Growth and dividends are stereotypically seen as qualities that are incompatible within the same stock.

ASX shares considered high growth usually represent companies that plough their spare cash back into the business to fuel expansion. 

On the other hand, companies that are high dividend payers can afford to do that because they're not reinvesting it back into growth.

So what happens when you come across a business that's both growing and handing out a fat yield?

You buy it and hold on for dear life.

ASX share with 'impressive financial results'

That's exactly what Cyan Investment Management is doing with construction materials provider Big River Industries Ltd (ASX: BRI).

Portfolio managers Dean Fergie and Graeme Carson told their clients in a memo that Big River's reporting season update was pleasing.

"Building products manufacturer and distributor Big River was… [a] holding that produced impressive financial results, with FY22 revenues rising 45% to $409 million and underlying profitability up 191% to $22.7 million."

The market pushed the stock price up 11% over August.

Then came the cream on top.

"Shareholders were rewarded with a final dividend of 10.0 cents per share, taking the full year payout to 15.5 cents, which equates to a ~7% fully franked yield."

Despite this August party, the Cyan portfolio managers are holding onto the stock for further growth.

"After meeting with Big River this week, the company does not consider FY22 to be a 'one-off' with business momentum and margin expansion continuing into FY23."

Strength in a volatile year

In a year when most non-mining stocks have been hammered, the Big River share price has shown remarkable resilience. The stock is flat over the past 12 months.

Analyst coverage of the company, with a market capitalisation of $178 million, is sparse. 

But according to CMC Markets, at least the team at Moelis Australia agree with Fergie and Carson, rating Big River as a strong buy.

The post This ASX company with 190% profit growth pays a MASSIVE dividend yield appeared first on The Motley Fool Australia.

It has been a tough 12 months for many fund managers, especially for growth focused investors in the small and microcap end of the ASX.

Although the S&P/ASX Emerging Companies Index has "only" fallen around 10% over the past year, that has masked some catastrophic sell-offs in non-mining stocks.

Particularly hard-hit have been a host of recent IPOs, including Booktopia Group Ltd (ASX: BKG) shares plunging over 90%, Hipages Group Holdings Ltd (ASX: HPG) shares sinking over 66% and the Airtasker Ltd (ASX: ART) share price having tanked 56%, all over the past 12 months.

Headed by Graeme Carson & Dean Fergie, the Cyan C3G Fund admits its recent performance has been disappointing, but feels "there are presently a number of emerging market trends that could result in markedly improved short to medium term performance."

Writing in the August update, the fund managers named the trends as…

• Continued takeover activity in the domestic market
  
• Further appreciation of underlying company performance
  
• Increased market liquidity
  
• Renewed opportunities through IPO and other corporate activity

The fund managers go on to say they feel their "investee companies have been, on the whole, trading well, and are firmly of the view that from present levels upside price appreciation far exceeds downside."

Building products manufacturer and distributor Big River Industries Ltd (ASX: BRI) was one fund holding that the managers said produced impressive financial results with FY22 revenues rising 45% to $409m and underlying profitability up 191% to $22.7m. The company announced a final dividend of 10 cents per share, and trades on a fully franked dividend yield of around 7%. The Big River share price is flat over the past 12 months.

The fund named Silk Logistics Holdings Ltd (ASX: SLH) as providing one of the highlights of the results season. The warehousing and logistics company delivered FY22 revenue up 22% to $394m and net profit after tax up 45% to $15.8m. The fund went on to say that "with further acquisitions and greenfield sites already confirmed, FY23 is forecast to be another record year. Given the impressive financials it was  both surprising and disappointing the shares closed the month slightly weaker." The Silk Logistics share price has fallen around 7% over the past 12 months.

The post Fund manager names 4 emerging trends that could result in 'markedly improved' performance appeared first on The Motley Fool Australia.

The Big River Industries Ltd (ASX: BRI) share price is rocketing today following the release of the company's full-year results.

At the time of writing, the timber and building manufacturer's shares are up 31.89% to $2.44.

Big River share price storms higher following record revenue

Big River delivered its FY2022 results for the 12 months ended 30 June 2022. Here are some of the key takeaways:

• Revenue up 45.4% to a record $409.3 million
• Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) up 113.3% to $48 million
• Underlying net profit after tax (NPAT) up 191% to $22.7 million
• Earnings per share (EPS) up 989.1% to 26.03 cents
• Final dividend of 10 cents per share, fully franked, bringing the full year dividend to 15.5 cents per share, up 176.8%

What happened in FY2022?

Big River reported a superb financial performance with robust growth recorded across the entire board.

The group achieved revenue of $409.3 million, an increase of 45% over the previous financial year. This was reflective of a solid construction sector, particularly the detached housing market, that was still benefiting from the homebuilder package introduced during FY2021.

EBITDA pre-significant items leapt by 113% to $48 million. Big River highlighted that growth was experienced in every division and geographic region in which the business operates.

Notably, a combination of strong organic growth, better operating cost leverage and contribution from its recent acquisitions drove the result.

EBITDA pre-significant items margin grew from 8% to 11.7%.

Net Profit after tax pre significant items stood at $22.7 million, an increase of 191% compared to the prior reporting period.

What did management say?

Big River CEO Jim Bindon touched on the outstanding results, saying:

FY22 was a period of substantial growth and success for our company, but one that also presented major challenges for our staff, customers and suppliers alike. Covid-19 related illness put pressure on all staff, while major product shortages needed close and expert management. Significant weather events affected several of our sites, and inflationary pressure impacted everyone in the supply chain.

Despite all these challenges, record revenue, profitability, earnings per share and free cash flow was achieved, which was a testament to all our employees, customers and suppliers.

What's the outlook for FY2023?

Looking ahead, Big River advised that addressable market volumes are forecasted to grow modestly in FY2023.

The company has an extended pipeline due to project delays, and material and labour shortages. This continues to underpin the near-term outlook.

Like-for-like revenue growth in the first 8 trading weeks of FY2023 is 23.3% higher than the corresponding period.

In addition, freight and supply chain pressure is expected to continue easing throughout the year.

Big River share price snapshot

With today's strong gains, the Big River share price is up 14% in 2022.

For context, the S&P/ASX 200 Materials (ASX: XMJ) sector is up 0.8% over the same time frame.

Big River commands a market capitalisation of approximately $200.64 million.

The post Guess which little-known ASX share is rocketing 30% on 'outstanding growth' appeared first on The Motley Fool Australia.

Ask A Fund Manager

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, NAOS Asset Management portfolio manager Robert Miller reveals 2 ASX shares he loves that play in very different sectors.

Investment style

The Motley Fool: How would you describe your fund to a potential client?

Robert Miller: We offer a boutique funds management business that is focused on ASX-listed industrials, with a focus outside the S&P/ASX 50 Index (ASX:XFL). Our motto across the business is 'conviction, long-term and aligned'. 

We're very concentrated in what we do. We only hold about 20 positions at the moment, approximately, across our total pool of capital. 

We're long-term investors. All of the shareholder funds that we currently manage are structured as listed investment companies. That allows us to be patient and have a disciplined investment strategy, which is typically a 5-year-plus investment timeframe that we're looking at.

Another big one for us is alignment. So we're big believers in investing in businesses alongside founders and management teams that have significant equity ownership in those businesses themselves. 

They're our 3 key points. It's a pure focus on industrial-type businesses and we've got a strong ESG focus internally as well.

Our ASX share portfolio

MF: Can you name a couple of your holdings and why you love them?

RM: The one I'll start with is COG Financial Services Ltd (ASX: COG), which is an asset finance, aggregation and broker group. They're Australia's largest asset finance and broking aggregator. So it has approximately between 17% and 20% of the market. 

We believe this is a very hard asset to replicate in terms of their distribution footprint. So if you think about what's happened with the mortgage and insurance industries, to use two examples, clearly there is an intermediary channel there where brokers are the vast majority — or have a very large influence. 

We believe asset finance is going in the same trajectory as the other two industries, and COG has very much a firm footing in that marketplace, being the largest at what they do. So this gives them the opportunity to cross-sell other products over time because the asset finance relationship between the customer and the broker can be very strong. 

A typical product would be, say you needed to buy a bit of yellow kit for farming or construction building — and you need a tractor or a ute, then COG, through their broker network, are the ones who would organise the finance for that.

I touched on insurance before and, obviously, the key in that market, one of the key ones is Steadfast here in Australia. And some of the ex-Steadfast people, including Cameron McCullagh who set this up, are involved in COG. So it's got that flavour to it. 

They had a very strong FY21 but I think there's a long way to go in terms of the underlying tailwinds that we're seeing in a lot of the industries they operate in. Obviously, agriculture is strong, construction and housing and whatnot, that should be relatively strong over the next little while. 

All of those factors, as well [as] the stimulus around the instant asset write-off programs, should all be beneficial to COG over the medium to longer term.

MF: And the other one?

Again, not necessarily our biggest but a material one for us, is Big River Industries Ltd (ASX: BRI). They're actually [an] over 100-year-old business, despite listing on the ASX in early April 2017, I think it was. 

They're a building supplies and distribution business. And if you think about Bunnings and Mitre 10… they're predominantly retail. This is trade-only so there's absolutely no retail store footprint. 

What they do is, as I said, provide and distribute building supplies. Say frame and truss timber, plywood and formply, and architectural products. They've got approximately 22 sites across the country at the moment where they sell products. And they've got some manufacturing operations as well, where they manufacture niche products like formply and some architectural products.

We think this business is run by an excellent CEO who knows everything inside-out in that business. And we think there's a very big opportunity to grow from here. As I said, they've only got low 20s in terms of the sites they operate. It's a very, very large [addressable] market. We believe, for instance, they've only got one site in Sydney. Their peers would have many more than that in terms of sites per capital city. So there's a long way to go in terms of the upside of site M&A, and also the ability to get strong revenues synergies out of that by, say you're buying a new site, an existing site that rolls into the rest of the group, you then have the ability to cross-sell all of your existing products and distribution capabilities over to that new asset that you've bought. In turn, you get margin expansion with scale, and we're starting to see this materialise now across the BRI group.

Secondly, the building cycle peaked in 2017 and it's been on the down cycle since then. And I think certainly with the example of [government program] HomeBuilder, obviously there's been a lot of building approvals over the last little while. A lot of that's yet to turn dirt. So we think that the building cycle is here to stay for the medium term. It's certainly in the upward trend and this should benefit Big River.

MF: It gives out a dividend as well.

RM: Yes, it does. As I said at the start, it's over a 100-year-old business and they've been paying dividends for a very long time — throughout many, many cycles. For us, that's a big factor that the business is able to survive all kinds of cycles and certainly thrive in some as well, like we're seeing at the moment.

The post This 100-year-old company is the ASX share that keeps giving appeared first on The Motley Fool Australia.

There are some small ASX shares that reported impressively according to Naos Asset Management. They could be worth watching. 

One of the listed investment companies (LICs) in Naos' stable is called Naos Emerging Opportunities Company Ltd (ASX: NCC). It targets small stocks with market capitalisations under $250 million. This LIC generally invests in industrial companies.

Since the LIC's inception, its portfolio's investment performance after all operating expenses, but before fees and taxes, was 12.3% per annum to the end of February 2021.

Despite a negative impact from its holding of BTC Health Ltd (ASX: BTC), the Naos Emerging Opportunities Company investment portfolio managed to make a return of 4.3% in February 2021.

Naos attributed its good performance to the reports delivered by its holdings, including the below three which it still believes remain undervalued with catalysts that may eventuate during the rest of FY21.

Experience Co Ltd (ASX: EXP)

Experience is an adventure tourism company that offers experiences of tandem skydiving, indigenous experiences and tours to the Great Barrier Reef.

Naos said that the small ASX share released a highly commendable result with the business remaining profitable and cash flow positive in a challenging environment due to COVID-19 effects.

The fund manager has stated numerous times that it believes a significant amount of progress has been made by the current management team and that will have a positive impact on the future profitability of the business with the return of domestic tourism demand.

Initiatives by Experience include gross distribution agreements, corporate cost initiatives, new product offerings and asset base realisation. Naos believes that over the next two years, helped by small acquisitions, it can be a business that generates around $50 million of earnings before interest, tax, depreciation and amortisation (EBITDA).

Saunders International Ltd (ASX: SND)

Saunders International is a small ASX share that provides construction, maintenance and engineering services to the energy, resources and infrastructure sectors. Some of its clients include Sydney Water, the Australian Government, Lendlease Group (ASX: LLC) and Rio Tinto Limited (ASX: RIO).

Naos said that Saunders International probably released the strongest result in the Naos Emerging Opportunities Company portfolio.

The fund manager said that recent half-year results have shown losses or minimal profits. But in this report it made a "significant" profit with earnings before interest and tax (EBIT) of $4 million and declared an interim dividend for the first time in almost three years.

Saunders International managed to exceed its entire FY21 guidance in just the first six months of FY21.

The small ASX share's management has said that they don't see any slowdown in the financial performance of the business a with a new revised FY21 revenue target of $110 million to $110 million and EBIT margins of between 7% to 8%, which implies a stronger second half.

Naos believes the guidance may prove to be conservative with several industry tailwinds supporting the business for the next 12 months to three years. The fund manager said there could be opportunities that are the largest in the company's history.

The tailwinds include the federal government focus on domestic fuel storage capability, infrastructure spend with a particular focus on regional programs including bridge replacement, there are also numerous and significant opportunities within the defence sector.

Big River Industries Ltd (ASX: BRI)

Big River is involved in many different timber operations. It's a major manufacturer of softwood and hardwood formply and structural plywood products in Australia, a major seller of consumable formwork products in Australia, and it's a national merchant of timber and associated building products to local trade, medium sized and enterprise sized companies.

The timber business produced a strong result according to Naos, with EBITDA growing by 15% compared to the prior corresponding period, which wasn't affected by COVID-19.

The fund manager was excited by new information in the half-year result which Naos believes could potentially result in the small ASX share more than doubling its current annualised net profit after tax run rate of $6.2 million.

According to Naos, Big River Industries' acquisition of Timberwood remains on track with the company trading well and forecast to contribute around $3 million of net profit after tax based on the current run rate.

The net cash inflow resulting from the closure of the Wagga Wagga facility and subsequent relocation to Grafton is expected to be around $10 million with an addition to net profit of around $2.5 million. The fund manager thinks the economic backdrop could also help grow future earnings.

The post 3 exciting small ASX shares to watch after strong results appeared first on The Motley Fool Australia.

There are a few small cap ASX shares that did really well in February 2021 for the NAOS Small Cap Opportunities Company Ltd (ASX: NSC) portfolio.

How does Naos Asset Management invest?

Naos is led by chief investment officer (CIO) Sebastian Evans. NAOS Small Cap Opportunities is one of the listed investment companies (LIC) operated by Naos.

That particular LIC looks at businesses with market capitalisations between $100 million and $1 billion.

The fund manager has a number of investment focuses. It looks for businesses that are good value with long term growth potential. With its portfolio, Naos believes it's better to have a quality portfolio rather than numerous holdings. That's why it only holds around 10 positions in each fund, with each ASX share representing a high-conviction position.

Naos invests in the small cap ASX shares for the long-term. It considers the performance and the liquidity of its positions whilst ignoring the index. Performance can sometimes be quite variable when compared to the index.

It looks to invest purely in industrial companies whilst also considering the ESG factors (environmental, social and governance).

Enero Group Ltd (ASX: EGG)

Enero is a collection of businesses relating to marketing and communications.

Naos said that Enero released the strongest result out of all of the businesses in its portfolio. Enero's net profit after tax went up 129% compared to the prior corresponding period. The earnings before interest, tax, depreciation and amortisation (EBITDA) increased to 30% and this helped increase the fully franked interim dividend to $0.105 per share.

The fund manager said that all of the small cap ASX share's public relations and creative agency businesses have shown significant earnings resilience as most of their client base operates within the technology, healthcare and government sectors which have continued to operate relatively normally in a COVID-19-affected environment.

The other main earnings driver was the 50.1% holding of ad-tech business OB Media, which is based in the US.

Naos believes OB Media is on track to earn over AU$22 million of EBITDA, compared to just a couple of million just a few years ago. OB Media has been investing in its technology and people, as well as building relationships with Google and Microsoft. The fund manager said that OB Media is now benefiting from this investment. On a standalone basis, Naos thinks OB Media is worth more than $300 million because it is a high growth technology business that makes a good amount of profit with a negative working capital balance.

COG Financial Services Ltd (ASX: COG)

This small cap ASX share is made up of two different businesses, an asset finance broking arm and a lending arm.

COG announced an initial half-year dividend. Naos said the ASX share's low capital intensity nature of the business has resulted in the business being in a strong net cash position with plenty of flexibility for both capital management and further acquisitions.

The company also provided further clarity about the imminent rollout of its insurance broking capability. The fund manager thinks insurance broking could match the earnings generated by the finance broking divisions when taking a three to five year view.

Big River Industries Ltd (ASX: BRI)

Big River is an integrated Australian timber products small cap ASX share. It's involved from the procurement of raw materials all the way to the sale of finished products to end users.

Naos said that said that Big River Industries' result was strong, with EBITDA growing by 15% and was not affected by COVID-19.

The fund manager pointed out that some new information was provided with the result that could more than double its current annualised net profit run rate of $6.2 million.

The acquisition of Timberwood remains on track with the company trading well and forecast to contribute close to $3 million net profit based on the current run rate.

Naos said the net cash inflow resulting from the closure of the Wagga Wagga facility and subsequent relocation to Grafton is expected to be around $10 million with net profit accretion of around $1.5 million.

The fund manager continues to see the economic backdrop being beneficial for the company which may further contribute to the growth in future earnings.

The post 3 small cap ASX shares that powered higher in February 2021 appeared first on The Motley Fool Australia.

There are some ASX small cap shares worth buying and owning according to fund manager Naos Asset Management.

What is Naos Asset Management's investment approach?

Naos is led by chief investment officer (CIO) Sebastian Evans. NAOS Small Cap Opportunities Company Ltd (ASX: NSC) is one of the listed investment companies (LIC) operated by Naos.

That particular LIC looks at businesses with market capitalisations between $100 million and $1 billion.

The fund manager has a number of investment focuses. It looks for businesses that are good value with long term growth potential. With its portfolio, Naos believes it's better to have a quality portfolio rather than numerous holdings. That's why it only holds around 10 positions in each fund, with each ASX share representing a high-conviction position.

Naos invests in the small cap ASX shares for the long-term. It considers the performance and the liquidity of its positions whilst ignoring the index. Performance can sometimes be quite variable when compared to the index.

It looks to invest purely in industrial companies whilst also considering the ESG factors (environmental, social and governance).

BSA Limited (ASX: BSA)

Naos describes BSA as a solutions-focused technology services small cap ASX share.

BSA assists clients in implementing their physical assets, needs and goals in the areas of building services, infrastructure and telecommunications. BSA clients include the National Broadband Network (NBN), Aldi Supermarkets, Foxtel and the Fiona Stanley Hospital.

In a recent monthly update, Naos pointed out that BSA announced two significant releases that the fundie believes will provide the company with an excellent base of work with tier-1 clients for the foreseeable future.

Naos said that most significantly, BSA was able to secure a renewal contract with NBN for up to 8 years commencing in early 2021.

Based on the initial contract revenue figures, BSA has secured a greater share of the overall NBN maintenance work due to what the fundie believes has been high levels of service and customer satisfaction, which has allowed BSA to gain market share from far larger competitors.

BSA also announced in December that it had successfully secured a five-year contract with Telstra Corporation Ltd (ASX: TLS), focusing on property and telecommunication asset works in Tasmania and Victoria.

In addition to those two contract wins, over 2020 BSA was able to secure a new contract with Foxtel as its sole contract provider. It was also able to successfully move into the mobile and wireless space with clients such as the NSW Telco Authority.

Naos said that if the small cap ASX share can continue to innovate in the way it meets and exceeds its clients requirements then the fundie believes BSA has the potential to be a business that generates more than $650 million of revenue.

According to Commsec, the BSA share price is valued at 10x FY23's estimated earnings.

Big River Industries Ltd (ASX: BRI)

Big River describes itself as an integrated Australian timber products business that operates across the full continuum from procurement of raw materials through to sale of finished products to end users.

Naos pointed out that the small cap ASX share announced a large acquisition of a business called Timberwood for a consideration of $24 million which equates to 5.1x the pro forma FY20 earnings before interest, tax, depreciation and amortisation (EBITDA).

Timberwood is a specialty manufacturer and distributor of a range of panel products. The acquisition was majority funded by a $20 million placement which, after the acquisition of Timberwood and the closure of the Wagga Wagga facility, will provide Big River Industries with significant financial flexibility to continue to acquire similar complementary businesses.

The company also provided a trading update, it's now expecting underlying net profit after tax to be more than 10% higher than the prior corresponding period. Naos said this is a strong result considering the prior period didn't include COVID-19 impacts.

The post 2 little-known small cap ASX shares rated as buys by fundie appeared first on The Motley Fool Australia.

There are some ASX small cap shares worth buying and owning according to fund manager Naos Asset Management.

What is Naos Asset Management's investment approach?

Naos is led by chief investment officer (CIO) Sebastian Evans. NAOS Small Cap Opportunities Company Ltd (ASX: NSC) is one of the listed investment companies (LIC) operated by Naos.

That particular LIC looks at businesses with market capitalisations between $100 million and $1 billion.

The fund manager has a number of investment focuses. It looks for businesses that are good value with long term growth potential. With its portfolio, Naos believes it's better to have a quality portfolio rather than numerous holdings. That's why it only holds around 10 positions in each fund, with each ASX share representing a high-conviction position.

Naos invests in the small cap ASX shares for the long-term. It considers the performance and the liquidity of its positions whilst ignoring the index. Performance can sometimes be quite variable when compared to the index.

It looks to invest purely in industrial companies whilst also considering the ESG factors (environmental, social and governance).

Eureka Group Holdings Ltd (ASX: EGH)

Naos says that Eureka Group is a provider of quality and affordable rental accommodation for independent seniors within a community environment. Eureka owns 30 villages and manages a further nine villages with a total of 2,147 across Queensland, Tasmania, South Australia, Victoria and New South Wales.

The ASX small cap share recently held its annual general meeting (AGM) and gave a market update in early November which included FY21 earnings before interest, tax, depreciation and amortisation (EBITDA) guidance of $9.8 million to $10.2 million. This would be an increase of 21% to 26% compared to the prior corresponding period. Occupancy has remained above 95% and the business continues to sell non-core assets, which will provide the funding for organic growth and acquisition opportunities.

The fund manager believes Eureka has multiple levers that can be pulled to help earnings growth at a significant rate going forward, and when overlaid with the current industry tailwinds, Naos thinks Eureka will be highly attractive to investors, particularly in this low interest environment.

COG Financial Services Ltd (ASX: COG)

The financing business also held its AGM and gave an update about its strategy going forward. It's still focused on its broking and aggregation business, particularly the insurance broking, as COG brokers have a close relationship with clients and have the ability to meet their financing needs.

The ASX small cap share also provided disclosure about the software that allows COG brokers to have real time data on their entire client base together with real-time quoting and application functionality. Naos believes this is key for COG as some of the brokers it owns may have 10,000 active SME clients that will have a number of financing and insurance needs in any given year.

Naos also thinks that a merger with Earlypay Ltd (ASX: EPY) – formerly CML Group – would also be beneficial if done at the right time.

Big River Industries Ltd (ASX: BRI)

This is a business that's a diversified manufacturer and distributor of timber and building products. It sells softwood and hardwood formply and structural plywood products, consumable formwork products and it's a national merchant of timber and associated building products to local trade, medium sized and enterprise sized companies.

Naos pointed out that Big River Industries was recently successful in applying for a $10 million grant for recovering from the bushfires. The grant will allow the ASX small cap share to close the manufacturing facility in Wagga Wagga and move this capability into the newer facility in Grafton.

The fund manager likes this because it will reduce the exposure to more commodity-type manufactured goods and allow the company to continue to focus on the distribution model with a focus on higher value products. The closure in the site could lead to a significant reduction in working capital and potential upside from land sale proceeds.

The post 3 little-known small cap ASX shares rated as buys by fundie appeared first on The Motley Fool Australia.