The best value for money ASX tech share I'd buy with $1,000

This business seems like a strong opportunity to me.

| More on:
A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares

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

The ASX tech share Bailador Technology Investments Limited (ASX: BTI) looks great value in my opinion, and it would be well worth an investment of $1,000, or more.

For readers who haven't heard of this business before, it describes itself as "a growth capital fund that is focused on the information technology sector, actively managed by an experienced team with demonstrated sector expertise."

Looking at it from a high level, the business said it "provides exposure to a portfolio of information technology companies with global addressable markets" and that it invests "in private technology companies at the expansion stage."

I believe there are at least three reasons why the ASX tech share looks good value.

Strong portfolio

There are a number of factors that Bailador looks for when it initially invests between $5 million to $20 million in businesses that are seeking investment. Some of those characteristics include:

  • Run by the founders
  • Proven business model with attractive unit economics
  • International revenue generation
  • Huge market opportunity
  • Ability to generate repeat revenue

When you add all those elements together, it ends up being an impressive business in theory.

At the end of July 2023, the ASX tech share had a portfolio of seven positions: hotel software business Siteminder Ltd (ASX: SDR), tours and activities management and booking software company Rezdy, telehealth business Access Telehealth, volunteer management software business Rosterfy, e-commerce personalisation business Nosto, men's digital healthcare business Mosh and language translation business Straker Ltd (ASX: STG).

It recently exited its InstantScripts position, which delivered an internal rate of return (IRR) of 62%.

At the end of July, it also had a strong net cash balance of $108.4 million, which can be used to pay dividends and make new investments.

NTA discount

This is the part where I think it's really good value. At the end of July 2023, the business said that it had a pre-tax net asset value (NAV) of $1.70 per share or $246.8 million in total.

At the time of writing, the Bailador share price is $1.26, so it's currently at a 26% discount to the pre-tax NAV. The post-tax net tangible assets (NTA) per share was $1.60 at the end of July 2023.

Don't forget that $108.4 million of the ASX tech share's NTA, or 75 cents per share, is cash. That means the ASX tech share's asset value has a strong backing.

The unlisted businesses' values may be conservative. Bailador has a history of being cautious with the valuations of its holdings (which is a good thing). For example, the recent InstantScripts sale will see net cash proceeds being 25% higher than the carrying value (what it said it was worth) before the sale.

I'm not going to speculate what the unlisted Bailador businesses could be worth, but their value if they were to be sold could be materially higher than what Bailador says.

Dividend returns

I like that the business is paying investors a regular dividend. It enables investors to benefit from realised sales, and also provides strong 'real' returns, even if the NAV discount doesn't close up.

The Bailador dividend policy is that the ASX tech share's shareholders will get a dividend yield of 4% of the pre-tax NTA per year. With the NTA being $1.70, the dividend could be 6.8 cents per share.

Due to the large NTA discount, at the current Bailador share price that's a fully franked dividend yield of 5.4%, or 7.7% grossed-up.

I think this ASX tech share and its portfolio can do well in the long term, while collecting solid dividends in the short term. I'm a shareholder myself because I believe in the value and future of the business.

Motley Fool contributor Tristan Harrison has positions in Bailador Technology Investments. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bailador Technology Investments. The Motley Fool Australia has recommended Bailador Technology Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Man holding a calculator with Australian dollar notes, symbolising dividends.
Technology Shares

$10,000 invested in DroneShield shares 5 years ago is now worth…

You might be laughing all the way to the bank if you had done this.

Read more »

Happy woman working on a laptop.
Technology Shares

Up 60% since April, why this $40 billion ASX 200 tech stock remains a 'compelling buy' today

A leading expert believes this $40 billion ASX 200 tech stock has a lengthy growth runway ahead of it yet.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

DroneShield shares sink 7% despite big news

Let's see what's going on with this market darling on Thursday.

Read more »

A man activates an arrow shooting up into a cloud sign on his iPad.
Technology Shares

Up 25% since April, is it too late to buy Xero shares today?

A leading expert gives his verdict on the growth outlook for Xero shares.

Read more »

Man looking at digital holograms of graphs, charts, and data.
Technology Shares

2 amazing ASX tech shares I wish I'd bought last year

These tech companies are among the world’s best companies.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2, and 3 on them on top of each other.
Broker Notes

3 reasons to buy this booming ASX All Ords tech stock today

A leading broker forecasts more gains to come from this surging ASX All Ords tech stock.

Read more »

Man ponders a receipt as he looks at his laptop.
Technology Shares

Brokers rerate 3 leading ASX 200 tech stocks

Experts reveal their ratings on the ASX 200 tech sector's three biggest companies.

Read more »

Hologram of a man next to a human robot, symbolising artificial intelligence.
AI Stocks

Why Macquarie forecasts a big rebound for these 2 quality ASX All Ords tech stocks

Macquarie expects a big rebound is coming for these AI linked, ASX All Ords tech stocks.

Read more »