Written by Ron Shamgar

After two years of relative underperformance, Australian small and mid caps are finally showing signs of life. With inflation easing, rate cuts now on the horizon, and investor sentiment gradually shifting back toward growth, we believe the next leg of the market move will be led by the very part of the market that has been overlooked: small and mid cap equities.

These companies, often more nimble and innovative than their large-cap peers, have spent the last few years tightening costs, improving balance sheets, and positioning themselves for a more favourable operating environment. The lag in performance has created a fertile hunting ground for investors who can look past short-term noise.

At TAMIM, we see a wide valuation gap between small and mid caps and the broader ASX 200, one that is unlikely to persist as the macro picture improves. We’ll explore why we believe there is still significant upside ahead, using three companies, Bravura Solutions (ASX: BVS), Emeco Holdings (ASX: EHL), and Symal Group (ASX: SYL), to illustrate how the opportunity is playing out in practice.

The Setup: Why Small and Mid Caps Still Have Room to Run

The Australian equity market is experiencing a classic late-cycle rotation. For much of 2022 and 2023, investors sought safety in large-cap defensives, banks, and resource giants, leaving smaller companies trading at deep discounts. This dynamic is now reversing.

There are three key drivers underpinning the recovery in small and mid caps:

1. Monetary Tailwinds: Inflation has cooled, and the RBA is widely expected to cut interest rates over the next 9 to 12 months. Lower rates reduce financing costs and tend to reprice growth assets upward, benefiting smaller companies more dramatically than large caps.
2. Valuation Gap: Small and mid caps are still trading at a 25–30% discount to their historical earnings multiples relative to the ASX 200. This spread has historically narrowed quickly during early bull markets.
3. Operational Leverage: Many small caps have restructured and streamlined during the downturn. As revenues recover, this operating leverage can lead to outsized earnings growth, driving multiple re-ratings.

These factors combined create a compelling setup for selective small and mid cap exposure, particularly in companies with solid balance sheets, disciplined management, and clear earnings visibility.

Bravura Solutions (ASX: BVS)

Market Cap: ~$250 million
FY26 Guidance: Revenue $265–275 million, Cash EBITDA $55–65 million
Investment View: Undergoing operational transformation, potential margin expansion and re-rating catalyst.

Bravura Solutions, a global fintech provider to the wealth management and superannuation industries, has been one of the standout recovery stories in our portfolio. The company recently upgraded its FY26 guidance, projecting revenue between $265–275 million and cash EBITDA between $55–65 million, both up meaningfully from previous forecasts.

This positive revision was driven by a mix of foreign exchange tailwinds and approximately $7 million in new professional services wins, primarily from the EMEA wealth management division. Importantly, professional services activity tends to be a strong lead indicator of annual recurring revenue (ARR) growth, the lifeblood of any software business.

Bravura’s management team continues to impress. The appointment of Colin Greenhill as CEO, effective January 1, 2026, adds further pedigree to the company. Greenhill, formerly CEO of SSP Worldwide (a subsidiary of Constellation Software), brings deep experience in customer-focused transformation and disciplined execution. His background is particularly relevant, given Constellation’s track record of improving margins and generating shareholder value through operational discipline.

What we find most appealing is the alignment of incentives. Greenhill’s entire long-term incentive package is tied to cash EBITDA margins and share price performance, two metrics that matter most to long-term investors. This structure ensures management focus remains squarely on profitability and sustainable growth.

At current levels, BVS trades at an undemanding multiple relative to peers in the software space. We believe the company can drive EBITDA margins toward 30% over time as it optimises its cost base and leverages its global platform. The combination of improving fundamentals, high-quality leadership, and renewed customer momentum makes Bravura a strong example of how smaller technology names are regaining investor confidence.

Emeco Holdings (ASX: EHL)

Market Cap: ~$611 million
FY25 NPAT: $75.1 million, up 43%
Investment View: Strong turnaround story, attractive valuation, and potential takeover candidate.

Emeco Holdings, one of Australia’s largest providers of rental equipment to the mining industry, has emerged as another example of a small cap quietly delivering results while trading at a discount to intrinsic value.

The company recently confirmed that it had received unsolicited takeover interest from several potential acquirers. While no binding proposal has yet been made, market speculation has pointed to interest from American Equipment Holdings, a major U.S. overhead crane and hoist provider, along with Saudi Arabia’s National Mining Company and Australia’s National Mining Services.

We believe this attention is justified. Emeco’s underlying fundamentals are strong, and its turnaround over the past two years has been impressive. The company reported a 43% increase in FY25 net profit to $75.1 million, supported by robust cash flows and disciplined capital allocation. Emeco currently trades at just below its net tangible asset value (NTA) of $1.36, offering investors significant downside protection at current prices.

Our initial entry into EHL occurred around $0.80 per share, when the market was still pricing in pessimism around mining services demand. Since then, management’s focus on cash generation, cost efficiency, and debt reduction has begun to bear fruit. We also anticipate capital management initiatives, such as share buybacks or dividends, over the next 12 months, which could further support the share price.

At a current valuation of roughly 8x earnings, EHL remains one of the more attractively priced industrials on the ASX. The potential for a takeover adds optionality to the upside, but even on a standalone basis, we see continued value as the business executes on its strategy.

Symal Group Limited (ASX: SYL)

Market Cap: ~$270 million
FY26 Normalised EBITDA Guidance: $117–127 million
Investment View: Founder-led infrastructure play with strong growth trajectory and multiple expansion potential.

Symal Group Limited is a name that has flown under the radar since its IPO last year, yet it embodies many of the attributes we look for in emerging mid caps: founder leadership, strong balance sheet, earnings visibility, and exposure to structural tailwinds.

The company recently announced the acquisition of McFadyen Group, a Queensland-based water utilities contractor, for $11 million. The transaction is expected to deliver annualised EBITDA of $3 million by FY26 and will be earnings accretive from the first year of ownership. Following the acquisition, Symal upgraded its FY26 normalised EBITDA guidance by $2 million to a range of $117–127 million.

McFadyen’s founder will remain with the business, ensuring continuity and cultural alignment, which we view positively. The acquisition fits neatly within Symal’s broader growth strategy, expanding its national footprint and diversifying into high-demand infrastructure verticals such as renewable energy and defence.

From an investment perspective, Symal’s fundamentals are compelling. The company trades on a 10x price-to-earnings multiple, well below peers in the construction and contracting sector, which are valued closer to mid-teen multiples. It also maintains a net cash balance sheet, providing flexibility to pursue further strategic acquisitions.

We believe Symal is on the cusp of a significant re-rating as it continues to win government and infrastructure contracts, scale operations, and deliver earnings consistency. Our internal valuation sits north of $3.00 per share, implying meaningful upside from current levels.

The Bigger Picture: Why Quality Matters More Than Ever

While the small and mid cap universe is rich with opportunity, selectivity remains crucial. The days of buying broad small-cap ETFs and expecting easy gains are over. Quality is once again the differentiator.

Across our portfolio, we focus on three key attributes that consistently drive long-term outperformance in this part of the market:

1. Founder or Owner-Led Culture: Companies like Symal, where management retains significant equity, tend to demonstrate superior capital discipline and long-term thinking.
2. Strong Balance Sheets: Access to capital has tightened. Companies with net cash or manageable leverage, such as Bravura and Symal, are positioned to invest and grow while others retrench.
3. Earnings Visibility: Predictable cash flow and recurring revenue streams remain the cornerstone of our approach. Bravura’s ARR growth, for instance, provides a solid base for valuation expansion.

These factors not only reduce downside risk but also enhance upside potential as sentiment shifts. When the market turns, investors gravitate toward proven operators rather than speculative concepts.

Looking Ahead: The Path to a Broader Re-Rating

The recent rally in small and mid caps is, in our view, still in its early stages. Historically, periods of strong outperformance have lasted several years once the cycle begins, driven by both earnings recovery and valuation multiple expansion.

If we look at prior cycles, such as the post-GFC recovery in 2009–2012 or the rebound following the pandemic in 2020, small and mid caps outperformed the broader ASX by over 20% annually during the first 18 months of those upswings. We see a similar setup now.

As interest rates decline and investor confidence rebuilds, small and mid cap valuations will likely re-rate toward their long-term averages. The current environment also favours active stock-picking, those able to identify early-stage earnings recovery stories before the crowd arrives.

At TAMIM, our process continues to focus on uncovering mispriced quality. We believe the companies discussed, Bravura, Emeco, and Symal, exemplify how selective exposure to this segment can drive strong long-term returns.

The TAMIM Takeaway

The narrative around Australian equities is shifting. The large-cap-driven defensive trade that dominated the past two years is losing steam, and the baton is being passed to growth, innovation, and operational agility, all hallmarks of the small and mid cap segment.

As rate cuts approach and economic conditions stabilise, we expect investors to rediscover the structural appeal of smaller companies: stronger earnings leverage, more targeted growth drivers, and management teams with real skin in the game.

Bravura’s transformation under new leadership, Emeco’s disciplined turnaround and takeover appeal, and Symal’s founder-led expansion into national infrastructure all highlight a common theme: operational execution is being rewarded again.

In our view, the Australian small and mid cap market is only at the beginning of its next re-rating cycle. For investors willing to look beyond the headline indices, the opportunity set is both broad and deep, and still undervalued.

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Disclaimer: Bravura Solutions (ASX: BVS), Emeco Holdings (ASX: EHL) and Symal Group Limited (ASX: SYL) are held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.