Motley Fool: Portfolio managers name 2 small cap ASX shares to watch
This article was published on Motley Fool by James Mickleboro on 13 September, 2022.
Pinnacle Investment Management Group Ltd recently held its annual Investment Summit for 2022.
At the event, a number of CIOs and portfolio managers from within Pinnacle’s network of affiliated asset managers provided insights.
Two small cap ASX shares that these portfolio managers rate highly right now are listed below. Here’s what they are saying about them:
Imdex Limited (ASX: IMD)
David Wanis from Longwave Capital Partners picked out mining technology company Imdex at the event. Its technology allows drilling contractors and resource companies to safely find, mine, and define orebodies with precision and at speed.
The portfolio manager highlights that Imdex is a technology business generating earnings and cash flow as well as spending big on research and development activities. Yet despite this, the company is valued materially less than some tech companies that are built largely on hope. Brainchip Holdings Ltd (ASX: BRN) with its $1.7 billion market capitalisation springs to my mind here.
Wanis commented:
Imdex is a mining technology business. It’s a real business – real revenues, real earnings, real cash flow – but it’s also a business that’s invested almost $100 million in R&D over the past five years in new products to grow their business into new markets. And if we think about how the market values a company like Imdex versus some of these ‘tech hope stocks’ in the market today, there’s a massive disconnect. There’s a big disconnect between the doers – the companies who are actually innovating and executing – versus those that are promising and are built off hype.
We think what we’ll see in the very short term is an improvement in their mining technology as a percentage of their revenue that will lead to an expansion in their EBITDA margins. But strategically longer term it’ll also potentially expand their market size by four times – doubling from existing into new exploration, and then from exploration into production.”
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