If you have a higher tolerance for risk, then it could be worth looking at the small side of the market.
But which small cap ASX shares could be buys?
Two that Bell Potter thinks would be good options are listed below. Here's what the broker is saying about them:
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IPD Group Ltd (ASX: IPG)
Bell Potter is feeling positive about this small cap ASX share. It is a distributor of compliant and innovative electrical infrastructure products with value-add custom-made solutions.
The broker was pleased with the company's decision to acquire CMI Operations for a total of approximately $100 million. It commented:
Overall, we view CMI as a strong addition to IPD's existing product suite (e.g. high internal IP, same customers, improves IPD's supplier diversity). In addition, the transaction price (trailing EV/EBITDA of 5.9x excl. synergies) would also appear to be reasonable for what we see as an established category leader in hazardous area and electrical safety verticals.
In light of this and its already positive view on the company's growth outlook thanks to long life cycle demand and its EV charging opportunity, the broker has put a buy rating and $5.75 price target on its shares.
Propel Funeral Partners Ltd (ASX: PFP)
This funerals company has also been given the thumbs up by the broker.
It believes Propel has a positive outlook thanks to its strong underlying business and good pricing power. It also sees further opportunities for the company to grow its market share through acquisitions. Its analysts explain:
We continue to view PFP's growth as well supported by a strong underlying business with good pricing power in addition to its acquisitive strategy in a large and fragmented market. We expect organic volume growth to return in 2Q24 as we have seen in NSW/VIC death statistics for the month of October/November and medium-long-term growth to be further supported by ageing baby boomers as the older cohorts reach average life expectancy in ~3 years.
Bell Potter has a buy rating and a $5.90 price target on the small cap ASX share.
