There could be big returns lurking at the small end of town according to analysts at Morgans.
Here's what it is expecting from these small cap ASX healthcare shares:
Image source: Getty Images
Aroa Biosurgery Ltd (ASX: ARX)
The first small cap ASX healthcare share that Morgans is bullish on is Aroa Biosurgery.
The broker highlights that Aroa Biosurgery is a regenerative medicine company engaged in developing, manufacturing, and distributing medical devices for wound and tissue repair. It does this with extracellular matrix (ECM) technology in the United States and internationally.
The company has a range of products. These include Endoform Natural and Endoform Antimicrobia Restorative Bioscaffold for treating acute and chronic wounds; Myriad Matrix, an engineered ECM for soft tissue repair, reinforcement, and complex wounds; Myriad Morcells, a morcellized (powdered) format of Myriad Matrix for soft tissue repair and complex wounds; and Reinforced Bioscaffolds, a surgical product for use in ventral hernia repair and abdominal wall reconstruction.
The broker is positive on Aroa Biosurgergy for a number of reasons. These include its low product price point, manufacturing capacity, and product pipeline. It explains:
Aroa has developed a cost effective technology which is estimated to be 30% cheaper than existing products. Sufficient manufacturing capacity through 2 facilities with enough capacity for $100m sales. ARX have a pipeline of new products through both Oroa and TelaBio supported by strong clinical data, we anticipate further news on Symphony and Enivo products.
Morgans currently has an add rating and $1.57 price target on its shares. This implies potential upside of 54% for this small cap ASX healthcare share over the next 12 months.
Volpara Health Technologies Ltd (ASX: VHT)
Another small cap ASX healthcare share that Morgans is tipping as a buy is Volpara.
It is a digital health company offering an increasingly popular solution that improves clinical decision making for early detection of breast cancer. Morgans notes that its products are approved for sale in key regions and provide objective evidence that can be used by relevant specialists including the woman herself to make informed decisions about further screening.
Its analysts have been impressed with the company's performance, which has been underpinned by a strategy shift. It commented:
VHT continues to focus on the most profitable products and markets as well as focusing on larger value customers in line with their revised strategy. The second consecutive quarter of positive net operating cashflow is ahead of management's guidance for 4Q24. We continue to expect the sales pipeline to grow and remain comfortable in guidance to have sufficient cash on hand to maintain net operating cashflow break-even.
Morgans has an add rating and $1.21 price target on this small cap ASX healthcare share. This implies potential upside of 59% for investors over the next 12 month.
