2 exciting small cap ASX shares to buy

These 2 exciting small cap ASX shares look like good options to buy, including global fashion retailer City Chic Collective Ltd (ASX:CCX).

| More on:
miniature figure of man standing in front of piles of coins

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There are a few exciting small cap ASX shares that are worth keeping an eye on for the coming years.

Smaller businesses can have a lot more growth potential because they're simply earlier on with their growth journey.

It can be useful to find businesses that are growing internationally because that opens up a much bigger total addressable market for the company.

These two exciting small cap ASX shares could be really good candidates to own:

City Chic Collective Ltd (ASX: CCX)

City Chic is one of the ASX retail shares with global growth aspirations. It has a sizeable network of stores across Australia and New Zealand. The retailer is currently rated as a buy by a few brokers including Morgan Stanley, which has a price target on it of $4.75. The broker is attracted to the level of online growth it's generating.

In the FY21 half-year result, City Chic reported online sales growth of 42%, off a high base, with 73% of total sales coming from the online channel (up from 65% in FY20).

The business is steadily growing its market share in the northern hemisphere, with 45% of sales from that side of the world (up from 42% in FY20 and 29% in the first half of FY20).

City Chic now has a strong online business in the UK with Evans and in the US with Avenue. It can keep growing profit strongly with higher margins, taking market share and selling its City Chic range in the northern hemisphere.

The small cap ASX share is now looking at the entry into Europe, new product launches across the world and converting to larger stores in the US.

According to Morgan Stanley, the City Chic share price is valued at 30x FY22's estimated earnings.

Bubs Australia Ltd (ASX: BUB)

Bubs is an Australian-based infant formula business that specialises in goat milk infant formula and adult goat milk products.

The Bubs share price is close to its 52-week low, even though the business reported in the latest quarter that it's now seeing a turnaround. The market is still difficult with daigou buyers due to COVID-19, as A2 Milk Company Ltd (ASX: A2M) is reporting, but Bubs has other avenues to access growth.

Even so, Bubs reported a strong turnaround from daigou buyers. In the three months to 31 December 2020 (the FY21 second quarter), Bubs revealed corporate daigou sales went up 122% compared to the first FY21 quarter.

The small cap ASX share saw good quarter on quarter growth in other areas. China cross border e-commerce (CBEC) sales rose 27%, adult goat dairy sales grew 45%, Bubs infant nutrition grew 27% and export sales to markets outside of China saw growth of 194% quarter on quarter.

Another highlight was that Bubs was the fastest growing infant formula manufacturer across Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Chemist Warehouse with combined retail scan sales at the checkout up 41% quarter on quarter.

Bubs said that its export sales to international markets outside of China contributed 17% of group revenue. The first shipments of Bubs infant formula and Bubs organic baby food products were exported to Malaysia during the second quarter.

The infant formula business has also signed with new prominent e-commerce platforms in the Asian region, with products now being sold on Redmart in Singapore and Lazada in Malaysia.

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Small Cap Shares

Two kids in superhero capes.
Small Cap Shares

2 small ASX shares to buy that have big potential

A fund manager is optimistic about these stocks.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Small Cap Shares

3 of the best small cap ASX stocks to buy now

Bell Potter thinks these shares are among the best to buy at the small end of town.

Read more »

A bland looking man in a brown suit opens his jacket to reveal a red and gold superhero dollar symbol on his chest.
Small Cap Shares

Is this the best small cap stock on the ASX right now?

Bell Potter is very bullish on this small cap. Let's find out why.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Small Cap Shares

3 top small cap ASX shares that brokers are tipping for big things

Let's see which small caps are being tipped as buys by brokers.

Read more »

A little girl wearing wonky glasses checks out what's happening in the world on a mobile phone.
ETFs

Why ASX ETFs are a threat to small-cap funds

Experts are concerned about investment capital inflows.

Read more »

Kid putting a coin in a piggy bank.
Small Cap Shares

2 ASX small-cap shares to buy with big potential

Experts reckon these small businesses have big potential.

Read more »

A person with a round-mouthed expression clutches a device screen and looks shocked and surprised.
Small Cap Shares

Why this ASX small cap stock just rocketed 145%

Why are investors getting excited about this stock? Let's find out.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Small Cap Shares

Why this Telstra-linked ASX small cap stock just crashed 90%

This small cap is having a very bad session. What's going on?

Read more »