Rare earths and tech: 2 exciting small cap ASX shares brokers rate as buys

Looking for some small-cap shares to add to your portfolio? Then have a look at the two listed below.

Here’s why analysts think they could be in the buy zone for investors with a high-risk tolerance:

Arafura Rare Earths Ltd (ASX: ARU)

If you’re not averse to investing in the mining sector, then you might want to check out this rare earths developer.

Bell Potter rates it very highly. This is due to the huge promise of the company’s Nolans project and the increasing demand for rare earths. It commented:

ARU is a rare earths developer advancing its Nolans project, a complete ore to oxide solution in Australia’s Northern Territory. Rare earths, in particular Neodymium (Nd), Praseodymium (Pr), Dysprosium (Dy) and Terbium (Tb), are critical minerals in a de-carbonised economy as they are crucial in the production of permanent magnets for EVs and wind turbines. ARU’s Nolans Project is sufficiently advanced, with binding offtake agreements for ~1,900tpa (43% of nameplate capacity). ARU are advancing construction activities ahead of final offtake and funding discussions. We anticipate production from Nolans to begin towards the end of 2025.

The broker currently has a speculative buy rating and 72 cents price target on Arafura’s shares.

Serko Ltd (ASX: SKO)

Another small-cap ASX share to consider is Serko. It is the online travel booking and expense management provider behind Zeno Travel and Zeno Expense platforms.

The company’s Zeno Travel platform provides artificial intelligence-powered end-to-end travel itineraries, cost control, and travel policy compliance to corporate customers.

Whereas the Zeno Expense platform allows businesses to automate and streamline their expense administration function, identify out-of-policy expense claims, and prevent fraud.

Citi is positive on the company due partly to its deal with travel giant Booking.com. It said:

Upgrading our forecasts, with further upgrade potential from CWT – Booking.com partnership With Serko calling out a strong start to the year, we upgrade our FY24e revenue forecast by +3% towards the top-end of the guidance range and reiterate our Buy/High Risk rating (target price +6%). With the CWT – Booking.com for Business partnership going live last week, we see upside risk to our forecasts as we see potential for it to accelerate active customer growth.

Citi has a high-risk buy rating and a $4.35 price target on its shares.