MoneyTalks: These 3 brokers say these 3 small caps are good buys right now
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Three leading brokers – Ord Minnett, CCZ Equities, and MA Moelis – have put these ASX stocks in their Buy list.
Broker: Ord Minnett
According to the broker, Camplify is in the process of evolving from a largely Australian-centric peer-to-peer RV (recreational vehicle) rental platform to a company with significant scale and growth potential following the acquisition of PaulCamper in late 2022.
Ord Minnett’s confidence in Camplify is based on the track record of the company since inception, and the outlook for domestic leisure in the short to medium term.
Camplify also has a long runway given that it has a very low market share (<1% in Australia) within its addressable markets.
Ord Minnet believes Camplify could outperform the market’s earnings expectations if it could execute on its adjacent business of insurance.
“The ability to develop and sell what we would call ‘the holy grail’, best-in-class global insurance products suitable for both hirers and owners using a single underwriter,” said the note out of Ord Minnett.
Camplify could also raise investors’ confidence further by increasing the level of automation such that it can prove the business model is profitable at scale.
“We have assumed a modest level of success in both objectives, but full execution represents upside risk to our numbers,” said Ord Minnett.
The company has ample cash of around $24m with no debt, and is expected to deliver positive free cashflow in FY24.
Broker: CCZ Equities
Target price: 20c
Current price: 14c
Birddog Technology is a global video technology company that enhances the quality, speed and flexibility of a video with its proprietary technology.
In the last quarter, Birddog recorded a disappointing unaudited revenue of $7.4m, which was 24% lower than pcp.
However, CCZ Equities believes that despite these short-term challenges in sales, the company has market appeal, particularly within the education segment.
“We feel the current upside potential outweighs the downside considerations,” said the note from CCZ Equities.
Although sales have been slow, BirdDog’s main product remains a leader in its field and will continue to be so as management continues to explore new verticals and increase visibility in key markets.
CCZ says it has scaled back its FY23 revenue estimate by -$11.2m to $29.7m (last published: $40.9m), anticipating trading conditions to remain similar in the second half of FY23.
But the broker sees better times ahead.
“In line with management expectations, we envisage growth to return towards mid-FY24,” said the CCZ notes.
“Investing in NDI technology now will pay off in the long run as more and more users become familiar with its advantages, leading to a higher demand for BDT’s cameras, converters, and AV accessories.”
CCZ’s model suggests a valuation of $40.5m or 20c per share based on FY23 forecasts. As of today, Birddog’s share price is trading at 14c.
Broker: MA Moelis
Target price: $5
Current price: $4.47
The industrial contract labour company has just reported record quarterly revenue with FY23 Q2 revenue of $145m, up 54% vs pcp.
This strong growth was driven by both core and ancillary services in the Australian segment, coupled with continued strong growth in the North American segment.
The company’s EBITDA margin has also improved on pcp, driven by higher margins in its North American segment.
MA Moelis believes management’s outlook appears relatively conservative in the context of a result which was, by its own admission, a “strong performance”.
The broker sees strong growth in markets like Canada and the US, as evidenced by strong QoQ revenue growth in that region.
“We retain a Buy rating with increased target price of $5.00 (prior: $4.05) based on 12x EV/FY24 EBIT,” says the note from MA Moelis.
“We are of the view MAD remains in an upgrade cycle with catalysts to come from continued execution on strong growth in North America, coupled with expanding group margins.
“High growth earnings over the forecast horizon in our view justifies shift to premium over market multiple.”
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
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