Morgans names 2 of the best small cap ASX shares to buy

At the small end of the Australian share market, there are a number of companies with the potential to grow materially in the future.

Two that Morgans rates highly and has on its best ideas list this month are named below. Here’s what you need to know about them:

Strandline Resources Ltd (ASX: STA)

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

This mineral sands developer is a new addition to the best ideas list, with Morgans appearing to be very excited by this “rare investment proposition.” It explains:

STA is a heavy mineral sands explorer and developer, with projects in Australia and Tanzania. We continue to note that STA is a rare investment proposition. It enjoys: 1) 100% ownership of a world-scale/ strategic asset in a tier 1 jurisdiction; 2) lenient debt terms; 3) visibility on upcoming cashflow/ de-risking; 4) proven, backable management; 5) a reputable board; and 6) clear M&A appeal while trading at a material discount.

Morgans has a 75 cents price target on the company’s shares. This compares very favourably to the latest Strandline Resources share price of 34 cents.

Universal Store Holdings Ltd (ASX: UNI)

Another small cap ASX share the broker is bullish on is Universal Store. This youth fashion retailer makes the list again this month thanks to its very positive outlook in a tough retail environment. The broker highlights its strong brands, expansion opportunities, and target demographic as reasons to buy. It said:

Universal Store (UNI) is one of the largest and fastest growing fashion retailers in Australia. Through a national network of over 100 stores and a successful online platform, UNI curates a diverse range of men’s and women’s fashion, shoes and accessories from local and international brands as well as its own private labels. UNI’s stores trade under the Universal Store, Perfect Stranger and THRILLS banners. UNI has opportunities to grow steadily through the rollout of bricks and mortar stores, increased digital penetration and expansion of wholesale channels. We expect some volatility in near-term earnings as consumer demand for highly discretionary categories like apparel ebbs and flows, but we see any share price weakness as an opportunity to buy into a high quality retailer with strong medium to long-term prospects.

Morgans has an add rating and $6.85 price target on the company’s shares. This compares to the current Universal Store share price of $4.40.