Is the share price of NIB Holdings Limited (ASX: NHF), AMP Limited (ASX: AMP) or BWP Trust (ASX: BWP) a strong buy?
In the current investing conditions it's hard to find shares that are good value. Some of the ASX tech growth shares are trading with very high forward price/earnings ratio multiples like Appen Ltd (ASX: APX) and Afterpay Ltd (ASX: APT).
I'm inclined to consider some non-tech ASX shares for my portfolio. Could one of these three ASX shares be considered a strong buy?
NIB
NIB is one of the biggest private health insurance businesses in Australia.
The company is in an interesting position with the ongoing global COVID-19 pandemic. Elective surgeries were delayed earlier in the year, though they have gradually returned as well as allied healthcare treatment like dentistry.
NIB recently acknowledged that there were likely to be some savings in claims expenses and there could be a possible cash refund for members in part compensation for the lack of access of private health treatments.
The ASX share has postponed its premium increase by six months to October 2020, it has offered financial hardship support, extended product coverage for no extra cost, extended cover to include telehealth consultations and offered frontline healthcare workers a $250 'wellness rebate'.
There was uncertainty for the private health insurance industry before COVID-19 with a national discussion about premium affordability. The picture looks even more clouded now. If people ditch their private health insurance due to household budget difficulties then that could be tough for NIB. There's also the current loss of incoming international students and workers who would have taken up private health insurance.
NIB is trading at 17x FY21's estimated earnings at the current NIB share price. It can be smart to invest when there's a lot of fear and uncertainty. I just don't see a big turning point for Australian policyholder growth unless the federal government does something. Though a vaccine could boost the NIB share price.
AMP
AMP shareholders have been through a very tough time since the start of 2018. The Hayne royal commission really hurt the financial services business.
Of course, every business has a price as long as it's not going to go broke. AMP is still worth several billion dollars. It has the financial firepower to potentially change things around.
The company recently sold AMP Life for $3 billion, including $2.5 billion cash. A sizeable part of the $2.5 billion cash pile will be used to deliver the new AMP strategy. Only time will tell if AMP can truly turn things around. Low-cost exchange-traded funds (ETFs) are now in high demand by younger investors, it's businesses like Vanguard, Blackrock and BetaShares that are attracting a lot of fund flows.
It's trading at 14x FY21's estimated earnings at the current AMP share price. The key question will be about what direction earnings will go in FY22 and beyond. I'm not convinced there's good future growth potential with AMP.
BWP
BWP Trust is a real estate investment trust (REIT) which owns warehouses that are leased to Wesfarmers Ltd's (ASX: WES) Bunnings.
Most REITs have seen their share prices decline due to COVID-19 like the office building REITs and shopping centre REITs.
Arguably, BWP is one of the best placed REITs in the sector because Bunnings performed so strongly because of the number of people who decided to undertake a home DIY project during lockdowns. BWP doesn't directly profit from that, but it would help Bunnings continue to pay the rent to BWP.
Indeed, the REIT has guided that the full year FY20 distribution will be 18.29 cents per unit, a 1% increase from FY19. I think that's a solid result considering all the uncertainty that occurred throughout FY20.
At the current BWP Trust share price it offers a 4.7% distribution yield.
Foolish takeaway
I don't think I'd call any of these ASX shares a buy at the current price. BWP would be the one I'd buy out of the three. Generally, when I buy dividend shares for yield I like them to have a yield of more than 6% – BWP Trust's isn't that large.
