The fund manager Wilson Asset Management (WAM) has recently identified two top small cap shares that it owns 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 targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.

WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.

The WAM Microcap portfolio has delivered gross returns (that's before fees, expenses and taxes) of 25.2% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 11.9%.

These are the two small cap shares that WAM outlined in its most recent monthly update:

Sovereign Cloud Holdings Ltd (ASX: SOV)

WAM describes Sovereign Cloud as an Australia infrastructure as a service (IaaS) provider that is focused on Australian government, defence, intelligence and critical national industry communities.

The fund manager noted that on 22 November 2021, Nextdc Ltd (ASX: NXT) bought an almost 20% stake of the business. Nextdc is a major Australian provider of premium data centre facilities.

According to WAM, this will provide Sovereign Cloud with access to a national network of over 1,500 enterprise customers and more than 730 channel partners.

Proceeds from the equity raising will be used by the small cap share to expand the small cap ASX share's operations and facilitate a move into the enterprise space, including investing in new cloud platforms in Brisbane, Melbourne and Adelaide.

The fund manager noted that Sovereign Cloud continues to see strong demand as it expands nationally, and as more businesses accelerate the transition to the cloud.

Iris Energy Ltd (NASDAQ: IREN)

This is not the typical ASX share investment that WAM Microcap makes, as it isn't actually on the Australian Stock Exchange.

Iris Energy is an Australian company that builds, owns and operates data centres and electrical infrastructure powered by renewable energy to sustainably mine Bitcoin, according to WAM.

In November, the small cap share completed a US$232 million initial public offering (IPO) and listed on the NASDAQ. The company plans to use the proceeds from the offering to fund its growth plans, such as the development of data centres across Canada, the US and Asia Pacific, as well as purchasing Bitcoin miners.

The post Wilson Asset Management believes these 2 leading small cap shares are a buy appeared first on The Motley Fool Australia.

The Sovereign Cloud Holdings Ltd (ASX: SOV) share price has returned to trading following the company's completed placement and institutional entitlement offer.

At the time of writing, the infrastructure-as-a-service (IaaS) company's shares are fetching for 77.5 cents, up a sizeable 27.05%.

Sovereign Cloud share price resumes

It's been a strong day for the Sovereign Cloud share price, with investors buying up amid the company's successful equity raise.

In a statement to the ASX, Sovereign Cloud advised it has raised gross proceeds of approximately $35 million. This consists of a placement to data centre operator, Nextdc Ltd (ASX: NXT) and the accelerated institutional component.

The placement saw 24.9 million shares issued to Nextdc at a price of 50 cents per share, raising $12.4 million. This was completed Monday 22 November and gives Nextdc a 19.99% controlling interest in AUCloud.

On the other hand, the institutional component raised roughly $4 million at the same price. This comprises a 4 for 11 fully-underwritten accelerated pro-rata non-renounceable entitlement offer. In turn, around 8 million new ordinary shares are to be issued by the company on 30 November.

A retail entitlement component is also expected to be raised, allowing everyday shareholders to take part in the offer. Approximately a further $18.6 million (before costs) is projected to be added to the Sovereign Cloud's equity raise.

The proceeds will be used towards investing in customer growth, scaling AUCloud, and the research and development of new features. The platform will also be rolled out to Brisbane, Melbourne, and Adelaide. This is expected to complement the new cloud platform's existing presence in Sydney and Canberra.

Furthermore, Sovereign Cloud will spend more than half of its funds on working capital requirements during the period.

AUCloud currently has 48 employees located in Canberra, Brisbane and Sydney. The company's resources are forecast to expand over the next 2 years to support revenue growth in Canberra and Sydney.

About the Sovereign Cloud share price

Over the past 12 months, Sovereign Cloud shares have moved in circles, particularly in the second half of 2021. The company's share price is down 30% since this time last year, and hovering around 25% below year to date.

Sovereign Cloud presides a market capitalisation of about $40.67 million, with more than 52.48 million shares on its books.

The post Why is the Sovereign Cloud (ASX:SOV) share floating 27% higher today? appeared first on The Motley Fool Australia.

The Sovereign Cloud Holdings Ltd (ASX: SOV) share price is still frozen today as the company undergoes a $35 million capital raise.

The capital raise includes a placement to NextDC Ltd (ASX: NXT) that will see it walking away with a 19.99% holding in Sovereign Cloud and a new partnership between the two companies.

The Sovereign Cloud share price has been halted at 61 cents since before the market opened on Monday.

Let's take a closer look at the latest news from the infrastructure-as-a-service provider servicing Australian governments and critical industries.

Sovereign Cloud's capital raise

As part of the company's $35 million capital raise, it will offer around 70 million shares for 50 cents piece.

That represents an 18% discount to its current share price. The soon-to-be-issued shares also represent around 70% of the company's existing shares.

NextDC's 19.99% stake will cost it approximately $12.4 million. The other $22.6 million will come from an institutional and a retail entitlement offer.

Under the entitlement offers, Sovereign Cloud shareholders will be able to purchase 4 new shares in the company for every 11 shares they already hold.

All eyes will be on the Sovereign Cloud share price tomorrow when the company is expected to exit its trading halt following the institutional entitlement offer.

What's next for Sovereign Cloud?

Following the capital raise, Sovereign Cloud's platform AUCloud will have a cash position of $41.5 million.

The funds will go towards investing in customer growth, scaling AUCloud, and the research and development of new features.

The platform will also be rolled out to Brisbane, Melbourne, and Adelaide, on top of its presence in Sydney and Canberra.

Additionally, NextDC will be appointing a new director to Sovereign Cloud's board. That will initially see NextDC's CEO and managing director Craig Scroggie at the table.

Finally, the partnership between NextDC and Sovereign Cloud will give the latter's platform access to NextDC's national network of more than 1,500 customers and 730 channel partners.

The two companies will also expand AUCloud into the enterprise market.

Sovereign Cloud share price snapshot

It has been a tough year so far for the Sovereign Cloud share price.

It has fallen 41% since the year began. Its also 3% lower than it was this time last month.

The post Here's why the Sovereign Cloud (ASX:SOV) share price is in the spotlight this week appeared first on The Motley Fool Australia.

The Sovereign Cloud Holdings Ltd (ASX: SOV) share price is on the move today following the release of a first half investor presentation.

In morning trade, the infrastructure as a service (IaaS) company's shares are sinking 5% to 88 cents.

What is Sovereign Cloud?

Sovereign Cloud is an IaaS company supporting the secure and continuous delivery of information. It counts the Australian government, the Australian Defence Force (ADF), and Critical National Industry (CNI) communities as customers.

Through the AUCloud brand, the company's IaaS service provides customers with a highly secure, scalable, automated cloud solution, delivering an efficient and effective hosting environment for critical and sensitive applications and systems.

How did Sovereign Cloud perform in the first half?

While Sovereign Cloud has previously released its half year accounts, today's presentation includes extras such as its outlook.

In respect to its results, for the six months ended 31 December, the company reported a 267% increase in revenue to $1.1 million. This left it with a total contract value (TCV) of $2.1 million at the end of the half, which was almost triple its TCV at the end of June.

TCV is the total value of expected revenue from estimated consumption of IaaS secured through non-enforceable customer contracts.

And while the company reported a cash outflow of $3.1 million, which was consistent with the prior corresponding period, it retains a healthy balance sheet. At the end of the period, the company had a cash balance of $20.5 million.

Outlook

Management notes that its AUCloud brand has a major market opportunity to grow into in the future.

This includes a proposed $15 billion spend by the ADF relating to information and cyber security and over $13 billion being spent by the Federal Government on ICT services.

The company commented: "Our focus into each of the above segments is reaping results based on increasingly proven capability, accreditations and growing customer needs with a view to increasing AUCloud's appeal to the Australian Government and Defence and their supply chain providers."

While this is positive, it hasn't been enough to stop the Sovereign Cloud share price from sinking today. Though, it is worth noting that it is still 17% higher than its December IPO price of 75 cents.

The post Why the Sovereign Cloud (ASX:SOV) share price is sinking 5% today appeared first on The Motley Fool Australia.

As well as being home to countless blue chip shares, the Australian share market is home to a good number of promising small caps.

Two small cap ASX shares that could be worth adding to your watchlist are listed below. Here's what you need to know about them:

SILK Laser Australia Limited (ASX: SLA)

The first small cap ASX share to look at is SILK Laser. It is a laser, skin care, and cosmetic injections company.

It has been growing very strongly in FY 2021 and recently released a trading update for the first five months of the financial year. At that point, the company revealed that its unaudited network cash sales were up 63% on the prior corresponding period to $38 million. Pleasingly, this means SILK Laser is on track to beat its forecasts for the year.

Looking ahead, management sees plenty of opportunities to drive growth through the expansion of its network of clinics. At the last count, SILK Laser had a total of 53 clinics in operation. Management believes it can grow its network by 6 to 10 new clinics per annum up to a total of approximately 150 clinics.

Sovereign Cloud Holdings Ltd (ASX: SOV)

Sovereign Cloud is an infrastructure as a service (IaaS) company supporting the secure and continuous delivery of information. It counts the Australian government, the Australian Defence Force (ADF), and Critical National Industry (CNI) communities as customers.

Through the AUCloud brand, the company's IaaS service provides customers with a highly secure, scalable, automated cloud solution, delivering an efficient and effective hosting environment for critical and sensitive applications and systems.

Positively, the services and data managed by AUCloud are all hosted and maintained in Australia. This compares to other global IaaS brands which may store data overseas, opening the stored data up to potential legal and jurisdictional compromise.

With cyber threats to government and commerce posed by malicious actors increasing, demand for its services is expected to grow strongly in the future.

The post Add these exciting small cap ASX shares to your watchlist right now appeared first on The Motley Fool Australia.

Earlier this week I took a look at three ASX shares which had helped the OC Micro-Cap Fund smash the market. You can read about that here.

Those shares weren't the only ones helping drive OC Micro-Cap Fund's strong performance. The fund manager also took part in a few IPOs during the final quarter of 2020. Here's what it was buying:

Booktopia Group Ltd (ASX: BKG)

The OC Micro-Cap Fund participated in the IPO of this online book retailer. This proved to be a good move, with the Booktopia share price gaining 13% in the final quarter.

Booktopia recently released its half year update and revealed that it had a very strong finish to the year with both a record month in December and a record half. Booktopia shipped a massive 728,000 units during the final month of the half, bringing its total shipments to 4.2 million units for the six months.

This was a 40% increase in shipments on the same period last year and underpinned a 52% increase in unaudited half year revenue to $113 million and a 506% increase in adjusted EBITDA to $8 million.

Doctor Care Anywhere Ltd (ASX: DOC)

The fund manager also took part in the IPO of this telehealth company. It will have been delighted to see the Doctor Care Anywhere share price surge 50% higher during the quarter.

As with Booktopia, Doctor Care Anywhere was on form during the final three months of 2020. It reported a 151% increase in fourth quarter revenue to 3.8 million pounds, bringing its unaudited full year revenue to 11.6 million pounds. This was a 102% year on year increase.

Management advised that this was driven by a 186% increase in the eligible patient metric to 2.2 million and the increasing demand for telehealth services during the pandemic.

OC Micro-Cap Fund commented: "DOC is a UK based tele-health provider with plans to expand its offering into continental Europe and potentially in the Asia-Pacific region. The COVID-19 health crisis has accelerated patients switch to accepting online medical advice (rather than face to face consultations) and DOC is well placed to capitalise on this opportunity to deeply penetrate its potential customer base."

Sovereign Cloud Holdings Ltd (ASX: SOV)

The OC Micro-Cap Fund also participated in this private cloud infrastructure company's IPO. As with the others, this proved to be a success, with the Sovereign Cloud share price gaining 37.3% during the period.

The fund manager believes it has significant potential.

It commented: "SOV, at $100m market capitalisation, is on the smaller side for our Fund to participate in as an IPO but we believe the company has tremendous potential. SOV provides a private cloud infrastructure environment for sensitive information controlled by customers such as the Australian government and the ADF and is levered to increasing value and use of data."

The post Here are 3 ASX IPOs this fund manager was buying appeared first on The Motley Fool Australia.

Respected fund manager Wilson Asset Management (WAM) has recently identified two small cap ASX shares that it owns in its portfolio.

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 targets small cap ASX shares with a market capitalisation under $300 million at the time of acquisition.

WAM says WAM Microcap targets the most exciting undervalued growth opportunities in the Australian microcap market.

The WAM Microcap portfolio has delivered gross returns (that's before fees, expenses and taxes) of 23.8% per annum since inception in June 2017, which is superior to the S&P/ASX Small Ordinaries Accumulation Index average return of 10.6%.

These are the two small cap ASX shares that WAM outlined in its most recent monthly update:

Dusk Group Ltd (ASX: DSK)

WAM Microcap said that Dusk was one of the significant contributors to the investment portfolio performance during December 2020.

The fund manager described Dusk as Australia's leading retailer on home fragrance products such as candles, diffusers and essential oils through its 115 owned and operated stores across Australia and online.

In a December trading update, the small cap ASX share provided sales guidance for the first half of FY21 of between $90 million to $90.5 million, up from $58.7 million in the first half of FY20.

Its earnings before interest and tax (EBIT) guidance for the FY21 first half was between $26 million to $27 million, up from $9.7 million in the prior corresponding period.

During the coronavirus pandemic, WAM Microcap said that Dusk has benefitted from consumers spending more time at home which has increased demand for comfort-related products. The company estimates net cash at the end of December of approximately $33.5 million. The fundie continues to see a positive outlook for the company driven by the roll out of new stores across Australia.

Sovereign Cloud Holdings Ltd (ASX: SOV)

This business trades as AUCloud and was listed in December 2020. WAM Microcap described the small cap ASX share as an infrastructure as a service (IaaS) company supporting the secure and continuous delivery of information to the Australian government, the Australian Defence Force (ADF) and 'critical national industry' communities.

WAM Microcap invested in AUCloud through a pre-initial public offering investment, as part of the strategy implemented following the WAM Microcap capital raising in August 2020.

The fund manager said that AUCloud has a successful partner channel with a number of the largest global software companies and a strong market opportunity, with the company estimating the Australian government will spend in excess of $13 billion per year on information and communications technology through to 2030.

According to WAM Microcap, the small cap ASX share is well positioned to capitaliise on the investment initiatives as a direct provider of IaaS services and through a channel partner selling into the Australian government or ADF. The AUCloud share price rose more than 50% on its first day of trading.

The post Wilson Asset Management thinks these 2 small cap ASX shares are a buy appeared first on The Motley Fool Australia.