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Experts
With the small caps sector emerging from its slumber, it’s time to pull out the sheep entrails and take a wild stab at who will outperform in 2025.
As the superannuation ads go, past performance does not guarantee future returns – or a timely insurance payout in the case of the embattled Cbus.
But last year we hit winners with the little-known water-management play Vysarn (ASX:VYS), whose shares bounced around 60% in 2024.
The equally obscure FOS Capital (ASX:FOS) – a provider of industrial lighting products – surged 80%.
We also sniffed the aroma of success with scented-candle play Dusk Group (ASX:DSK), but went to water somewhat with Duxton Water (ASX:D2O) and H2O treatment play Fluence Corporation (ASX:FLC).
A manufacturer, marketer and distributor of fabricated and semi-fabricated aluminium-related products, Capral (ASX:CAA) is one of the few listed remaining ASX-listed building material companies after a spree of takeovers.
The $170 million Capral looks cheap, the legacy of past problems with a badly timed investment in its Bremer Park facility. Now, the leaner company is well placed for a housing recovery.
No-one likes being sprung using a mobile while they’re driving or not wearing a seatbelt, but these activities are a leading cause of road trauma.
That’s acknowledged even in America, which has an elevated view of what amounts to personal liberties.
Acusensus (ASX:ACE) is a leader in mobile camera tech to detect such infringements, even through the tinted windows of a supersized SUV.
The company has contracts with road authorities in most Australian states as well as the US, the UK and New Zealand and this month won a $27 million contract extension with Queensland’s road authorities.
Motorists dislike being pinged for illicit parking even more. But fair’s fair, private parking is private parking.
Smart Parking (ASX:SPZ) manages car parks across five geographies including the UK, Germany, Denmark and NZ. But most of its revenues derive from ‘parking breach notices’.
In a September quarter trading update the company reported revenue of $17 million, up 24% year-on-year and adjusted underlying earnings of $5.4 million.
The company has dibs over 1529 sites – ahead of its guidance of 1500 and is striving for 3000 sites by the end of 2028.
Canaccord describes Smart Parking’s business as “predictable and scalable”, which sounds like just the ticket.
We’re stealing this idea from Katana portfolio manager Romano Sala Tenna – but please don’t sue.
IPH (ASX:IPH) is the largest patent attorney in Australia, Canada and Singapore, with a sector-leading client base.
Patent law has exceptionally low client churn and most firms have been around for decades (IPH listed in 2014).
Despite management’s sound execution of international growth, the stock has halved over the past two years and yields a healthy 6.9%.
The company itself believes the stock is undervalued, having supersized its buyback scheme from $40 million to $75 million.
By its nature, the agricultural sector is subject to the whims of commodity prices and the weather. Arguably the stalwarts such as Graincorp (ASX:GNC) and Elders (ASX:ELD) look fully or fairly valued, so what else is taking seed?
Often overlooked, stockfeed group Ridley Corporation (ASX:RIC) is climbing the “wall of value” from rendering (mushing up slaughterhouse waste) to higher-value, higher-nutrient products.
For a left-of-field play, Bio-Gene Technology (ASX:BGT) is developing novel insecticides from natural compounds, as rejoinder to the Chemical Charlies who spray their land with far too much of the hydrocarbon-based stuff.
Bio-gene aims to file its application approval for Flavocide’s active ingredient with the local gatekeeper by the end of 2025.
For investors wanting a bit more buzz, Duxton Broadacre Farms (ASX:DBF) owns vast tracts of land but also has a $5.75 million, 23% stake in Duxton Bees, which owns and manages around 1650 hives (mainly in Murray Darling region).
The busy pollinators are in huge demand, with more than 30 ag industries relying on them to generate a commercial yield.
It’s been a stellar year for the pre-commercial biotech sector, with (largely) positive trial results and well-supported capital raisings.
But does better value lie with the overlook established plays?
Fundie Seneca likes Monash IVF Group (ASX:MVF), the leading provider of assisted reproductive services in Australia and Malaysia.
The company achieved Australia’s first IVF birth and the world’s first pregnancy from a frozen embryo, under the guidance of the late Professor Carl Wood.
After a flurry of corporate activity, Monash IVF is the sole remaining listed fertility services provider. The company trades at a circa 30% discount to the earnings multiple paid by private equity for its nearest competitor, Virtus Health, in 2022.
Having completed its merger with Capitol Health, Integral Diagnostics (ASX:IDX) officially has become Australia’s second-biggest radiology provider.
Investors Mutual Portfolio Manager Lucas Goode notes radiology volumes have grown at a 4%-plus compound annual growth rate over the past 15 years and this should accelerate due to the need for ageing Australians to have more testing.
Integral’s investment in tech means it is well placed to benefit from growth, while the merger should yield significant operational benefits. A strong balance sheet provides scope for further accretive acquisitions.
We’ll also throw in Clinuvel Pharmaceuticals (ASX:CUV), which has an approved drug for a rare skin disorder with robust revenues and a cash-rich balance sheet. And did we mention the company is strongly profitable?
To management’s bemusement, Clinuvel shares have lost 60% of their value over the past five years.
The bourse is a glorified casino and brokers are bookies in nice suits, but ironically online sports betting mob Pointsbet (ASX:PBH) looks more than a sheer punt given the short odds of it being taken over.
Having abandond its costly, failed Very Big Adventure in the US, Pointsbet’s revenues these days derive locally, with a smaller Canadian operation expanding more rapidly.
As Seneca notes, Pointsbet last year reported its first positive quarterly operating cash flows.
Given the need for the local sector to consolidate ahead of a likely gambing ad crackdown, we bet that Pointsbet will be subsumed by this time next year.
The company denied reports of a takeover approach in November, but where there’s smoke there’s fire.
Something is lurking in our water – and its invisible and very nasty.
The toxin in question is PFAS, the ‘forever chemicals’ widely used in applications such as fire retardants, Teflon pans and carpets.
The plaintiff lawyers are circling, given PFAS has been linked with maladies including cancer, organ damage and infertility.
The profitable SciDev (ASX:SDV) is a leader in cleansing technologies to cleanse PFAS from waterways – which is easier said than done.
In November Scidev secured its first European commercial order, from Swedish Hydro Solutions AB for a contract value of $475,000.
Scidev estimates the global PFAS treatment market at US$1.8 billion ($2.76 billion) per annum and growing at an annual rate of 5.2%.
Having prodigious athletic talent is one thing – we’re thinking of the ‘catch me if you can’ sensation Gout Gout – but it still needs to be accurately measured.
Catapult Group (ASX:CAT) has become a global champion in measuring and analysing performance via its wearable devices.
Catapult’s results for the September half-year showed revenue of US$57.8 million ($85 million), up 19% year-on-year.
Annualised contract value, the company’s preferred metric, grew 20% to US$96.8 million with free cash flow of US$4.8 million.
Catapult shares have – er – catapulted 160% this year and the company is worth a tad under $1 billion.
But who would you back: a gold medal performer or Slovakia with one bronze medal at the Paris Olympics?
No offence.
Forager Funds is convinced, because Catapult is its biggest holding in its Australian shares fund.
Experts
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