If you have a high tolerance for risk, then it can be worth having a few small cap ASX shares in a balanced portfolio.
But which ones could be buys?
Fortunately, the team at Morgans has done the hard work for you by picking out two small caps that it rates as speculative buys with major upside potential. They are as follows:
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Micro-X Ltd (ASX: MX1)
The first small cap ASX share that Morgans is positive on is Micro-X. It is a tech company developing and commercialising products for global health and security markets based on proprietary cold cathode, carbon nanotube (CNT) emitter technology.
The broker has been pleased with the progress the company has been making. This includes winning a major contract for its Rover Plus offering this month. It said:
MX1 continues to make solid progress across all its verticals. Today MX1 announced its largest contract for its Rover Plus worth A$3.3m. Other recent announcements note positive progress on the Head CT imaging project with the ASA, a A$4.4m grant to trial the head CT scanner in standard ambulances for stroke diagnosis and a contract extension with the DHS to enhance the self-screening checkpoint detection algorithm.
We have made no changes to forecasts or valuation of A$0.17. The cadence of news flow increases our confidence that MX1 has reached an important inflection point and deserves greater investor attention. We maintain our SPECULATIVE BUY recommendation.
Morgans has a speculative buy rating on its shares with a price target of 17 cents. Based on its current share price of 11 cents, this implies potential upside of 55% over the next 12 months.
Neurizon Therapeutics Ltd (ASX: NUZ)
Another small cap ASX share that has caught the eye of Morgans is Neurizon Therapeutics.
It was pleased to see the US Food & Drug Administration (FDA) lift the clinical hold on its NUZ-001 product this week. It notes that this removes a major regulatory overhang and ought to be considered a de-risking event. It said:
The FDA has finally lifted the clinical hold on NUZ-001 after 9 months, clearing the way for NUZ to join the HEALEY ALS Platform Trial and removing a major regulatory overhang. First patient enrolment in the HEALEY trial is targeted by the end of the year, with initial data possible by late 2026 depending on recruitment rates.
This is a major catalyst and a clear regulatory de-risking event for NUZ. With a validated IND and a clear path into HEALEY, we expect renewed investor interest and momentum in the stock as the company advances towards trial and data. Our target price moderates to A$0.39 and we maintain our Speculative Buy rating.
Morgans has a speculative buy rating and 39 cents price target on its shares. Based on its current share price of 14 cents, this suggests that upside of well over 100% is possible between now and this time next year.
