Small-cap stocks tend to exhibit increased volatility compared to well-established, blue-chip companies.
However, history shows that a select few of these penny stocks will grow into the mid-cap or even large-cap stocks in the future.
Identifying them early is the challenging part.
One small-cap stock to keep an eye on is Macmahon Holdings Limited (ASX: MAH).
It has already risen by more than 67% in 2025, and the team at Bell Potter has just bumped up its share price target on the back of a key contract win for the company.
Macmahon Holdings is an Australian company providing mining services across Australia and Southeast Asia. Its services cover surface and underground mining, civil construction, and resources engineering.
At the time of writing, shares are trading for approximately $0.59; however, Bell Potter has just raised its price target, indicating potential for more growth ahead.
Here is the latest guidance from the broker.
Key contract win
In a report released by Bell Potter on Monday, the broker stated that the company has secured an underground contract win in Indonesia.
The contract is for a term of 34 months, with a contract value of $36m in the first year.
This follows a contract win in Indonesia announced in August 2025, for an underground mine in North Sulawesi, with PT Tambang Tondano Nusajaya.
This contract is valued at $33m over a 32-month period.
Bell Potter said these two contracts will partly replace the revenue lost from a previous agreement with Vault Minerals Ltd (ASX: VAU).
However, the broker believes this will increase exposure to underground mining, in line with the company's strategy, which is expected to be less capital-intensive.
The company has delivered strong growth, and the shares have performed well in 2025, but continue to trade on just 10.5x prospective earnings.
The company is guiding to EBIT(A) of $180m-$195m in FY26, which at the mid-point would be 9% ahead of FY25.
Buy recommendation for this small-cap stock
Based on this guidance, Bell Potter has increased its target price on this ASX small-cap stock to $0.65 (previously $0.50).
Based on yesterday's closing price of $0.59, this indicates an upside of 10.17%.
This optimism is based on a combination of factors, including:
- Strong revenue base: FY25 secured revenue of $2.1bn, and an order book of $5.4bn provides visibility and stability.
- Underground mining growth: Expected 50% growth over the next 2–3 years.
- International expansion: Targeting 15% of group turnover from international work, supported by new contracts in Indonesia.
- Competitive advantage in Indonesia: Strong existing relationships and expertise in hard-rock underground mining.
