This high-dividend ASX small cap could rise more than 50%: Broker

MotorCycle Holdings Ltd (ASX: MTO) shares have underperformed over the past year, but after a recent investor day, the analyst team at Morgans believes a rerating might be on the cards.

The broker has just released a new research report into the company, with a buy recommendation and a bullish share price target, to add to the healthy 7.1% dividend yield the company pays.

I’ll get to the specifics of the share price target shortly. First, let’s look at how the company has been travelling.

Record year for MotorCycle Holdings

As the name suggests, MotorCycle Holdings sells motorcycles and other recreational vehicles, such as personal watercraft and all-terrain vehicles, as well as parts and accessories.

Last financial year, the company reported record revenue of $788.7 million, up 21.3% on the previous year, and booked a net profit of $24.1 million, up 33.8%.

The company also moved from a net debt position of $9 million to having net cash of $13 million at the end of June this year.

Chief Executive Officer Matthew Wiesner said while releasing the annual results that it had been “an exceptional year of growth and strategic advancement for MotorCycle Holdings”.

He added:

Our market leadership position strengthened considerably during FY2026 through the continued growth in our wholesale vehicle distribution businesses across ANZ and the acquisition of select business assets of the Peter Stevens Group which was completed on 31 July. It enhances the Group’s national footprint, provides stronger relationships with OEMs, introduces new products and categories and increases our market share.

Mr Wiesner added that the company’s wholesale division was going from strength to strength, with record sales of 20,127 units, up 15% year on year.

MotorCycle Holdings shares looking cheap

Morgans said in their research note that the investor day “reinforced a business transformed in scale and mix, with wholesale driving earnings in a challenging market, retail and data offering the next leg of improvement, and FY31 targets giving clarity on the growth trajectory ahead”.

The broker said MotorCycle Holdings had set a revenue target of $1.2 billion for FY31, pointing to 8% sales growth per year over a five-year period.

They said they were encouraged by the clear strategy and added:

We think the market overlooks MTO’s wholesale business, which has meaningful growth levers across product, categories and partnerships. We see scope for Retail upside from Harley-Davidson scale, ongoing brand rationalisation and data and systems integration. Double-digit earnings growth and a net cash balance sheet look compelling.

Morgans has a price target of $4.30 for MotorCycle Holdings shares compared to $2.71 currently.

If achieved, this would be a 58.6% return.

The post This high-dividend ASX small cap could rise more than 50%: Broker appeared first on The Motley Fool Australia.

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Motley Fool contributor Cameron England has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Harley-Davidson. The Motley Fool Australia has recommended MotorCycle. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.