If you’re looking for ASX small-cap shares you’ve come to the right place. Here’s what you need to know to start your research on Xref Ltd (ASX: XF1), Splitit Ltd (ASX: SPT) and Frontier Digital Ventures Ltd (ASX: FDV).
Why Small-Cap Shares Matter
Small-cap shares come with a higher risk of failure than their larger ‘blue-chip’ counterparts simply because they’re earlier stage businesses with sometimes unproven business models.
The following Rask Finance video explains some of the differences between blue-chip stocks and small caps in more detail:
Here are three ASX small caps worth considering…
1. Xref Ltd
Xref is a software company that sells “Xref credits” to large corporate customers. These credits are used on Xref’s platform to reduce time and effort in hiring, checking and referencing new employees across the world. Xref has integrated its platform with leading recruitment organisations and HR software.
Xref is not yet profitable but the sale of Xref credits and reported revenue seems to be climbing by double-digits year-over-year. One critical thing to note is the cash balance and cash burn. With the company still using up its cash it may need to do a capital raising to ensure it can capitalise on the large growth opportunity in front of it.
2. Splitit Ltd
Splitit offers consumers the ability to split the purchase price of basic products (e.g. TVs, clothing, etc). Shoppers can split their purchases into up to 36 interest-free monthly payments using their existing Visa or Mastercard.
We’ve covered Splitit shares many times on Rask Media, including current CEO Gil Don’s decision to step down which was announced today.
With ongoing growth in new merchants like Kogan.com Ltd (ASX: KGN), plus new funding facilities, shareholders will hope Splitit is able to keep growing its user base over time. Potential competitors to Splitit include Afterpay Touch Group Ltd (ASX: APT) and Humm, owned by Flexigroup (ASX: FXL).
3. Frontier Digital Ventures Ltd
Frontier Digital was founded in May 2014 and is headquartered in Kuala Lumpur. The company is focused on becoming the world leader in online marketplace businesses in emerging markets, with a particular focus on property and automotive verticals and general classifieds/marketplace websites. Currently, Frontier Digital owns leading marketplaces in Pakistan, Central America, Vietnam, Uruguay, Paraguay and more.
As Rask Media’s Luke Kennelly wrote here, “Is Frontier Digital Ventures (ASX:FDV) The Next REA Group (ASX:REA)?”, there’s a lot to like about Frontier Digital. And even though it operates in emerging markets it might not be as speculative as you think. With a unique strategy that backs local technology founders and combines their businesses into a diverse portfolio, it could be one to watch closely over time.
Buy, Hold Or Sell?
We don’t own any of these companies in the Rask Invest model portfolio but we have taken a close look at each of them recently. Each has its risks and, in my opinion, should never be more than, say, 2% of a well-diversified portfolio. Having said that, if you can get a collection of maybe 20 of these high-growth businesses you may find the risks are outweighed by the potential rewards.
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Disclosure: At the time of publishing, Owen does not have a financial interest in any of the companies mentioned.
