Fund manager Wilson Asset Management (WAM) has identified two top small-cap ASX shares 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 focuses on small-cap ASX shares with a market capitalisation under $300 million at acquisition.
WAM says WAM Microcap targets "the most exciting undervalued growth opportunities in the Australian microcap market".
These are the two small-cap ASX shares the fund manager outlined in its most recent monthly update:
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Myer Holdings Ltd (ASX: MYR)
WAM noted that Myer operates 58 department stores across Australia.
Last month, Myer announced its FY22 half-year earnings, which were reportedly better than the market had been expecting.
The fund manager pointed out that the company grew sales by 8.5% to $1.52 billion year-on-year, despite spending 23% of in-store trading days under COVID-19 lockdowns.
Myer's half-year net profit after tax (NPAT) of $32.3 million increased 55.2% year-on-year after adjusting for the government JobKeeper allowance.
WAM believes that the small-cap ASX share's in-store sales will continue to recover as economies reopen and foot traffic returns to CBDs.
The fund manager is positive on Myer's medium-term outlook and believes that the company can continue to recover and generate double-digit earnings growth over the next few years.
Objective Corporation Limited (ASX: OCL)
Objective Corporation is an Australian-based business that provides "mission-critical" software providers to the public sector, working with more than 1,000 government organisations.
Last month, the company announced plans to acquire Atlanta-based software company Simflofy and expand into North America. Simflofy provides more than 100 customers with software solutions targeted to all levels of the United States government, financial services, insurance and Fortune 500 companies.
WAM expects the acquisition will add to the small-cap ASX share's earnings while addressing the strong demand for 'federated' information technology governance structures.
The fund manager believes that the ASX share has a positive outlook with a strong balance sheet which provides opportunities for more acquisitions that will add to earnings.
