Here are four ASX-listed companies, currently trading at a discount relative to the broader market, that I believe will outperform in 2018.
TPG Telecom Ltd (ASX: TPM) is Australia’s second largest fixed-line broadband provider. The company’s share price, along with those of its peers in the telecommunications sector, has been beaten down on fears the National Broadband Network (NBN) will increase competition and squeeze profit margins of the incumbents.
Firstly, I think TPG’s selloff was an overreaction, so often the case on negative news. Secondly, TPG has a history of being the lowest-cost operator in its industry, and I expect this to continue when the firm becomes Australia’s fourth mobile network operator later this year.
Currently trading on a trailing price to earnings ratio of less than 14, I believe TPG shares will outperform in 2018 on results that exceed the market’s low expectations.
Huon Aquaculture Group Ltd (ASX: HUO) is one of few Atlantic Salmon famers in the Southern Hemisphere, operating out of the cool waters of Tasmania. FY2018 is set to be the company’s best yet as a listed entity, with sales volumes expected to increase 32.5% on the previous period due to improved growing conditions and feed diet.
Huon paid its inaugural dividend in 2017 and management expects further earnings growth for at least the next two financial years, driven by high domestic demand for farmed salmon.
The company’s shares trade for less than 11x FY2017 earnings, which could increase significantly if Huon’s export plans for Asia are successful.
Vocus Group Ltd (ASX: VOC) hasn’t just been sold off due to the market’s NBN concerns, the company has also experienced integration issues following major acquisitions, senior leadership changes, and large asset write-downs.
Earlier this week, management announced a new operating structure in an effort to restore shareholder value and afford senior leadership greater segment focus. If Vocus can improve the returns on its underperforming assets, the company’s share price should rapidly increase.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) is an investment conglomerate with significant interests in ASX-listed companies, private equity and property. The firm takes a value-oriented, long-term approach to investing which has produced a 12.8% per annum return over the last 15 years.
Despite the company’s history of market-bearing performance and claim to be one of only two ASX-listed companies to have increased its dividend every year for the past 17 years, Soul Patts shares trade on a modest trailing P/E ratio of 12.
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Motley Fool contributor Ian Crane owns shares of TPG Telecom Limited and Vocus Communications Limited. The Motley Fool Australia owns shares of and has recommended TPG Telecom Limited, Vocus Communications Limited, and Washington H. Soul Pattinson and Company Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.