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3 broker backed small caps

Foster Stockbroking has got their eye on these 3 speculative small caps.

Find out why this broker thinks they should be on your watchlist, below.

Nearmap Ltd (ASX: NEA)

Geospatial map technology provider Nearmap Ltd has been gaining the attention of brokers for its strong share price rally and, more recently, its March quarter results.

Nearmap works with organisations of all sizes across the building, construction, architecture, engineering and government sectors, among others.

According to Foster, Nearmap is now a buy, after the broker placed a price target of $1.59 on the stock which is down 1% to 89c per share at the time of writing.

Foster believe large US enterprises will continue to drive sales and opportunity for Nearmap after the company reported its US annualised contract value (ACV) portfolio exceeded US$10 million – in line with Foster’s estimate of US$10.2 million.

Nearmap said its March quarter growth was primarily driven by large enterprise customers as the company has made significant inroads in the US aerial imagery market with a growth acceleration strategy in the market bolstered by the appointment of a dedicated US enterprise customers general manager.

The Fosters broker maintains confidence in Nearmap’s product offerings and labels the company as having “strong growth prospects” with diverse geographies now facilitating growth in subscriptions globally.

LiveHire Ltd (ASX: LVH)

Cloud-based online human resources productivity platform company LiveHire Ltd may only be a $123.5 million market cap company at present, but it’s gaining the attention of many of late.

LiveHire operates in the HR technology industry, focusing on the sourcing and recruitment of candidates, and according to Foster Stockbroking, the stock should be on hold.

Foster listed concerns the March quarter results out of LiveHire missed expectations, with key negatives including a decline in cash receipts from the previous quarter, the slowdown of talent community connections and the loss of a key customer.

All of these things led to a downgrade from Fosters, who despite maintaining their hold rating on the stock, reduced NPAT forecast for FY18 and FY19 and cut its share price valuation from $1.17 to 70c per share.

LiveHire shares were up 2.9% to 71c per share at the time of writing.

Poor quarterly results caused Fosters to reset its expectations for LiveHire, and while product attractiveness remains, Fosters envisage a “slower ramp up” to achieve critical scale and profitability than first thought.

LiveHire was placed in a company-requested trading halt on May 1 pending the release of information regarding a 6-month integration with the Apply with SEEK product provided by SEEK Limited (ASX: SEK) as Seek did not approve of the announcement release at the time.

Terracom Ltd (ASX: TER)

Small cap mining company Terracom Ltd have been flagged by Foster Stockbroking as a buy after the company released promising third quarter results this month.

Terracom is a $103 million market cap company with a portfolio of projects in the coal bearing regions of Mongolia, Central Asia and Australia.

Fosters believe fourth quarter results out of Terracom will be even more promising, with its Blair Athol project the highlight of its third quarter with plans to ramp up activity at Blair Athol likely boding well for the miner.

Fosters have upgraded its forecast on FY19 NPAT for Terracom on the back of higher coal prices with a valuation of 58c per share on the stock which was priced at 27c per share at the time of writing.

Terracom still have a way to go before they can assert themselves as a key player in the commodity sector, and while Fosters risk profile on the company is high, its buy rating is telling in terms of its overall confidence in the company.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nearmap Ltd. The Motley Fool Australia has recommended SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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