2 small-cap ASX shares to rule them all this year: experts


It hasn’t been an easy time to own small-cap ASX shares.

The S&P/ASX Small Ordinaries (ASX: XSO) index is down almost 9% this year, and the loss would be more if it weren’t for the resources sector holding it up.

But one could argue that now is a great time to pick up some bargains and watch them grow. 

A couple of experts each recently singled out a small-cap that they would buy right now.

Foreign exchange is always a hot business

OFX Group Ltd (ASX: OFX) is the favourite small-cap share for 1851 Capital portfolio manager Martin Hickson.

“They operate in the foreign exchange space and trade on a P/E of 20 times. They had an investor day … which was very positive,” he told Livewire.

“I think what investors are missing is that a lot of the revenue and earnings from that business today comes from the small business and enterprise space.”

Hickson has indeed put his money where his mouth is, as OFX shares are one of the top ASX shareholdings in the 1851 fund.

“There are only two brokers that cover the stock, it is not well held by the market,” he said.

“They made a highly accretive acquisition a couple of months ago in Canada, so, we think that the P/E can re-rate and the earnings consensus forecasts have been understating their growth.”

The OFX share price has rocketed 133% in the past 12 months and advanced 17.4% last week alone. It closed Friday’s session at $2.50.

The stock is also one of the largest holdings for Monash Investors, portfolio manager Sebastian Correia told The Motley Fool.

“It’s still got a while to go before it reaches our price target,” he said earlier this month.

“I don’t think the market had really appreciated that it was a turnaround story that had already turned around. Management was already delivering against a lot of their core operational objectives.”

Hayborough Investment Partners portfolio manager Ben Rundle likes the look of chemicals provider DGL Group Ltd (ASX: DGL).

“They do storage as well as recycling of those chemicals,” he said. 

“The beauty of this industry is that there are high barriers to entry in terms of the capital cost and the permits that are required to be able to operate.”

According to Rundle, the founder and CEO is doing a “fantastic job”.

“Simon Henry … owns just shy of 60% of the business,” he said.

“He’s a very good capital allocator and he’s already made about eight acquisitions since they listed. I think that it is a really exciting company and it’ll be much bigger in a few years’ time.”

Henry recently bought another 500,000 shares and on Monday, DGL will join the All Ordinaries Index (ASX: XAO).

The DGL share price closed Friday’s session at $2.97. That’s almost 200% above the company’s initial public offering (IPO) price of $1 per share. The stock commenced trading on the ASX in May 2021.

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