Down in the capitalisation depths of the Australian Securities Exchange (ASX), there is no shortage of very intriguing companies, doing some interesting things. Here are four such small-company situations, that all look very promising; with one other thing in common – they all currently have a price in the 50s, in cents.

1. Intelligent Monitoring Group (IMB, 58 cents)

Market capitalisation: $175 million

12-month total return: 170%

3-year total return: 2.7% a year

FY25 Estimated Yield: no dividend expected

FY25 Estimated P/E ratio: n/a

Analysts’ consensus target price: $n/a

Security monitoring company Intelligent Monitoring Group (IMG) provides monitored security services to more than 180,000 businesses, homes, and individuals across Australia and New Zealand, operating three monitoring centres in Australia and one in New Zealand.

In August 2023 the company transformed itself into Australia’s largest independent home and business security monitoring business, with the $45 million acquisition of ADT Security in Australia and New Zealand: it more than tripled in size through the purchase, which added 340 staff and $95 million in revenue, at a time when households and businesses are increasingly looking to 24-hour monitoring in a tougher economic climate, with crime rates rising. The company said ADT – which runs a full-service model that includes installation, service and maintenance, patrols, and security monitoring – was a strong global brand and the acquisition would create a business with greater economies of scale. Moreover, ADT has a “sticky” revenue base, with 95 per cent of its sales coming from subscription services.

IMG has continued on the acquisition path; in May this year it picked up Mammoth, an Australian designer and manufacturer of IOT (Internet of things) connected security products, providing innovative security solutions to retail and wholesale customers; and in July, it added to the group Adeva Home Solutions (renamed Signature Security), ACG Integration, and Alarm Assets Group, and told investors in July that “early signs are very positive” regarding the contribution of these businesses to IMG in FY25.

At the time of the ADT acquisition, IMG put out market guidance for FY24 of an expected underlying earnings before interest, tax, depreciation and amortisation (EBITDA) figure of $29.8 million which equated to an annualised EBITDA of $31 million (to account for 11 months of ADT ownership). This compared to a pro forma combined group EBITDA of $24.8 million in FY23. Then, in May, the company lifted that guidance, to:

• Between $32 million–$32.5 million for expected underlying EBITDA FY24 (compared to $29.8 million), and
• Between $33.5 million–$34 million for expected underlying annualised EBITDA (compared to $31 million).

IMG finished the financial year trading in-line with the upgraded guidance (it is yet to report FY24 results).

IMG has a large recurring revenue base – currently running at about $6.5 million a month – which underpins the business. It earns very strong margins, at about 40% at a gross level and 25% at EBITDA level. It looks like the company has a clear path to net profit, and IMG also holds tax losses of approximately $22.5 million to use’ minimising tax payments is expected to drive strong cash flow over the next three to five years.

To top it off, security monitoring is a fragmented and under-penetrated (compared to the US) industry, with no clear industry leader and still dominated by small business providers. IMG is in a good position to drive further consolidation. IMG has an excellent technology base, as the industry moves to leverage IoT and AI technologies to use “smart” high-resolution cameras, as “cameras as alarms.” This is a small company doing all the right things.

2. Sun Silver (SS1, 63 cents)

Market capitalisation: $78.7 million

12-month total return: n/a (listed May 2024)

3-year total return: n/a

FY25 Estimated Yield: No dividend expected

FY25 Estimated P/E ratio: n/a

Analysts’ consensus target price: n/a

 Floated through an initial public offering (IPO) in May, at 20 cents a share to raise $13 million, Sun Silver has been one of the best-performed IPOs of the year.

Sun Silver is exploring and developing the Maverick Springs silver project in Nevada, USA, which has an inferred mineral resource of 423

million ounces of silver equivalent, at a grade of 67.2 g/t of silver equivalent, and also contains about 2 million ounces of gold. The company has always expected further drilling to boost this resource – reasoning that the high-grade mineralisation extends to the north-west beyond the existing mineral resource – and it confirmed that theory spectacularly just last week, with a hole put down in its inaugural drilling program hitting an intercept of almost 332 grams per tonne (g/t) silver equivalent, just 115 metres from the boundary of its current resource.

Then, yesterday, the company announced a 45% boost to the resource, to the figure given above, from 292 million ounces of silver equivalent, and 1.37 million ounces of gold. (Unfortunately, for an article about stocks in the 50-cents band, the shares jumped six cents, or 10.5%, to 63 cents, from 57 cents.

To add to the good news, the hole reported last week also hit some very interesting antimony grades, just days after China announced that it was imposing export restrictions on the “critical” metal, which is widely used across industries including aerospace and defence, but also electronics, solar photo-voltaic components, telecommunications, petrochemicals and vehicles. With its regional allies, China controls 90% of global supply. Antimony was expected in the Maverick Springs area, given historical data.

Sun Silver speaks of Maverick Springs mainly in the context of silver demand from solar panels, which is projected to grow exponentially through to 2050 – solar energy is currently the fastest growing source of silver demand. The company wants to value-add its silver into ‘silver paste,’ which improves the efficiency of solar panels.

Solar energy capacity within the US alone is forecast to increase by 125GW per year to 2030. In the next six years, the US government is aiming for more than six times current solar capacity: the target is for solar energy to provide 30% of all electricity in the US by 2030 and 45% by 2050. The estimated amount of silver required to achieve this target by 2050 represents virtually all of the current known global reserves. If Maverick Springs can be successfully developed, Sun Silver will be a major player in meeting this target – and in helping the US move away from having to rely on China for its ‘clean energy’ requirements.

Maverick Springs was already looking likely to become a silver-gold mine, but thinking of it as a silver-gold-antimony deposit is even more attractive. The resource remains open in all directions, meaning that further exploration will only result in more upgrades; the high-grade silver intercepts keep coming. There are very good grounds for bullishness on Sun Silver.

3. PlaySide Studios (PLY, 68 cents)

Market capitalisation: $278 million

12-month total return: 51.1%

3-year total return: 22.5% a year

FY25 Estimated Yield: no dividend expected

FY25 Estimated P/E ratio: 68 times earnings

Analysts’ consensus target price: $1.05 (Stock Doctor/Refinitiv, three analysts)

Melbourne-based PlaySide Studios (PLY) is one of the ASX’s true global leaders, but it is not a very well-known one. It is a big name in the global video game industry, in which it is one of the top independent developers in the world. PlaySide develops its own intellectual property (IP) in the form of self-published games delivered across four platforms: PC, mobile, virtual reality (VR) and augmented reality (AR). In 2022, PlaySide established a publishing arm, which provides funding, development support, marketing and publishing of third-party games from smaller independent studios, on a work-for-hire basis. The company develops video games for multiple platforms including mobile, PC/console, virtual reality and mixed reality, with a portfolio of more than 70 titles.

PlaySide also spoiled my ’50-cents-level stocks’ article idea, moving from 63 cents to 68 cents yesterday. I was going to argue that investors should buy it if they saw it with a 5 in front of its share price; but I still think it’s a decent buy.

In FY24, PlaySide lifted sales revenue to 68%, to $64.6 million; on the back of a major deal with Warner Bros to create a Game of Thrones video game, as well as a flurry of promising titles and projects with smaller developers. Both earnings before interest, tax, depreciation and amortisation (EBITDA) and net profit surged into the black from losses in FY23. EBITDA saw a $20.9 million turnaround from a $3.4 million loss, to $17.5 million; while net profit lifted $18.3 million, from a loss of $7 million to a record profit of $11.3 million.

Revenue for the Original IP arm more than doubled to hit $30.3 million, while Publishing revenue grew by 46%, to reach $34.3 million. PlaySide finished the year with net cash of $37.1 million on the balance sheet, up $4.9 million, or 15.2%.

Apart from the two PC/Console titles using the Game of Thrones IP, PlaySide also has a deal with Polish game developers Fumi Games to publish the 1930s-inspired game MOUSE, which is expected to launch in 2025, and is already the 40th most wish-listed title on online gaming platform giant Steam; and will also release in the current financial year a multi-player console title using its own Dumb Ways to Die IP. PlaySide says “commercial success of one or more of these titles has the potential to create a significant change in the company’s revenue and earnings.” PlaySide Studios is an impressive little stock, and the analysts that follow it are bullish on its prospects.

4. Smart Parking (SPZ, 59 cents)

Market capitalisation: $205 million

12-month total return: 73.5%

3-year total return: 35.9% a year

FY25 Estimated Yield: no dividend expected

FY25 Estimated P/E ratio: 17.4 times earnings

Analysts’ consensus target price: 65 cents (Stock Doctor/Refinitiv, four analysts)

 I don’t know what was in the air on Wednesday, but my fourth stock, Smart Parking, also surged, rising 5 cents, or 9.3%, to 59 cents.

The company did report FY24 results on Monday and told the market that it had boosted revenue by 21%, to $54.3 million; EBITDA increased 28%, to $14.7 million, and net profit declined 10%, to $5.6 million (after surging more than five-fold in FY23, to $6.4 million.) As at 30 June 2024, the group had cash on hand of $7.2 million, down from $10.7 million a year earlier.

Smart Parking designs, develops and manages car parking technology, and has built its business in Australia, New Zealand, the United Kingdom and Germany. It springboarded from its Queensland base into New Zealand, then the UK – its largest market, and probably the most sophisticated (and regulated) private parking market in the world – and since January 2022, SPZ has taken what it’s learned in the UK and is breaking into the German market, a market the company believes could be total addressable market (TAM) twice the size of the UK.

Then, in February 2024, Smart Parking took its model to Denmark, potentially another high-value market, underpinned by the Danish standard of living.

Smart Parking has a broad range of technology to survey vehicle activity. These technologies include:

• Automatic number plate recognition (ANPR)
• Variable message signs
• Car counters
• In-ground or overhead sensors

All the data collected by the various hardware assets is relayed back to its SmartCloud management platform. The cloud-based program processes millions of parking events each day, providing real-time data and availability guidance to its mobile app and operators. The platform provides feedback to site owners including insights into capacity, traffic flow, parking patterns and assists in setting enforcement rules.

The business has three divisions:

• Parking Management

Provides parking management solutions (parking tickets), with the target clients being shopping centres, property managing agents and site owners. Tickets, or “parking breach notices” (PBNs), generated 83% of the company’s revenue in FY23.

• Technology

The sale of technology, hardware and software. It primarily supports the parking management division through SmartCloud and bay monitoring technology. The on-street and off-street products include:

• SmartApp
• Automatic number plate recognition (ANPR) cameras
• SmartSpot Gateway
• SmartCloud
• Overhead Guidance Indicators (OHIs)
• Pay & Walk
• Enforcement Management System

And the research and development division.

The number of sites under management (with the ANPR system) that the company operates in rose by 28% in FY24, to a total of 1,424.

• 1,124 of 45,000 possible sites in the UK;
• 162 of 3,000 possible sites in New Zealand;
• 71 of 2,000 possible sites in Queensland;
• 67 of 90,000 possible sites in Germany; and
• 109 of 10,000 possible sites in Denmark, after kicking-off in that market in January 2024.

SPZ has told shareholders that it expects global sites under ANPR management to reach 1,500 sites by December 2024.

In FY24, the UK operations generated almost 86% of total revenue, in the Parking Management and Technology businesses; and accounted for 79% of total sites. ANPR is SPZ’s secret sauce: it is a reliable, cost effective off-street parking management solution. SPZ says it is proven to serve a wide range of industries including supermarkets, retail, hotels, hospitals and leisure centres: Smart Parking’s ANPR solution ensures greater compliance and increased parking revenue.

Germany is a large market that broker Shaw and Partners says is likely to hit breakeven by the second half of 2025. It models SPZ potentially achieving $16 million in EBITDA by FY30 in Germany.

Smart Parking is another small Australian company doing good things overseas and building its scale and profitability: analysts don’t see it doubling anytime soon, but it will very likely reward an investor buying it now.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.