Meet the latest ASX small cap stock that’s racing ahead during COVID

It looks like land-bound Aussies have found a new way to splurge their holiday budget – and this ASX small cap is reaping the benefits.

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Photo from motorcycle rider's perspective looking at handlebars and road with green fields either side

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It looks like land-bound Aussies have found a new way to splurge their holiday budget – and this ASX small cap is reaping the benefits.

The closing of international borders till at least late 2021 means that overseas holidays are off the agenda. It appears that cashed-up Aussies with nowhere to go are indulging in their mid-life fantasies and buying motorcycles.

At least, that’s what I took away from the MotorCycle Holdings Ltd (ASX: MTO) profit update released today.

MotorCycle share price revving up

The motorcycle dealership said its first half FY21 earnings before interest, tax, depreciation and amortisation (EBITDA) will be “in excess of $20 million”.

This compares to its 1HFY20 EBITDA of $10.4 million and its 2HFY20 figure of $10.3 million.

The news sent the MotoCycle share price surging 22.5% to a two-year high of $2.45 in early trade.

Can the MTO share price sustain momentum?

It seems the group has also benefited from the federal government’s JobKeeper wage supplement and cost cutting to deal with COVID-19.

But before investors get too excited, management included a warning to its bullish update.

“Given the exceptional circumstances, care should be taken using this year’s results as a guide for future performance,” it said in its ASX release.

ASX small cap in the fast lane

Investors though aren’t quite listening and if the MotoCycle share price closes around the current level, it would have gained 21% since the start of 2020.

That puts it only a tat behind the Carsales.Com Ltd (ASX: CAR) share price at 28%, but well ahead of the Autosports Group Ltd (ASX: ASG) and Eagers Automotive Ltd (ASX: APE) share price, which are wallowing in the red.

In contrast, the S&P/ASX 200 Index (Index:^AXJO) shed 14% of its value over the same period.

Another ASX small cap COVID winner

But the MTO share price isn’t the only small cap retailer zooming ahead this morning. The Baby Bunting Group Ltd (ASX: BBN) share price surged 6.5% to $4.89 after it too released a bullish update.

The baby products retailer told investors that its going gangbusters. Margins are expanding and same store sales have jumped 17% since the start of the June 30 financial year, reported the Australian Financial Review.

Excluding locked-down metro Melbourne, same store sales are up 28.5% while click and collect sales surged 233%.

Who said a crisis only brings bad news?

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with me on Twitter @brenlau.

The Motley Fool Australia has recommended carsales.com 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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