There are some small cap ASX shares that are growing quickly and may be worth a spot in a growth portfolio, like Bubs Australia Ltd (ASX:BUB).
The post 2 small cap ASX shares that are growing quickly appeared first on The Motley Fool Australia. –
Small cap ASX shares that are growing quickly have the potential of delivering good investment returns over the long-term.
Here are two that could be worth looking at:
Bubs Australia Ltd (ASX: BUB)
Bubs was one of the businesses affected by COVID-19 impacts over the last year. The Bubs share price is down 34% on where it was seven months ago because sales are lower.
In the quarter ending 30 September 2020, Bubs saw a sales decline of 34% compared to the prior corresponding period. It blamed COVID-19 disruption to the domestic daigou channel in Australia for the drop, particularly with adult milk powder products. In the update, the Bubs infant formula sales were up 9%.
However, the recent update for three months to 31 December 2020 was much stronger. Whilst overall revenue was still down 12% year on year, the $12.8 million of quarterly gross sales was 36% better than the first quarter of FY21.
This growth for the small cap ASX share was driven by various segments doing well.
China cross border e-commerce (CBEC) sales went up 27% quarter on quarter, those sales were up 34% year on year.
Adult goat dairy gross revenue increased by 45% quarter and quarter, with growth of 34% against the prior corresponding period.
The Bubs infant nutrition portfolio, which represented 57% of second quarter revenue, saw sales rise by 27% compared to the first quarter of FY21.
Bubs boasted of being the fastest growing infant formula manufacturer across Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Chemist Warehouse. It saw combined retail scan sales at the checkout go up 41% quarter on quarter and up 67% year on year.
The corporate daigou trade was still softer than pre-COVID levels, but it was up 122% on the first quarter of FY21.
Total export sales revenue was up 45% on the previous quarter and up 55% on the prior year. Management said that this validated the global expansion strategy. Export to markets outside of China saw growth of 138% compared to the prior corresponding period.
Bubs revealed that it has signed with new e-commerce platforms in Asia with products now being sold on Redmart in Singapore and Lazada in Malaysia.
EML Payments Ltd (ASX: EML)
EML Payments has a number of different payment services for clients to use. EML Payments has general purpose reloadable offerings such as gaming payouts with white label gaming cards, salary packaging cards, commission payouts and rewards programs. EML Payments also offers physical gift cards, shopping centre gift cards and digital gift cards. Finally, the small cap ASX share offers virtual account numbers.
Broker Macquarie Group Ltd (ASX: MQG) thinks that the payments business will steadily move away from the physical gift card sector and focus more on digital cards and incentive programs. Whilst the broker is expecting strong double digit growth of gross debit value (GDV) over the next couple of years, there’s a concern that the lockdowns in Europe could hamper short-term growth.
But, for now, the small cap ASX share is reporting a return to growth after the worst of COVID-19 in the first half of the 2020 calendar year.
In the FY21 first quarter, EML’s total revenue went up by 20% compared to the fourth quarter of FY20, to $40.6 million. The amount of earnings before interest, tax, depreciation and amortisation (EBITDA) generated in the FY21 first quarter was $10 million, which was 69% higher than the fourth quarter of FY20.
According to Commsec, the EML Payment share price is valued at 37x FY23’s estimated earnings.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends EML Payments. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO, EML Payments, and Macquarie Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.