If you have a high tolerance for risk, then it could be worth checking out the speculative ASX share in this article.
It has been recommended by analysts at Bell Potter, who believe it has the potential to rocket 80% from current levels.
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Which ASX share?
The small cap share that Bell Potter is bullish on is ImpediMed Ltd (ASX: IPD).
It manufactures and sells a medical device employing a technology known as bioimpedance spectroscopy (BIS). This is used in a non-invasive clinical assessment and monitoring of fluid status and tissue composition of patients.
Bell Potter notes that ImpediMed has undertaken a major capital raising and announced a cost reduction plan. The broker feels the cost reductions are credible and leaves the ASX share positioned for break-even if revenue picks up. It said:
As part of the capital raising, IPD advise it is implementing a $5m cost out programme, which reflects a combination of headcount, relocating some roles from the US to Australia, and general cost reductions. While encouraging, the gap to breakeven remains with the revenue side of the ledger. IPD requires c.$12m in additional annual revenue, c.80% of which is expected to be sourced from BCRL [breast cancer-related lymphoedema] in the US, implying that Heart Failure and Body Composition require a longer gestation period. Approx. 40% of the BCRL 350-unit target is expected to come from existing customers.
The BCRL target infers a simple average of 50 units / qtr over the next seven quarters, although IPD is more likely to escalate sales volume from the current 30 units incrementally and one would expect IPD to achieving more than 50 units / qtr by 2Q28. Given IPD's current sales profile and investment in building SOZO's value proposition, the assumptions seem credible, but execution is the risk, given past performance.
Big potential returns
If everything goes to plan, Bell Potter believes this ASX share could deliver very big returns.
According to the note, the broker has retained its speculative buy rating with a reduced price target of 1.5 cents. Based on its current share price, this implies potential upside of 87% for investors.
Commenting on the speculative stock, Bell Potter said:
Assuming all options are exercised, the dilution to the share count is material with a potential tripling of the SOI to c.6.6b. This swamps any benefit from the cost reductions, and results in our DCF valuation halving to $0.015/sh. Our WACC is a conservative 17%. Should IPD achieve breakeven and the current risk profile unwinds, a lower and normalised WACC of c.10.5% could be justified which would provide upside potential to $0.045/sh fully diluted.
