The fund manager Wilson Asset Management (WAM) has recently identified two top small cap ASX shares that it owns in its portfolio that could be ideas.
WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Capital Limited (ASX: WAM).
There's also one called WAM Microcap Limited (ASX: WMI) which targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.
WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.
The WAM Microcap portfolio has delivered gross returns (that's before fees, expenses and taxes) of 22.2% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 9.5%.
These are the two small cap ASX shares that WAM outlined in its most recent monthly update:
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Austin Engineering Ltd. (ASX: ANG)
Austin Engineering manufactures and supplies specialised mining products that improve efficiency and assist decarbonisation efforts for clients globally.
At the moment, Austin Engineering is undergoing a 'three-phase' optimisation plan under the guidance of its newly appointed CEO and Managing Director, David Singleton.
In December 2021, the small cap ASX share reported a five-year contract renewal with Rio Tinto Limited (ASX: RIO).
WAM pointed out that in January 2022, the company announced updated guidance relating to the FY22 first-half earnings before interest, tax, depreciation and amortisation (EBITDA) to $11.5 million and indicated an increase in EBITDA margins across the group, signalling that the company's turnaround strategy is delivering.
Wilson Asset Management is positive that the company will see revenue and EBITDA grow across the Asia-Pacific, North America and South America sites with the execution of its three-phase plan.
Generation Development Group Ltd (ASX: GDG)
Generation Development is the owner of Generation Life. It specialises in investment bond products which provides tax-effective investment solutions.
In January, Generation Development released its December quarter update. It showed its highest-ever sales inflow for the quarter and a 44% increase in funds under management, compared to the previous corresponding period.
Generation Life achieved a 52% market share of annual sales inflows in the three months to September 2021, growing from 40% in the prior corresponding period.
WAM remains positive on the small cap ASX share ahead of its upcoming launch of the investment-linked lifetime annuity, subject to regulatory approval, and the next instalment of investment bonds that the fund manager believes will further bolster the company's customer value proposition.
