With markets looking fully priced, opportunities can be a little hard to come by. Here are three companies I think are worth a closer look today:
Telstra Corporation Ltd (ASX: TLS)
Telstra's woes have been well covered in the media and I won't repeat them again here. In a nutshell, the company has too much debt, its capital expenditure is increasing, and it has been forced to cut its dividend. The share price has plunged from $5 to $3.47 today.
I think it's likely that Telstra shares continue to fall further in the short term as investors account for the lack of growth and lower dividends – the current yield is estimated at around 5% at today's prices. However, due to the strength of its brand and mobile operations, Telstra is starting to look like an attractive prospect for income-seeking investors.
Aconex Ltd (ASX: ACX)
Aconex provides project management software to construction companies, allowing them to improve communication and co-ordination on site, reducing costs and improving efficiency. The idea is that the software more or less pays for itself and that Aconex can continue to grow its market share and revenues over time.
Revenues are certainly growing strongly, up 31% last year, however I remain a bit sceptical on Aconex due to its price tag, and am inclined to watch from the sideline for now.
Wesfarmers Ltd (ASX: WES)
An interesting idea that's emerging for Wesfarmers is the 'sum-of-the-parts' investment thesis. As Wesfarmers reportedly considers divesting its coal mine, Kmart, Target, and Officeworks, investors are increasingly assigning a price tag to each division in the conglomerate, to see if they add up to more than the whole.
My quick back of the envelope calculations this morning suggests that Wesfarmers' businesses are worth about $45 billion, compared to the enterprise value (market capitalisation, plus debt) of about $52 billion.
However, these prices are based on what I think are a 'fair' price for the businesses – usually around 12x earnings, and 20x for Bunnings – and not necessarily what could be achieved at IPO. If you assume higher multiples, Wesfarmers could currently be slightly undervalued on sum of the parts, and if shares continue to slide it will start to look quite interesting.
