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Fund manager Wilson Asset Management (WAM) has identified two top small-cap ASX shares in one of its portfolios that could be investment ideas.WAM says WAM Microcap targets “the most exciting undervalued growth opportunities in the Australian microcap market”.
The investment team described Synlait Milk as New Zealand’s fourth-largest milk processor. It’s a business-to-business supplier of dairy ingredients, infant formula products and lactoferrin.The fund manager said an update released in March regarding the company’s FY23 net profit after tax (NPAT) guidance range advised it would take an additional year to complete its financial recovery plan.WAM said Synlait’s longer-than-expected financial recovery was “largely due to supply chain disruptions, operational challenges and inflationary cost pressures”. This led to a decline of around 30%.
The investment team explained its optimistic outlook for the small-cap ASX share, sayingespite these setbacks, we are confident that Synlait Milk can deliver on their revised earnings forecast with signs that exports are returning to normal and the operating environment and systems are improving.