respiratory distress syndrome (ARDS) trial results.

The post These were the best performing ASX 200 shares last week appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Altium. The Motley Fool Australia owns shares of and has recommended Altium. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It was another positive week for the S&P/ASX 200 Index (ASX: XJO). The benchmark index continued its impressive run and climbed 0.2% or 16.9 points to end the period at 7,312.3 points.

Unfortunately, not all shares climbed higher with the market. Here’s why these were the worst performers on the ASX 200 last week:

NRW Holdings Limited (ASX: NWH)

The NRW share price was the worst performer on the ASX 200 last week with a 7.4% decline. This was despite there being no news out of the mining services company during the period. However, tough trading conditions have been weighing on the company’s shares this year. So much so, the NRW share price is now down by almost 50% since the start of the year.

HUB24 Ltd (ASX: HUB)

The HUB24 share price was out of form and tumbled 6.4% lower over the five days. Once again, this was despite there being no news out of the investment platform provider. However, with the HUB24 share price up 19% year to date even after this decline, this weakness could have been driven by profit taking from some investors.

Corporate Travel Management Ltd (ASX: CTD)

The Corporate Travel Management share price was the next worst performer with a 6.4% decline. This may have been driven by concerns over the stuttering travel market recovery from the pandemic. Particularly given the recent lockdowns in Victoria and border closures. In addition to this, with the Corporate Travel Management share price still up over 21% since this time last month, profit taking could also be weighing on its shares.

Virgin Money UK (ASX: VUK)

The Virgin Money UK share price was a poor performer and fell 5.1% during the five days. This was despite there being no news out of the UK based bank. Though, last month analysts at Morgans downgraded the company’s shares to a hold rating with a $3.45 price target. It appears to believe its shares are fully valued at the current level.

The post These were the worst performing ASX 200 shares last week appeared first on The Motley Fool Australia.

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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Hub24 Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Next Science Ltd (ASX: NXS) share price went from red to green before finishing back in the red during afternoon trade.

At 3pm, shares in the company were trading for $1.80 – down 1.1% – before rising to $1.87 within half an hour. Just 8 minutes later, however, the Next Science share price was even deeper in the red than before. It ended the day at $1.76 – down 3.3%.

The volatile price movement came after the technology company announced it was lowering forecasted revenue for the second half of FY21.

Let’s take a closer look at today’s update.

Earnings forecast drops

In a statement to the ASX, Next Science said it expected revenue for the first half of calendar year 2021 to be between $3.5 million and $4 million.

Judith Mitchell, managing director of Next Science, said of the figure:

We expect H1 2021 revenue to exceed total revenue for FY 2020 and our growth rate will be at least 230% on the prior corresponding period.

However, back in January this year, Next Science said it expected the earnings trajectory from Q2 to continue into the second half of this financial year. Earnings for that period were $2.3 million and the announcement sent the Next Science share price 8% higher that day.

Extrapolating this figure, Next Science predicted revenue for the second half of the financial year to be $4.6 million. From today’s announcement, that means the current projection is 13% lower at best and 24% lower at worst.

Investors responded to the updated numbers by sending the Next Science share price seesawing.

Next Science share price snapshot

Over the past 12 months, the Next Science share price has increased 29.3%. However, it has not fully recovered since the COVID market crash of March 2020. On 5 March that year, Next Science shares were trading for $2.19. Over the previous 12 months, the highest price these same shares have traded at is $2.06.

Next Science has a market capitalisation of around $350 million.

The post Next Science (ASX:NXS) share price swings on lowered earnings update appeared first on The Motley Fool Australia.

More reading

• Here’s why the Next Science (ASX:NXS) share price finished higher today

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Next Science Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Although the tech sector has been recovering recently, it is still underperforming the market by some distance in 2021.

While this is disappointing for investors with overweight exposure to the sector, it could be a buying opportunity for others.

Two ASX tech shares that are still trading notably lower than their 52-week highs and have been given buy ratings are listed below. Here’s what you need to know about them:

Appen Ltd (ASX: APX)

Despite a recent improvement, this artificial intelligence (AI) data annotation products and solutions provider’s shares are down 68% from their 52-week high.

This has been driven partly by concerns over softer than expected demand for its services from some of its largest customers due to COVID-19 headwinds. This has led to doubts that it will be able to achieve its guidance in FY 2021, particularly with management expecting a sizeable skew to the second half.

Nevertheless, the company remains positive on its longer term prospects thanks to its leadership position in a growing market.

Ord Minnett also appears positive on its future. The broker has a buy rating and $24.75 price target on the company’s shares.

Kogan.com Ltd (ASX: KGN)

The Kogan share price has been sold off this year and is now down 58% from its 52-week high. Investors have been selling the ecommerce company’s shares after its incredible sales and profit growth came to an abrupt end.

This has been caused by management’s failure to handle its inventory efficiently during the pandemic. It loaded up on product and was left with excessive inventory on its hands when demand softened again. Things gots so bad at one stage it was paying millions in demurrage charges for inventory stuck at ports because it ran out of room in its warehouses.

While this is very disappointing, these issues are only expected to be temporary. As a result, this recent weakness in the Kogan share price could be a buying opportunity for long term focused investors.

Analysts at Canaccord Genuity appear to believe this is the case. They currently have a buy rating and $14.00 price target on its shares.

The post 2 ASX tech shares that could be good value appeared first on The Motley Fool Australia.

More reading

• Up 25% in a month: Is the Appen (ASX:APX) share price still good value?
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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Appen Ltd and Kogan.com ltd. The Motley Fool Australia owns shares of and has recommended Appen Ltd and Kogan.com ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Magnum Mining and Exploration Ltd (ASX: MGU) share price closed the day in positive territory. This came after the mineral miner announced an agreement with global mining company, Anglo American.

At the end of market trade, Magnum shares finished up 2.86% to 18 cents.

Magnum progresses on Buena Vista iron ore project

Investors pushed the Magnum share price higher after coming out of a trading halt today.

According to its release, Magnum has signed a mandate letter and an indicative term sheet with Anglo American. This will see both parties exclusively negotiate definitive documents for the offtake and prepayment financing for Magnum’s Buena Vista iron ore project.

The mandate letter provides for a 60-day period to finalise a binding agreement.

Should both companies come into an offtake arrangement, Magnum will sell its entire direct shipping ore (DSO) from Buena Vista to Anglo American. This includes Magnum’s iron ore concentrate, hot briquetted iron and pig iron.

Pleasingly, Anglo American has proposed to buy a minimum of 560,000 tonnes of Magnum products. Furthermore, subject to due diligence, Anglo American may purchase up to an estimated 800,000 tonnes on a secured prepayment basis. The DSO however would require a payment beforehand of US$8 million, and possibly an additional US$4 million for vessel costs.

The company noted the prepayments would support fund infrastructure and working capital, along with increasing DSO operations.

Magnum managing director Dano Chan said:

Magnum is systematically delivering on its strategy of shipping ore in 2021 and the proposed agreement with Anglo American of a long-term offtake and financing is intended to be a key step in this process.

Magnum said it would provide a further update to investors when the formal agreements were complete.

More on the project

Located in Nevada, in the United States, the Buena Vista mine is an advanced magnetite iron ore project wholly owned by Magnum.

In the short term, the mine is expected to produce around 232 million tonnes of export-grade DSO at 62% and 65% fines. At the longer-term end of the scale, DSO quality is expected to increase to 67.5% of iron magnetite concentrate.

The mine has good access to rail, water, port, and power facilities.

About the Magnum share price

A strong 12 months has driven up Magnum shares by about 250% on the back of investor excitement in the sector.

Based on valuation metrics, Magnum has a market capitalisation of around $90 million, with approximately 478 million shares outstanding.

The post Why the Magnum (ASX:MGU) share price edged higher today appeared first on The Motley Fool Australia.

More reading

• 2 blue chip ASX shares that could be buys in June
• The Mesoblast (ASX:MSB) share price has rocketed 18% this week
• What moved the Stockland (ASX:SGP) share price this week?
• These 3 shares were the biggest gainers of the ASX 200 this week
• What happened with the CBA (ASX:CBA) share price this week?

Motley Fool contributor Aaron Teboneras 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Have you got room for a blue chip or two in your portfolio? If you are, then take a look at the blockbuster blue chip shares listed below.

Here’s why they are highly rated:

REA Group Limited (ASX: REA)

The first ASX blue chip to look at is REA Group. It is of course the market leader in real estate listings in the Australian market.

At the last count, the company’s local websites were commanding over triple the visits of its nearest rival. This certainly is a big positive given the current housing market boom, which is driving growth in listing volumes again.

Combined with price increases and new revenue streams, this bodes well for the company’s performance in the second half of FY 2021 and the next financial year.

One leading broker that believes the company’s shares are in the buy zone is Morgan Stanley. Its analysts currently have an overweight rating and $175.00 price target on its shares.

Westpac Banking Corp (ASX: WBC)

Another blue chip ASX share to consider is Westpac. It recently released its half year results and revealed a 256% increase in cash earnings to $3,537 million.

This was driven by a significant improvement in trading conditions after the worst of the pandemic passed. And positively, with the banking sector’s outlook continuing to improve, the medium term looks very positive for the bank and its shareholders.

Morgan Stanley is very positive on the company. It believes it has the balance sheet strength to return significant funds to shareholders in the near future. The broker suspects that Westpac will announce a $3.5 billion share buyback with its FY 2022 half year results.

It has an overweight rating and $29.20 price target on its shares. The broker is also expecting Westpac to pay fully franked dividends per share of $1.18 and $1.25 over the next two years. Based on the latest Westpac share price, this will mean yields of 4.5% and 4.75%.

The post 2 blue chip ASX shares that could be buys in June appeared first on The Motley Fool Australia.

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• Westpac (ASX:WBC) just made it a bit more expensive to buy a house with higher interest rates

James Mickleboro owns Westpac shares.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 REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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