The S&P/ASX Small Ordinaries Index (ASX: XSO) is down 0.65% on Thursday at 3,139.3 points.
ASX small-cap shares represent young and growing companies with a market capitalisation of between a few hundred million and $2 billion.
Some analysts think the short-term future looks bright for small-caps after central banks around the world began cutting interest rates in 2024.
Indeed, the ASX small-cap shares index has lifted 6.5% in the past six months alone.
Small-caps tend to carry a fair bit of debt to fund their growth. So, rate cuts are especially beneficial to these young companies because they lower their cost of debt.
Economists expect the Reserve Bank of Australia to start cutting rates in February or May.
Meantime, here are three ASX small-cap shares catching the eye of professional brokers this week.
3 ASX small-cap shares tipped for growth
Humm Group Limited (ASX: HUM)
Shaw and Partners has commenced coverage of diversified non-bank financial services provider Humm with a buy rating and a 12-month target price of $1.
Humm is trading at 70 cents per share, down 2.11% on Thursday.
In a note published on asx.com.au, Shaw and Partners said its target price reflected an "undemanding" price-to-earnings (P/E) ratio of 5.2x its FY27 earnings per share (EPS) projection.
The broker said:
Humm is currently trading at very attractive value – reflecting a PE of 4.0x FY26 and 3.3x FY27 EPS.
We consider that HUM has double-digit growth to FY27 as it emerges from its restructuring phase and enhances its core operations of commercial asset lending and unsecured consumer finance.
Shaw and Partners said Humm emerged from the pandemic era in good financial shape.
It has a "more focussed strategy, streamlined costs and [is] led by a new CEO".
The broker added:
The loan book is in solid shape with net credit losses in FY24 down to historic lows (1.8% of average net receivables.) Net interest margin also stabilised in FY24 at 5.5%.
The broker said non-banks were continuing to take market share away from the major banks in the small-to-medium business lending arena.
Humm recently suspended buy now, pay later (BNPL) products in Australia that had become unprofitable amid higher interest rates, inflation, and new regulation.
The broker thinks the Australian business may achieve profitability in FY25.
Humm AU provides consumer finance for larger ticket consumer purchases such as home solar, hearing aids, dentistry, veterinary services.
Its lending products are distributed through merchants and practitioners.
FY25 will benefit from Humm AU's new, credit-regulated product, that can generate returns because it can charge interest and does not depend solely on consumer/merchant fees.
Humm AU has right sized its cost structure and credit quality ahead of FY25.
Shaw and Partners predicts Humm's international business may break-even in FY25.
The broker said: "HUM's Ireland business is currently profitable, but Canada has been slower to ramp."
This ASX small-cap share has risen 42% in the year to date.
Strickland Metals Ltd (ASX: STK)
With a market cap of $196.5 million, Strickland Metals is technically an ASX micro-cap share, not a small-cap.
East Coast Research has recently initiated coverage on Strickland Metals with a 12-month target price of 28.2 cents. Strickland Metals is trading at 8.8 cents per share, down 1.12% on Thursday.
East Coast Research describes Strickland as 'a low-risk and high-potential' ASX gold mining share.
Analysts at the research company say:
STK is a developing gold and base metals exploration company with an inferred resource base of ~5.7Moz AuEq across the highly prospective and favourable mining jurisdictions of Serbia and Western Australia.
The company owns 100% of its assets, the flagship being the Rogozna project (Serbia) and the Yandal project (WA).
The regional geological settings enhance the attractiveness of STK as an investment opportunity.
Strickland's Rogozna Project in Serbia is located in a Tier-1 active mining and exploration jurisdiction.
The project spans 184 square kilometres and contains several unexplored prospects.
The reseach house notes:
The JORC-compliant inferred resources are derived from just two of the four drilled deposits.
The region's multiple mineralisation systems suggest significant resource upgrade potential.
Recent highgrade deposit hits (best Au-deposit hit by a junior ASX-listed miner in ~two years) indicate a strong probability of doubling the resource base.
Additionally, the region's well-developed infrastructure, the availability of a skilled workforce, and lower corporate tax rates (around 15%) further support investment in STK.
Strickland sold its Millrose Gold project to Australia's biggest listed gold miner, Northern Star Resources Ltd (ASX: NST) in 2023.
East Coast Research says the deal strengthened Strickland's balance sheet, enabling more aggressive spending on exploration activities.
According to a note published on asx.com.au, Canaccord Genuity has also just commenced coverage on this ASX micro-cap share.
It has a speculative buy rating on the stock with a 12-month price target of 16 cents.
Strickland Metals shares are down 12% in the year to date.
Betmakers Technology Group Ltd (ASX: BET)
Ord Minnett has begun coverage on this ASX technology stock with a speculative buy rating.
Betmakers has a market cap of $107 million. So, it is also an ASX micro-cap share rather than a small-cap.
The broker has given Betmakers a 12-month price target of 16 cents. The Betmakers share price is currently 11 cents, down 2.73% today and up 34% in the year to date.
In a new note published on asx.com.au, Ord Minnett says:
Over the past ~2 years, EBT has right-sized its cosdt base (from $92m to a <$60m guide), while we expect revenue growth will return from 2H25.
The company is also guiding to positive OCF from 3Q24 (we model 2Q25).
On this basis, and given the company trades on just ~1.4x FY26 EV/rev, we see now as an interesting entry point on a risk/reward basis.
The broker said its 'speculative' buy rating was due to some balance sheet concerns.
