MoneyTalks: This expert reckons these three small caps are going ‘cheap’

• HD Capital Partners focuses on finding undervalued and overlooked ASX small caps for long-term gains
• Investment firm says some small cap tech stocks still recovering from a bear market, including Airtasker
• HD Capital also bullish on investment platform Praemium and newly-listed B2B payments processor Cuscal

MoneyTalks is Stockhead’s drill down into what stocks investors are looking at right now. We’ll tap our list of experts to hear what’s hot, their top picks, and what they’re looking out for.

Today we hear from HD Capital Partners co-founder and co-CIO Harley Grosser. 

For HD Capital Partners it’s all about finding undervalued and overlooked companies for long-term gains. The boutique investment firm manages capital for high net worth individuals, family offices and institutional investors.

“Our primary focus is on ASX-listed smaller companies with a market cap of $100 million to $300m,” Grosser said.

“We like to find companies which have long track records we can go back, analyse and research.

“We also like businesses which produce lots of free cash flow and try to buy them at big discounts to what they are worth.”

He said while a lot of HD Capital fund’s top holdings are technology companies, this was not done intentionally.

“We just look for good companies trading cheaply and at the moment most of our fund is in technology companies because they happen to be cheap,” he said.

Grosser said tech small caps were hit by a rough bear market from about 2021 to 2023.

“It was probably a two to three year small cap bear market in general, but particularly tech which was coming from quite lofty valuations back in 2021,” he said.

While a lot of ASX small cap tech hit by the bear market had come out the other side there was still good value to be found.

“Some have been re-rated because the market realised they were too cheap or have been acquired by private equity and usually at massive premiums to their last trading price, which shows how cheap some of these companies can get,” Grosser said.

HD Capital’s three ASX small cap tech stock picks

Airtasker (ASX:ART)

Online marketplace for local services Airtasker was founded by CEO Tim Fung in 2012 and made its bourse debut in March 2021.

“We like founder-led companies so that was a big plus for us with Airtasker and we’ve been invested since early 2024,” Grosser said.

He said Airtasker was still a company yet to fully recover from the bear market so represented good value.

“We think the way Airtasker will make money for us is as it re-rates as a listed company but I also wouldn’t rule out that it will be acquired one day,” he said.

Grosser said Airtasker had a very mature and profitable Australian business, which pumps out $10m to $20m of free cash flow a year, and was showing accelerating growth.

“They also have UK and US businesses which are growing at triple digit percentage rates each year off small bases but compounding very quickly,” Grosser said.

HD Capital believes Airtasker’s Australian business alone is worth more than its current market cap of ~$132 million.

“You’re getting the Australian business at a discount and then a free UK and US business thrown in on top,” Grosser said.

“I wouldn’t be shocked if in five, six or seven years the UK business is as big as the Australian business and then you’ve definitely hit a home run in the stock.”

Grosser said Airtasker was also yet to see the full benefit of media for equity deals done.

“That will be longer-term so I think for Airtasker’s UK and US businesses there could be massive growth,” he said.

Praemium (ASX:PPS)

Praemium is an investment platform, which Grosser said could be considered a smaller version of Hub24 (ASX:HUB) or Netwealth Group (ASX:NWL). 

“Praemium’s difference is they focus in on high net worth and ultra-high net worth clients so those with large portfolios, diverse assets including private and public assets,” he said.

“Their software is able to do quite complicated tax reporting on all of those assets and so that tends to be their niche.”

Grosser said Praemium was trading at a massive discount from where Hub24 and Netwealth trade.

“Netwealth actually tried to buy Praemium a few years ago at a big premium but it didn’t go through,” he said.

“We think Praemium is selling cheaply so probably on 10 times EBITDA in FY26 versus Hub24 and Netwealth which trade on multiples of that, so it’s actually our largest holding at the moment.

“But if you zoom out and look at Praemium’s performance it has grown revenue at double digit rates for the past 20 years and it’s consistently taken increased market share every year in an overall market which continues to grow.”

Cuscal (ASX:CCL)

Cuscal only listed on the ASX in November 2024, with Grosser describing it as essentially a B2B payments processor.

“Clients are companies like Bendigo Bank and Smartpay and they use Cuscal infrastructure technology to connect into Australia’s payment system,” he said.

“Our view is that Cuscal is trading far too cheaply for the quality of business that it is and is on about 11 or 12 times forward PE.

“We think it could probably trade on 18 to 20 times in the future as long they can get a few more half or full year periods of meeting their guidance and delivering to the market.”

Grosser said a sparse IPO market has been difficult with a cautious reception from investors.

“I think over time, as Cuscal starts to deliver on guidance, there will be a re-rate of the stock and it’s a top holding for us,” he said.

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