Fund manager Wilson Asset Management (WAM) has identified two top small-cap ASX sharesÂ in one of the portfolios it manages that could be investment ideas.
WAM says WAM Microcap targets âthe most exciting undervalued growth opportunities in the Australian microcap marketâ.
These are the two small-cap ASX shares the fund manager outlines in its recent monthly update.
WAM described Qualitas as one of Australiaâs leading alternative real estate investment managers.
It has $5.5 billion of capital committed across real estate private credit, opportunistic real estate private equity, income-producing commercial real estate, and build-to-rent residential.
WAM noted that Qualitas announced the establishment of a $50 million warehouse facility for its listed Qualitas Real Estate Income Fund (ASX: QRI). The WAM investment team believes it will be âimmediately earnings accretiveâ for Qualitas and allow the listed income fund to deploy its capital more effectively.
The business released a âstrong trading updateâ at its AGM and WAM noted that capital deployed in FY23 to date was more than $1 billion. That’s more than 50% of the total capital deployed in FY22 in just four months.
WAM also pointed out that Qualitas reaffirmed its FY23 earnings guidance of $30 million to $33 million of net profit before tax.
It pointed out that the small-cap ASX share is âsignificantly exposedâ to the senior commercial real estate loan business, with the funds structured in a way that provides âpositive earnings leverageâ to a higher interest rate environment.
The fund manager concluded:
Coupled with the companyâs stronger rate of capital deployment to date, Qualitas appears well positioned to upgrade its earnings guidance at the upcoming 2023 first half result in February. Its balance sheet is also strong with a significant net cash position, providing optionality to deploy further capital into existing and new strategies or undertake earnings-accretive acquisitions. Overall, we view Qualitas as attractively valued given the positive growth outlook on offer.
MMA Offshore Ltd (ASX: MRM)
The other small-cap ASX share that WAM mentioned was MMA Offshore which provides supply vessels and a comprehensive suite of marine and subsea services to the offshore energy sector as well as government, defence, and wider maritime industries.
The fund manager said that last month, MMA Offshore announced that it expects to deliver earnings before interest, tax, depreciation and amortisation (EBITDA) in the range of $30 million to $32 million in the first half of FY23. This would represent growth of 70% compared to the second half of FY22.
WAM explained that the good earnings guidance happened because of stronger-than-expected market conditions during the first half of FY23, driven by âincreased activity” in the companyâs traditional oil and gas markets and offshore wind developments in Southeast Asia.
Here are WAMâs final thoughts on the small ASX share:
We continue to believe that the recovery in oil and gas activity following disruptions caused by the coronavirus lockdowns, combined with the growth in offshore wind developments, presents a unique opportunity for MMA Offshore to secure meaningful contracts moving forward.
The post 2 exciting undervalued small ASX shares to buy: fund manager appeared first on The Motley Fool Australia.
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Motley Fool contributor Tristan Harrison has positions in Wam Microcap. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.