The careful selection of a handful of small cap growth shares has the potential to turbocharge your portfolio’s returns. Below are 3 small cap shares I like right now.
RPMGlobal Holdings Ltd (ASX: RUL)
RPMGlobal is an IT company within the mining industry that has traditionally provided advisory services and technical support in regards to mine preparation and planning. The company is currently transitioning from a perpetual license revenue model to a subscription-based revenue model.
In the short-term, it means that RPM must get across the dreaded SaaS revenue cliff. Revenues initially drop off drastically as large, one-off perpetual license payments are replaced by much smaller, recurring monthly payments.
The company looks to be making good progress and investors certainly agreed, with the release of its FY19 results leading to a 25% increase in the share price.
There is still plenty of execution risk but I think the current share price more than compensates investors for bearing this risk and it is a stock I continue to own in my portfolio.
Frontier Digital Ventures Ltd (ASX: FDV)
Frontier Digital owns a stake in 14 online classified businesses in a range of emerging markets. By far, its biggest position is in Zameen, which is basically the REA Group of Pakistan. Zameen is the dominant player in its market, is growing revenues at a rapid rate and turned EBITDA positive for the first time in the recently concluded half year.
Frontier Digital has gone under the radar of most analysts, being too small for most to consider. However, it will start to gain increasing amounts of attention as more of its investments cross the line of profitability.
The potential is huge and significant headway has been made over the past 12 months. I think the current share price undervalues the true value of the company’s investments, something that will change as investors become more aware of the huge growth opportunity available.
Xref Limited (ASX: XF1)
Xref is a Sydney-based human resources technology company that allows prospective employers to seamlessly and professionally conduct pre-employment reference checks on suitable candidates via an online candidate-referencing system.
The company is attracting new clients at a fairly rapid rate and has a number of blue chip companies using its service. If Xref can continue to scale up efficiently, it could potentially reach profitability within 12-24 months. High gross margins means profits could escalate quickly, which would make the company worth many multiples of its current market valuation.
Last Wednesday, Xref announced it had bolstered its presence in the US market through a strategic partnership with talent management platform PageUp. This announcement sent the Xref share price 15% higher on the day.
The execution risk remains high with Xref but so too is the return potential for those brave enough to take the plunge right now. Personally, I won’t be buying yet but it’s certainly one I’m watching closely.
For more ASX pocket rocket growth share ideas, check out the companies profiled in the free report below.
At the time of publishing, Luke owns shares in RPMGlobal and Frontier Digital Ventures.