If you are looking for investment ideas, then it could pay to listen to what Bell Potter is saying.
That's because the broker has just released its latest top Australian picks from the smaller size of the market.
These are its panel of favoured small cap Australian equities that it believes offer attractive returns over the long term.
Three that make the list in August are named below. Here's why it is bullish on them:
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DroneShield Ltd (ASX: DRO)
This counterdrone technology company is on the broker's panel again this month.
It believes the ASX share is well-positioned for growth thanks to increasing demand for its technology from military customers. Commenting on the high-flying stock, the broker said:
DroneShield is an Australian defence manufacturer specialising in counterdrone technology. DRO provides an end-to-end counter-drone solution that integrates proprietary artificial intelligence software with a suite of hardware products utilised to detect, identify and defeat aerial, ground and maritime threats. The company's products are largely in-house technology and include handheld, vehicular and fixed installations. DRO's customers primarily include military and intelligence, as well as law enforcement, critical infrastructure and commercial parties globally.
Kinatico Ltd (ASX: KYP)
A new addition to the broker's panel this month is Kinatico.
Bell Potter likes the workforce compliance management company due to its transition into a high growth software as a service (SaaS) company. It explains:
We are adding Kinatico (KYP) to our small-cap panel based on its transition from a legacy screening business into a high-growth, SaaS-based company focused on workforce compliance management. The upside lies in KYP's ability to leverage its existing CVCheck business, which has over 10,000 repeat corporate customers to upsell its higher-margin SaaS solutions. As the revenue mix shifts towards the SaaS platform, we expect to see margin improvement and a potential valuation re-rating, offering upside from a small number of customer conversions. This growth is supported by a strong, debt-free balance sheet.
Universal Store Holdings Ltd (ASX: UNI)
The final ASX share that gets the thumbs up from Bell Potter is Universal Store. It is a leading youth fashion retailer that is growing its footprint at a fair pace through its rollout strategy.
Given its positive growth outlook, the broker feels that its shares are being undervalued by the market. It said:
Universal Store Holdings is a leading youth focused apparel, footwear and accessories retailer in Australia. UNI will continue to increase store numbers over the next few years, supporting earnings growth of 14% p.a. over (FY25-27). Valuation looks attractive, trading on a forward P/E of ~15.5x. UNI is a quality small cap (ROE ~26%) that is executing on its rollout strategy.
