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Just 3 of 19 small cap ASX tech hardware stocks are winning – and one’s about to jump ship
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When it comes to hot-spot sectors among small-cap ASX stocks, tech hardware companies rarely rate a mention.
In fact, a common refrain among many local investors is that Australia lags other developed economies when it comes to listed tech success stories.
When an exciting tech stock has got the market’s attention, it’s typically the field of tech software; think the recent success of logistics software company Wisetech Global or data services provider Appen Ltd.
On the hardware front, very few companies have executed the launch from small-cap to mid-cap and beyond.
But a summary-level view of the sector shows there’s still a number of listed companies operating in the space.
Hard to make a buck in hardware
How are they doing?
Well, for companies classified as electronic equipment, instruments and components manufacturers, it’s been a rough year:
| Ticker | Name | Price | Market Cap | 1Y Tot Ret | 6M Tot Ret | 1M Tot Ret |
|---|---|---|---|---|---|---|
| NTC | NETCOMM WIRELESS LTD | $1.07 | $156,572,992.00 | -26.2% | -20.7% | 40.8% |
| RDF | REDFLEX HOLDINGS LTD | $0.61 | $91,633,240.00 | 8.0% | 74.3% | 38.6% |
| BLG | BLUGLASS LTD | $0.21 | $87,844,488.00 | -35.8% | -24.6% | -10.4% |
| HYD | HYDRIX LTD | $0.03 | $16,058,963.00 | -75.0% | -32.4% | 0.0% |
| QFY | QUANTIFY TECHNOLOGY HOLDINGS | $0.01 | $7,312,430.50 | -79.8% | -52.5% | 33.3% |
| CIO | CONNECTED IO LTD | $0.00 | $5,439,255.00 | -89.6% | -37.5% | -16.7% |
| CT1 | CCP TECHNOLOGIES LTD | $0.01 | $4,015,503.25 | -60.9% | -43.8% | -25.0% |
| KTE | K2 ENERGY LTD | $0.01 | $2,104,600.00 | -50.0% | -30.0% | 16.7% |
| QTG | Q TECHNOLOGY GROUP LTD | $0.01 | $1,351,855.38 | -69.0% | -77.5% | 80.0% |
The heavier slumps were felt more keenly by speculative companies at the minnow end of the market.
But as with most small-cap sectors, a closer inspection still reveals pockets of interesting activity.
For one thing, the largest company in the group by market capitalisation — Netcomm (ASX: NTC) — could be about to leave the ASX.
NTC’s board has unanimously recommended that shareholders accept a takeover offer by the NASDAQ-listed Casa Systems.
Although NTC’s share price is still lower for the year, Casa’s offer was at a significant premium to Netcomm’s recent trading range, and the stock price rocketed higher by more than 40 per cent.
The company has also just rolled out a self-install product for 5G internet, which allows users to pinpoint the optimum location in their house or business for a 5G modem.
In the wake of its takeover-related bounce, Netcomm is now the biggest tech hardware stock on the ASX, as measured by market cap.
But at $156m it’s still firmly in small-cap territory — perhaps a reflection of the broader industry’s scale in Australia.
The second biggest electronics manufacturer on the ASX, Redflex Holdings (ASX: RDF), was the only stock in the sector to finish higher over the past year.
Redflex makes products which improve the performance of road traffic lights and speed cameras. It counts various city councils among its customer base, both domestically and abroad.
While it’s outperformed the sector over the last 12 months, that doesn’t mean the stock price is hitting new record highs.
Rather, investors have rewarded the company for closing the door on a fraudulent era of its history, after it admitted to bribing city officials to win contracts in the US.
Hot chips
Aside from electronics, we sorted the other ASX stocks that fall within the benchmark Global Industry Classification Standard (GICS) codes for tech hardware.
Semiconductors; tech hardware, storage & peripherals; and communications equipment. Here’s a summary of the recent price action:
| Ticker | Name | GICS code | Price | Market Cap | 1Y Tot Ret | 1M Tot Ret |
|---|---|---|---|---|---|---|
| SEN | STRUCTURAL MONITORING-CDI | Semi conductors | $0.90 | $103,228,624.00 | -8.6% | -9.1% |
| SMN | SENETAS CORP LTD | Semi conductors | $0.07 | $77,854,464.00 | -41.7% | -10.3% |
| SLX | SILEX SYSTEMS LTD | Semi conductors | $0.27 | $45,173,844.00 | -26.8% | 44.4% |
| SPZ | SMART PARKING LTD | Semi conductors | $0.12 | $37,717,612.00 | -57.7% | -12.0% |
| NUH | NUHEARA LTD | Tech hardware, storage & peripherals | $0.07 | $70,607,552.00 | -6.6% | -9.0% |
| WBT | WEEBIT NANO LTD | Tech hardware, storage & peripherals | $0.53 | $33,415,540.00 | -61.4% | -6.1% |
| SRH | SAFEROADS HOLDINGS LTD | Tech hardware, storage & peripherals | $0.38 | $13,104,000.00 | 90.0% | 13.4% |
| 4DS | 4DS MEMORY LTD | Communications Equipment | $0.09 | $83,050,168.00 | -1% | 50.0% |
| BCT | BLUECHIIP LTD | Communications Equipment | $0.07 | $35,319,868.00 | 25.9% | -1.4% |
| AMO | AMBERTECH LTD | Communications Equipment | $0.12 | $3,668,781.75 | 0.0% | 0.0% |
It’s pretty safe to say the ASX will never be home to a major global manufacturer in semiconductors like Qualcomm or Broadcomm.
But again, for niche investors the sector isn’t a total wasteland. Semiconductors still underpin cutting edge digital advancements in fields such as sensor technology, storage tech and autonomous vehicles.
A few listed stocks are playing the game at a smaller scale, and some of their business models look interesting.
Do any of them have potential to make money? Pitt Street Research managing director Marc Kennis thinks so.
He highlighted Weebit (ASX: WBT) and 4DS Memory (ASX: 4DS), which develop chips used in the application of storage tech.
Both companies are now 18-24 months away from a commercial application of their technology, which means they could be in line for licensing agreements before then.
Kennis gave Stockhead’s Rachel Williamson the full rundown in this video:
ASX Semiconductor Stocks to Watch
