If you have a high tolerance for risk and a penchant for small cap ASX shares, then read on!
Listed below are two small caps that Morgans has just given buy ratings to. Here's what it is recommending this month:
MotorCycle Holdings Ltd (ASX: MTO)
This motorcycle retailer could be a small cap ASX share to buy according to Morgans.
It highlights that MotorCycle Holdings has started FY 2026 strongly, with sales up 19% year to date. And with its margins rising more than expected, this bodes well for its earnings growth in FY 2026. It said:
MTO has commenced FY26 positively, delivering +19% sales growth (+6% organic; +13% inorganic) on better-than-expected gross margins (+85bps on pcp). The Peter Stevens Motorcycles (PSM) turnaround and integration process is taking shape quickly, with MTO driving a return to sales growth in October (+16% on pcp). Organic sales growth of +6% through FY26 (4 mths) was a commendable outcome given weak industry volumes through 3Q CY25 (-6%), leading to further incremental organic market share gains for the group (17.8% vs 15.5% pcp).
Another positive is that Morgans expects the second half of FY 2026 to be even stronger. It adds:
We view a stronger 2H to be driven by a full contribution of PSM (at a normalised run-rate); a seasonally stronger Mojo 4Q; and benefits from the group's broader initiatives (digital transformation; used volume growth; eCommerce) taking effect. Despite industry conditions remaining cyclically low from a volume and margin perspective, MTO has continued to improve the business, acquiring material scale through PSM, diversifying operations via Mojo, stabilising the cost base and driving organic share gains.
In light of this, Morgans has put a buy rating and $4.50 price target on its shares. This implies potential upside of 20% from current levels. It concludes:
We view the valuation undemanding (~11x FY26F PE; ~5% yield), with a material margin expansion opportunity ahead should volumes turn slightly more favourable. BUY maintained.
Tesoro Gold Ltd (ASX: TSO)
Morgans also thinks that this gold developer could be a buy for investors with a high risk tolerance.
In fact, the broker has named it as its top gold pick in the Americas region thanks to its robust production base case. It said:
We update our TSO model, rolling our valuation forward and adjusting cash position. TSO remains our top gold pick in the Americas, supported by a robust production base case and district-scale resource growth potential that offers potential step-change upside.
And even though its shares have rallied strongly this year, Morgans believes there's still potential for huge returns over the next 12 months. It has put a speculative buy rating and 32 cents price target on its shares. This is compares to its current share price of just 7.2 cents.
Morgans highlights that its shares are trading at a deep discount to peers on an EV/Resource basis. It adds:
While the share price has performed well, TSO still appears inexpensive relative to peers on an EV/Resource basis, trading at A$54/oz (vs A$176/oz peer average), and on a P/NAV basis at 0.2x vs the peer benchmark of 0.4x. We maintain our SPECULATIVE BUY rating, with a price target of A$0.32ps (previously A$0.27ps).
