If you're interested in adding some small cap exposure to your portfolio, then read on!
The two small cap ASX shares listed below have just been named as buys by analysts at Morgans. Here's what the broker is saying about them:
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Mach7 Technologies Ltd (ASX: M7T)
The first small cap ASX share to look at is Mach7. It is a global provider of enterprise image management systems that allow healthcare enterprises to identify, connect, and share diagnostic image and patient care intelligence.
Morgans was pleased with the company's performance in FY 2022 and notes that its "story [is] becoming more compelling."
In response to the result, the broker retained its add rating and $1.34 price target on Mach7's shares. It commented:
M7T posted a strong FY22 result, with another year of record revenue up 42% on pcp, as well as a strong sales order pipeline which will drive growth in FY23 and beyond. Over the year, the business mix has trended towards more SaaS based deals (60/40 split) with customers increasingly open to transitioning from capital to subscription contracts. We view this as a positive trend with the market valuing SaaS contracts more highly. We have rolled forward our model, made no changes to our forecasts, and our DCF valuation remains unchanged at $1.34. Add maintained.
MotorCycle Holdings Ltd (ASX: MTO)
Another small cap ASX share that the broker is positive on is Australian motorcycle dealership and accessories group, MotorCycle Holdings.
Although the company reported a small decline in profits in FY 2022, it was still slightly ahead of Morgans' expectations. And while FY 2023 could be a tough year, the broker was pleased to see the company start the year with a large order book.
Overall, its analysts feel that its shares are trading on attractive multiples and offer significant upside potential. The broker has an add rating and $3.12 price target on its shares. It said:
MTO have commenced FY23 with a large order book; a bolstered inventory position; and a small bolt-on acquisition that is expected to contribute to FY23 earnings. However, while positive for FY23, MTO are preparing for likely subdued trading conditions against a softer consumer backdrop. Trading on ~7.5x FY24 PE; a solid balance sheet (~0.3x ND/EBITDA); ongoing favourable margin conditions (robust margin dynamic); a strong order book (near-term earnings support) and clear intent to continue to scale via acquisition, we consider MTO as offering solid value and maintain an Add rating.
