2 small cap ASX shares to buy for 20% to 50% returns

If you’re wanting some exposure to small cap ASX shares, then it could be worth checking out the two below that Bell Potter has named as buys today.

Here’s what the broker is saying about them:

LGI Ltd (ASX: LGI)

The first small cap ASX share that has been named as a buy is LGI.

It is the local market leader in the recovery of biogas from landfill, and the subsequent conversion into renewable electricity and saleable environmental products.

Bell Potter was pleased with news that the company has signed a long-term gas management agreement with Bingo Industries, and its subsidiary Dial A Dump, covering the Eastern Creek Landfill site in Western Sydney. The broker commented:

In our view, a contract of this significance further validates LGI’s position as an industry leader in biogas recovery, which we view as a significant growth market to facilitate the transition to net-zero. The net result of our changes are minor downgrades to our FY24 estimates but more substantial upgrades to our long-term forecasts based on increased biogas flows from the new Eastern Creek Landfill project, which drives our upgrade to a BUY recommendation.

Bell Potter has upgraded its shares to a buy rating with an improved price target of $2.55. This implies potential upside of 23% for investors.

Nexted Group Ltd (ASX: NXD)

Another small cap ASX share that has been named as a buy is Nexted. It is a provider of tertiary education services to international and domestic students.

Bell Potter notes that Nexted has just released a trading update and guidance for FY 2024. The broker concedes that the update was modestly softer than it was expecting. It explains:

NXD expects to report 1H24 revenue +36% YoY to $59.2m (vs. BPe $59.8m) which is at the lower end of the guidance range as previously flagged ($59.0m-$63.0m).

Nevertheless, its analysts remain very positive on the company due to its exposure to the rebounding international student market. It said:

The re-opening of Australia’s international borders and removal of COVID restrictions, has prompted a strong recovery in international students in Australia. NextEd has significant exposure to this market with international students accounting for >75% of the total student and revenue mix. This recovery has (1) driven unprecedented demand for NextEd English language courses and (2) provided a subsequent cross-selling opportunity of progressing English students into other NextEd courses.

Bell Potter has retained its buy rating and $1.05 price target on its shares. This suggests 52% upside for investors.

The post 2 small cap ASX shares to buy for 20% to 50% returns appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended LGI Limited. The Motley Fool Australia has recommended LGI Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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