Top 5 Australian small-cap stocks to watch out for

Small-Cap stocks are publicly traded companies with a market capitalisation ranging from AU$500 million to AU$2 billion. These stocks are known for attracting those investors who want to get higher returns from their investments, albeit with higher risk.

 

The Australian domestic equity market has started to rebound from the unfavourable environment after COVID-19 lockdowns last year. Despite Australia being mired in the throes of the current delta variant, a bunch of small-cap stocks are continuing to outperform. 

 

Here are the five small-cap stocks that are in the spotlight.

 

Telix Pharmaceuticals Ltd

Telix Pharmaceuticals Ltd (ASX:TLX) is a small-cap stock with a market capitalisation of AU$1.48 billion on July 26, 2021. The biotech companydevelops diagnostic and therapeutic products using Molecularly Targeted Radiation (MTR).

 

The company is trying to combat cancer, focusing on radiation therapy rather than immunotherapy. For the fiscal year ended December 31, 2020, Telix Pharmaceuticals Ltd's revenues increased over 49% to AU$5.2 million, and net loss increased more than 60% to AU$44.5 million. 

 

Despite the losses, investors continued to acquire TLX shares in FY21. In June 2021, the company said that its first patient had been dosed in a Phase I study of TLX250-CDx in patients with urothelial carcinoma or bladder cancer at Fiona Stanley Hospital in Perth, Western Australia. Furthermore, the US Food and Drug Administration (FDA) approved recruitment for a Zirconium Imaging in Renal Cancer Oncology (ZIRCON) research in January.

Covid-19 had a significant impact on sales of the TLX591-CDx prostate cancer imaging kit in 2020, especially in the second and third quarters. Around 9,500 individual patient doses were delivered by Telix, prepared from over 3,700 TLX591-CDx kits.In FY2020, the business received AU$3.9 million in cash proceeds from TLX591-CDx kit sales, a 15% increase over the previous year.

Karoon Gas Australia Ltd

Another small-cap firm is Karoon Gas Australia Ltd (ASX:KAR), with a market cap of almost AU$709.61 million on July 26, 2021. Having operations in Australia, Brazil and Peru, KAR is an oil and gas exploration and production company. 

 

The company has 100% ownership in Santos Basin, consisting of five offshore blocks in Sáo Paulo, Brazil. Santos Basin is spread across 352,000 sq kilometres, one of the largest sedimentary basins in Brazil.

 

Besides, KAR also holds a 50% interest in the Carnarvon Basin. This is divided into Northern and Southern Carnarvon Basin - the Northern part being extremely rich in gas resources.KAR also holdsa 40% holding in the Tumbes Basin. 

 

Due to favourable market conditions, KAR was able to post solid financial results for the six months ended December 31, 2020. Its revenues stood at AU$32.9 million, and net loss decreased 90% to AU$2.4 million. Moreover, during the Jan-March 2021 quarter, a Brazilian business unit was started, and there was no material impact from COVID-19 on production operations in this unit.

 

By the end of March 2021, KAR had cash or cash equivalent of AU$173 million, up from AU$133 million in Dec 2020.

 

Vulcan Energy Resources Ltd

Vulcan Energy Resources Ltd (ASX: VUL), the third small-cap stock on the list, is a mineral exploration company. The company recently signed an acquisition agreement with Global Engineering and Consulting Gmbh. The new agreement provides Vulcan a three-year exploration licence for geothermal heat, brine, and geothermal energy covering three states in the Upper Rhine Valley, Germany. 

 

Vulcan wants to be the first lithium manufacturer in the world with carbon neutral footprint. Its Zero Carbon Lithium Project aims to develop lithium-hydroxide chemistry for use in electric vehicle batteries in Europe.

 

Hatch Ltd, an international lithium plant engineering firm, and GLJ Ltd, an international energy engineering firm, have been hired by VUL.

 

VUL's market capitalisation is almost AU$989.70 million on July 26, 2021. The company’s performance graph is going good especially after it made a couple of announcements in April this year. Other than signing an agreement to acquire leading geothermal engineering company Global Consulting Engineers, it also initiated the spun-off and further started the IPO process of its non-core Scandinavian Battery Metal Projects. The spin-off will further help Vulcan to focus on its core Zero Carbon Lithium combined renewable energy and lithium chemicals project in Germany.

 

 

Johns Lyng Group Ltd

Johns Lyng Group Ltd (ASX:JLG), another small-cap stock on the list, is a building service company that provides building and restoration services like express builders, regional builders, insurance builders etc across Australia.

 

JLG acquired a 60% controlling stake in Unitech Building Services, a South Australian-based insurance building services company, on 12 July 2021. The remaining 40% will stay with the original owners. The acquisition will increase JLG exposure to South Australian market.

 

On July 20, 2021, JLG has a market cap of AU$1.20 billion. The company's stock has risen over 100% in the past year, including more than 50% in 2021 alone.

 

For the first half-year of FY21 ended on 31 December 2020, JLG's profit was AU$9.6 million compared with last year's AU$7.9 million. Its group sales revenue increased almost 19% to AU$277.8 million from ordinary activities as compared with last year’s corresponding period, and the company declared its interim dividend of 2.2 cents per share.

 

The company also upgraded its guidance for full year 2021. Full year forecast for EBITDA now stands at AU$47.5 million, an increase of 15% over what was announced in August 2020, whereas sales revenue forecast has been increased by 8% and now stands at AU$524.1 million.

 

Life360, Inc.

Life360 (ASX:360) operates through a Life360 mobile app and helps connect family and friends who can share their current locations. The app tries to help such families who are busy enough to take time out and know each other better, communicate and protect each other. The San Francisco-based company is present in 195 countries and has over 25million active users, as of December 2020.

 

The company seems to be financially stable. At the end of June 2021, Life360 completed a funding round led by Bryant Stibel, an investment firm that provides financial, strategic, and operational support to entrepreneurs and their companies. Few other investors also participated in the round. The funding willhelp Life360 to form Family Advisory Council, which will finally help in easing the tension between family members, keep kids safe, and shape the product and marketing strategy for the leading family safely platform.

 

Life360 is performing positively ever since the fund-raisingnews has been declared. Infact, it is currently trading at its highest level ever since the company got listed on the ASX in May 2019. This is mainly because the company has been regularly announcing its developments. For example, in May 2021, it announced that it had acquired the Chicago-based wearable location devices provider Jiobit to strengthen its position as a leading family safety platform.

 

Life360 reported revenue of US$80.7 million for the fiscal year ending December 31, 2020, up 37% year over year. Its statutory net loss was US$16.3 million, an improvement of 44% year over year. Despite the effects of COVID-19 in CY20 H1, the company's net subscriber revenue retention exceeded 100%. The company has a market capitalisation AU$1.31 billion on July 26, 2021.