Last week's fourth Annual Australian Microcap Investment Conference showcased a number of interesting younger companies. While some of the companies presenting were quite early stage and yet to turn a profit – indeed some are yet to even start producing revenues – others are already profitable and set to grow revenues and earnings strongly over the next few years.
Here are three companies that are already reporting profits and look set to achieve this step-change in revenues within the next few years, making them worthy candidates for investors to further investigate.
TFS Corporation (ASX: TFC) is the owner and manager of Indian sandalwood plantations across Northern Australia. TFS also owns an Albany-based processor and oil distributor, which allows the company to operate as a vertically integrated producer. Founded in 1997, TFS is now the largest operator of sandalwood plantations in the world. One of the most interesting and appealing facts about Indian sandalwood is that the heartwood currently sells for around $110,000 per tonne, having risen at a compound rate of 16.9% per annum over the past 19 years. With the first harvest currently underway, TFS should soon begin to reap the rewards.
Jumbo Interactive (ASX: JIN) began selling lottery tickets over the internet in 2000. In 2013 Jumbo's lottery ticket sales reached a record $109 million, allowing the company to boast of 13 years of unbroken record sales. Having been purely domestically focused, Jumbo is now set to enter overseas markets including Germany, Mexico and the USA. This move has set the stage for Jumbo to gain exposure to not just the $4 billion domestic lottery market and Australia's population of 23 million people but to a total market size potential of $74 billion in lottery sales with a total population of 480 million people.
NewSat (ASX: NWT) is Australia's largest pure-play satellite communications company. With the rights to eight orbital slots, NewSat has embarked on an ambitious plan to launch and operate its own satellites. The company already turns a profit thanks to its land-based teleport infrastructure and with the first satellite scheduled for launch in early 2015 and the funding for the build and launch secured, NewSat is set for a step-change in its revenue and earnings.
Foolish takeaway
Buying smaller companies does come with certain risks, however one way to minimise this is to focus on firms that already have proven and profitable business models and that are set to expand their revenue base significantly.
