19 small-cap shares for 2025

A number of last year’s best ideas in the small-cap space make this year’s list of top picks, but there are new companies offering high yields and significant opportunity.

16th January 2025 14:15

by Graeme Evans from interactive investor

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Small-caps including Marston's (LSE:MARS)’s, Wickes Group (LSE:WIX) and the high-yielding Kenmare Resources (LSE:KMR) have been named on a City bank’s 19-strong list of top picks worth less than £400 million.

The 2025 selection keeps several of the strong performers from last year’s compilation, which delivered an average total return of 15% or 27% on a market-cap weighted basis.

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Returning stocks include Galliford Try Holdings (LSE:GFRD), having delivered last year’s second-best performance behind Oxford BioMedica (LSE:OXB) following a return of 80%.

Peel Hunt believes the regulated and public sector-focused construction specialist is capable of adding 21% to 450p, reflecting confidence in Galliford’s upbeat assessment of prospects.

It added: “Galliford Try remains in great shape, continuing the pace of strategic, operational and financial progress under a leading management team.”

On The Beach Group (LSE:OTB) is also back on the list, having ended years of legal wrangling by signing a deal that provides frictionless access to Ryaniar’s seat inventory.

Its shares produced a 46% total return in 2024, but in light of favourable booking trends and expansion into the city-breaks market the bank sees a further 20% upside to 300p.

Peel Hunt said: “The now historical dispute with Ryanair was a reason, for some, not to buy OTB shares. The agreement does much more than remove a risk in our view, it facilitates greater efficiency and growth.”

LBG Media Ordinary Shares (LSE:LBG), McBride (LSE:MCB) and Marston’s are also back on the list after featuring among the top 10 performers of last year’s 27-strong list.

The pub chain rose 30% in 2024 but its valuation multiples are still close to record lows, leading to Peel Hunt’s 74% upside to 75p.

The bank recently upgraded profit forecasts as it expects better labour scheduling, lower central overheads and energy efficiencies to offset Budge- cost headwinds. A forecast £52 million reduction in net debt in 2025 offers a potential 20% boost to equity value.

New entries include Wickes, reflecting hopes for a 20% upside to 180p. It added: “Wickes has delivered well in tough markets, consistently taking share. The group is well positioned to see profits inflect as and when market volumes begin to recover.”

Peel Hunt believes that DFS Furniture (LSE:DFS) is also in good shape to take advantage of a market uptick, having coped well with the challenging conditions of recent years. The bank, which has a 200p target, said: “We have no doubt that based on normal earnings, the shares are extremely cheap.”

Stocks with particular appeal for income investors include Kenmare Resources, which is one of the world's largest producers of titanium minerals.

Recent strong ilmenite pricing has enabled Kenmare to return significant cash as well as drive investment to secure a multi-decade future for its Moma mine in Mozambique.

Entering the current investment cycle from a net cash position means Peel Hunt sees Kenmare being able to sustain an 8% dividend yield. It has a price target of 515p, up 66%.

International Personal Finance (LSE:IPF), which provides unsecured consumer credit to underserved consumers across nine markets, is on the list with a 9% forward dividend yield.

The bank said: “One constant in recent years has been IPF’s continued strong operational and financial performance. Credit quality remains robust, leading to strong customer repayments and lower levels of impairments.”

Despite the performance, IPF trades on six times forecast 2025 earnings and five times 2026 earnings. The bank’s target price of 185p equates to a multiple of nine times.

The selection with the greatest potential share price upside is Afentra (LSE:AET), which stands for African Energy Transition. It is focused on acquiring assets in West Africa with solid low-cost production, proven reserves and significant upside.

Peel Hunt believes the company run by former Tullow Oil boss Paul McDade has a significant opportunity for further inorganic growth in Angola, backing shares to rise 78% to 85p.

A 72% upside for industrial fastenings firm Trifast (LSE:TRI) follows the August launch of a refreshed strategy, which is focused on margin improvement through self-help initiatives. Peel Hunt said: “The business has massively improved over the year and in our view is now in a great position for when market conditions improve.”

The other stocks on the list are AOTI Inc (LSE:AOTI), Brickability Group Ordinary Shares (LSE:BRCK), MJ Gleeson (LSE:GLE), Helical (LSE:HLCL), Restore (LSE:RST), Serabi Gold (LSE:SRB), Team17 Group (LSE:TM17) and Warehouse REIT Ord (LSE:WHR).

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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