Australia continues to emerge as a listing destination for tech companies which in recent years has been highlighted by the emergence of companies like Afterpay, Xero, Atlassian and Appen on the global stage. While less than 1% of ASX small cap tech stocks have any chance of getting into the same conversation as those, here are six small cap tech stocks that are being watched at Emerald Financial as ones that are well positioned to capitalise on the fallout from COVID-19 in 2021.
Catapult Sports (ASX: CAT)
Share Price: $1.84
Market Cap: $368 million
Specialising in sports tech, Catapult manufactures wearable devices specifically designed for high performance analytics. Alongside the emergence of common wearables such as Fitbit and Garmin products, Catapult has transitioned their business model over the past 2 years away from just device sales, shifting to an emphasis on subscription services for their deep analytics.
The onset of a pandemic in 2020 resulted in mass shutdowns of professional sports where even training activities were banned. As a result, upon resumption of sporting leagues, the attrition rate of athletes was notably higher, while there was a clear prevalence of soft tissue injuries due to changes in conditioning through the pandemic.
While a significant portion of high performance and support staff were let go, others used the shutdowns to improve their analytics capabilities with the notion of working smarter rather than harder.
Being forced to change the way they approach high performance due to the pandemic, the use of deep data analytics that can be collected through Catapult products and services should disrupt how athletes are prepared for competition in the post-pandemic world.
Through FY20, Catapult reported a 6% increase in revenue to $100.7m and 225% increase in EBITDA to $13.3m.
Wisr (ASX: WZR)
Share Price: $0.195
Market Cap: $213 million
As a result of the mass job losses caused by the pandemic, Australians were largely conservative in their spending through 2020, with discretionary spending falling significantly due to the limited travel and holiday opportunities.
During this time, many Australians used their increased time and savings to invest in the sharemarket while getting their financing in order, minimising the possibility for ongoing pandemic fallouts where possible.
For many, it involved refinancing of mortgages, but on the smaller end of town, debt consolidation will save Australians millions of dollars in unnecessary interest payments as negative sentiment circled the big banks and we did away with credit cards.
This was evidenced by an increase in loan originations for neo-lender Wisr whose digital-only service without any brick-and-mortar retail locations enables their competitive lending rates. Such was so, their loan book surged from $163.3m at the end of 2019 to $390.5m at the end of 2020 – a 239% increase.
Complii Fintech (ASX: CF1)
Share Price: $0.056
Market Cap: $16 million
Listing on the ASX at the end of 2020, Complii offers a range of financial services for businesses with a focus on tech solutions that enable the traditionally paper-intensive operations to be entirely digitised in line with AFSL, ASIC and APRA regulations.
Although Complii is primarily a B2B business working with advisors, brokers and managers, they are likely to benefit from the global economic sentiment which prompted a major influx of investors and investment activity into the market through 2020.
This was highlighted by an ASIC analysis of investor activity between April and June which found there were 255 ASX-listed companies where share prices doubled, 70 companies that tripled and 29 that quadrupled. Retail investors accounted for 80 per cent of trades of these stocks, despite comprising just 16 per cent of broader market activity.
Following this market activity, the ASX saw a major increase in IPO activity which included a large portion of international companies listing in Australia as a pathway towards capital. This is where Complii’s Advisor Bid and Corporate World are of interest. Specifically, the software solutions which are already used by most Australian brokers enables paperless and speedy facilitation of capital raises which are likely to intensify while the market is trading at all-time highs.
As is the case with many young fintechs, revenue is minimal for Complii at the moment, having generated $160k for a $1m net loss in FY20. However, the second half of CY20 is when capital raising activity picked up, with IPO funds to also be applied to potential expansion in the United Kingdom and Singapore.
Crowd Media (ASX: CM8)
Share Price: $0.052
Market Cap: $27 million
The pandemic started at an opportune time for Crowd Media which had commenced a major business transformation towards eCommerce just months before the breakout of COVID-19.
While eCommerce is at the heart of Crowd’s plans to combine their artificial intelligence with influencer marketing for the purposes of sales, marketing, customer service or education, the Company has specifically flagged 2021 as the year they expand their consumer goods eCommerce channels into fintech services.
This coincidently comes in the same year that Crowd CEO Domenic Carosa, an early Bitcoin investor, has listed Banxa (TSXV: BNXA) on the Toronto Stock Exchange with a market cap around $50 million, where he serves as Founder and Chairman.
Banxa is a fintech company which facilitates onboarding and offboarding transactions for individuals to purchase Bitcoin easily via credit card. Amid the all-time high price of Bitcoin in 2021, global attention around Banxa’s crypto services may raise eyebrows with Carosa also being the Founder of Crowd Media.
Prior to their plans to enter the fintech sector in 2021, Crowd’s business transformation has seen a $2.9m improvement in the Company’s bottom line, generating $16.5m in FY20 for a net loss of $1.9m – major improvement on the $4.8m loss incurred the year prior. This was spearheaded by the Chairman appointment of Steven Schapera, Founder of BECCA Cosmetics.
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In March 2020, Emerald Financial listed three small cap tech stocks expected to benefit from the onset of a pandemic. Of those three, G Medical has re-domiciled to the United States while the other two performed very well through 2020:
Novatti Group (ASX: NOV)
Share Price: $0.245
Market Cap: $55 million
Pandemic lockdowns have seen a surge in adoption towards digital payments which have been driven by eCommerce and declining use of cash economies. Many of these digital payments are facilitated by Novatti’s cross border payments division which processed more than $2.3 billion in transactions last year.
This established payments infrastructure has led Novatti to emerge as a partner of choice for companies looking to improve their services and standing within Australia, where Novatti holds a Visa Principal Issuer licence, enabling them to issue Visa cards for physical and digital use.
Through their suite of payment and regulatory services, Novatti has always had a number of incubation projects in the mix with 2021 expected to see some notable activity. This will first be seen through the expansion of their billing automation division Emersion to the United States which should open up a significant market for Novatti, where 32% of professional service invoices in the United States are sent electronically compared to 84% in Australia.
Novatti has been readying for their launch of Emersion in the US through a notable hiring and training spree at the end of 2020. The new year will also see the launch of RentPay which Novatti holds a stake in, an app tipped to disrupt the real estate industry by reducing the amount of friction between tenants and landlords.
Family Zone (ASX: FZO)
Share Price: $0.475
Market Cap: $183 million
While working-from-home numbers are likely to remain higher than they were pre-pandemic, COVID-19 has shown us how things can be done well remotely and education has been yet another field to benefit from this pandemic-forced trial.
Despite much of the world getting a reasonable grasp on their case numbers, the United States continues to be an utter car crash, but was coincidentally a market Family Zone had been targeting for their learn-from-home technology prior to the pandemic’s onset.
Their sales and marketing activities in the US have been catalysed by school closures where students must log in to their classes from home. This has also created a handy medium for the large number of students that are home-schooled where remote learning still has a major role to play in the US if they are to get on top of COVID-19.
Through the heart of the pandemic in 2020, Family Zone ended the year with 3,133 schools on their platform which represented a 153% increase through the pandemic. Even with the big increase, Family Zone is only servicing 3% of school districts which highlights the opportunity for growth in a market where the education structure enables Family Zone to sign up multiple schools by securing school district contracts (average 5.6 schools per district).
*Past performance is not a reliable indicator of future performance
** Disclosures: Alfred Chan is an Analyst for Emerald Financial, a Director of Principal Investor Relations (ABN: 51 633 750 928) and an Authorised Representative of Emerald Financial Group ABN 85 106 823 741 which holds Australian Financial Services License number 241041.
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