These are the top small cap ASX picks for 2022

Leading independent, full-service financial services firm, Canaccord Genuity, has released its “Top Australian Stock Picks for 2022”. The publication is a collection of Canaccord’s top 26 stock picks across a diverse group of sectors including Metals and Mining, EV Materials, Energy, Mining Services, Sustainability, Software and Services, Internet, Telecommunications, Retail, Beverages, Health Care and Wealth Management Platforms.

The year that just passed, 2021, will go down as another year people would rather forget despite a strong performance in equities markets. Firstly, the Delta variant travelled across the world spreading fear and panic. There were, however, opportunities for those who bought equities during lockdown.

The ASX 200 Index closed the year +14%, posting a strong performance in comparison to – the years before. It, therefore, is obvious, equity markets aren’t so concerned about lockdowns, snap border closures, or the economic damage from widespread COVID restrictions. What was more important, was rising vaccination rates and achieving herd immunity. On that basis, certain stocks outperformed whilst others underperformed due to Covid-19.

Consumer and Retail

• BWX Limited (BWX-ASX | BUY, $5.62 TP) – Leading beauty and wellness business, valued on ~20x FY23E PE. Outlook is particularly strong.
• City Chic Collective (CCX-ASX | BUY, $7.50 TP) – Canaccord believes City Chic will exit FY22E with substantial sales momentum.
• Mighty Craft (MCL-ASX | SPEC BUY, $0.51 TP) – Better Beer to become one of the largest independent beer brands over the near term and is undervalued.
• Top Shelf International (TSI-ASX | SPEC BUY, $2.51 TP) – TSI’s near-term and long-term growth profile is attractive.

Energy 

• Carnarvon Petroleum (CVN-ASX | BUY, $0.44 TP) – Dorado development and the potential for macro tailwinds.
• Paladin Energy (PDN-ASX | BUY, $1.05 TP) – Number of uranium market tailwinds, we expect this performance to continue into CY22

Healthcare

• Alcidion Group (ALC-ASX | BUY, $0.35 TP) – Alcidion’s recent acquisition of Silverlink represents a positive addition to the company’s Miya software suite.
• Aroa Biosurgery (ARX-ASX | BUY, $1.80 TP) – Current guidance is achievable (NZ$34-37m FY22 revenues), even with a slight COVID-19 disruption.
• ImpediMed Limited (IPD-ASX | SPEC BUY, $0.41 TP) – Canaccord believes the publication, change in guidelines and reimbursement policies are key signals for the market to move the share price materially higher.
• Trajan Group (TRJ-ASX | BUY, $4.91 TP) – The FY21 result beat TRJ’s IPO forecasts and the recent AGM confirmed that organic growth continued to generate a double-digit lift to revenue. 

Metals and Mining

• Allkem Ltd (AKE-ASX | BUY, $12.00 TP) – Strong fundamentals for the lithium market.
• Bellevue Gold (BGL-ASX | SPEC BUY, $1.45 TP) – Is well positioned and funded to have the 183kozpa at A$1,014/oz project in production in <2 years.
• Euro Manganese (EMN-ASX | SPEC BUY, $1.30 TP) – Developing the most advanced manganese for the Lithium Ion Battery supply chain project globally.

Mining Services

• DDH1 Limited (DDH-ASX | BUY, $1.59 TP) – DDH is a mineral drilling company that is well positioned to continue its positive run.

Industrial Services

• DGL Group (DHL-ASX | BUY, $3.35 TP) – The recent AGM update read positively, so expect continued progress in CY22.

Sustainability

• Calix Ltd (CXL-ASX | BUY, $6.40 TP) – Underlying ESG/decarbonisation structural tailwinds.
• SECOS Group (SES-ASX | BUY, $0.45 TP) – ESG credentials, impressive growth rates, increasing profitability, and large addressable markets are attractive points.

Technology, Media, and Telecom

• Dropsuite Ltd (DSE-ASX | BUY, $0.30 TP) – DSE is profitable, high-recurring growth, revenue model business with elevated incremental EBIT margins trading at an attractive multiple.
• HT&E Limited (HT1-ASX | BUY, $3.05 TP) – Up to date industry revenue data suggests metro radio advertising revenues are on track to surpass Q4 CY19.
• Macquarie Telecom Group (MAQ-ASX | BUY, $94.00 TP) –  There is strong demand for the Group’s cloud and cyber security services.
• Marley Spoon (MMM-ASX | BUY, $3.00 TP) – Global meal-kit provider should benefit from Omicron COVID-19.
• OFX (OFX-ASX | BUY, $2.70 TP) – Strong momentum earnings  OFX enters CY22 with significant earnings momentum in its core business..
• Praemium Limited (PPS-ASX | BUY, $1.85 TP)- Divesting its international business which will streamline the PPS operations to its established and highly profitable domestic business.
• Superloop Limited (SLC-ASX | BUY, $1.44 TP): Has very high organic growth over the coming years, and see a strong chance of more acquisitions.
• Toys “R” Us ANZ (TOY-ASX | BUY, $0.25 TP) – Canaccord expects CY22 to see meaningful delivery against its medium-term target of having 5% domestic market share.

And there you have it, Canaccord’s “Top Australian Stock Picks for 2022”.  Keep an eye on some of the big themes that may drive prices in 2022 – Covid-19 (Omicron) vaccine rollout, working from home trends, potential lockdown, trade war with China, cryptocurrency and NFTs, low interest rates and US geopolitical events.

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.