Broker names a 'key small-cap investment opportunity'

Bell Potter is saying good things about this growing small cap.

| More on:
A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors that are on the lookout for some exposure to the small side of the market, might want to take a look at GenusPlus Group Ltd (ASX: GNP).

That's the view of analysts at Bell Potter, which think it could be a small cap ASX stock to buy right now.

What is GenusPlus?

GenusPlus is a specialist power and communications infrastructure and services provider operating across Australia. It designs, builds and maintains electrical transmission and distribution networks, substations, and battery systems.

Last month, it released its FY 2024 results and reported record revenue of $551 million (up 24.1%) and record net profit after tax of $19.3 million (up 43.7%).

Bell Potter believes that this strong form could continue for the foreseeable future. Particularly given its robust short to medium term outlook. It explains:

Recent contract wins for the delivery of maintenance and upgrade works at transmission and distribution networks across Australia should support further recurring deliverables in addition to long-term / panel workflow. Revenue from recurring works has grown at a CAGR of 50% p.a. between FY20-24. Solar and wind project delivery, with increasing BESS integration, represents a significant opportunity for GNP in addition to several greenfield large-scale transmission developments scheduled to be built over the next 3-5 years.

The broker expects this to lead to sales of $645 million in FY 2025, $719 million in FY 2026, and then $815 million in FY 2027.

And with its margins expected to improve in the coming years, the broker has pencilled in net profit after tax of $26 million in FY 2025, $30 million in FY 2026, and then $35 million in FY 2027.

Market-beating returns

Bell Potter believes the small cap ASX stock could generate market-beating returns for investors picking them up at current levels.

According to the note, the broker has put a buy rating and $2.70 price target on its shares. This implies potential upside of 15% for investors over the next 12 months.

In addition, a modest 1.3% dividend yield is expected, lifting the total potential return beyond 16%.

Overall, Bell Potter continues to see GenusPlus as key small cap pick and thinks it would be a great option thanks to its exposure to a number of key tailwinds. It concludes:

We continue to see GNP as a key small-cap investment opportunity to play the theme of increasing investment in renewable energy, battery energy storage and transmission infrastructure across Australia. We see GNP's valuation multiples as undemanding considering our EPS CAGR expectation of 20% p.a. over FY24-27.

Should you invest $1,000 in Genusplus Group right now?

Before you buy Genusplus Group shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Genusplus Group wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 7 February 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended GenusPlus Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Small Cap Shares

A man slumps crankily over his morning coffee as it pours with rain outside.
Small Cap Shares

Why this Telstra-linked ASX small cap stock just crashed 90%

This small cap is having a very bad session. What's going on?

Read more »

A young boy wearing a hat, sunnies and striped singlet looks fierce and flexes his arm in victory.
Small Cap Shares

The ASX small-cap stock trading at 'half of the earnings multiple of industry leaders'

A leading fund manager sees a lot of untapped value for this soaring ASX small-cap stock.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Small Cap Shares

These small cap ASX stocks could rise 15% to 70%

Analysts think big returns could be on the cards for buyers of these stocks.

Read more »

A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.
Small Cap Shares

2 under-$5 ASX hidden gems worth your attention

These buy-rated shares are flying under the radar. Let's see why analysts are bullish on them.

Read more »

Miner looking at a tablet.
Resources Shares

2 small-cap ASX mining shares exploding 40%+ on China tariff news

Investors are sending the small-cap ASX mining shares flying higher on Wednesday.

Read more »

Siblings jumping on a trampoline.
Small Cap Shares

3 ASX small-cap shares with a 'solid growth outlook' for 2025

A leading fund manager expects strong growth from these ASX small-cap stocks in 2025.

Read more »

A little girl with red hair runs excitedly with a rocket strapped to her back, trying to launch.
Small Cap Shares

Guess which ASX small-cap stock exploded 154% on big US news!

ASX small-cap stocks carry added risk, but also sometimes offer supersized rewards.

Read more »

A group of businesspeople clapping.
Healthcare Shares

This fund returned 109% in 2024. Here are 2 of its best-performing ASX shares

Small caps proved to be the winners last year.

Read more »