The small side of the market has come under pressure recently amid increased volatility.
While this is disappointing, it could have created a buying opportunity for investors with a high tolerance for risk.
But which small cap ASX shares could be buys? Let's take a look at two that Bell Potter is tipping as its best buys.
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Integral Diagnostics Ltd (ASX: IDX)
This medical imaging services provider could be a small cap ASX share to buy according to Bell Potter.
It believes the company is well-placed for growth in the coming years thanks to its recent merger with Capitol Health. The broker said:
The merger between Integral Diagnostics and Capitol Health results in a diagnostic imaging (DI) company which operates 151 clinics throughout Australia. Its strongest presence will be within Victoria and Queensland (67 & 41 locations respectively) with minor penetration in the other States. The company offers a range of imaging modalities through its clinics with the largest contribution to revenue from CT (31%) followed by US (24%), MRI (13%) and X-Ray / Diagnostic Radiology (11%), and Nuclear Medicine PET (5%). The growth strategy has centred around a combination of greenfield & brownfield investments and M&A opportunities.
Bell Potter has a buy rating and $4.00 price target on its shares. This implies potential upside of almost 60% for investors over the next 12 months.
Praemium Ltd (ASX: PPS)
Another small cap ASX share that could be a buy according to the broker is investment platform provider Praemium.
Bell Potter thinks that Praemium's shares are being undervalued by the market, especially when comparing it to its larger peers. It said:
Praemium Ltd (PPS) was formed in 2001 as a financial technology company that operates an investment platform offering alongside a branded online portfolio administration service, supporting financial intermediaries and individual investors in their managing wealth. The integrated technology simplifies portfolio management end-to-end and delivers a complete value proposition. Today, PPS manages +$60bn in custodial and non-custodial FUA.
While Praemium has demonstrated commercial momentum, strong growth capacity, and a leading technology offering, its valuation continues to lag key peers. This stock looks very attractive at a 12MF PE of ~20x, and we expect the market to catch on as the company executes on further market share gains and FUA growth.
The broker has a buy rating and $1.05 price target on the small cap. Based on its current share price, this suggests that upside of almost 35% is possible for investors between now and this time next year.
