Wilson Asset Management (WAM) is a leading fund manager in Australia with various funds like WAM Capital Limited (ASX: WAM), WAM Leaders Ltd (ASX: WLE) and WAM Research Limited (ASX: WAX). It made the case for some top ASX shares.
The WAM team try to identify undervalued growth businesses. These are some of the ASX shares that WAM owned in one of its funds at the end of September 2020 and outlined the current thesis for each one in its latest update:
Transurban Group (ASX: TCL)
WAM describes Transurban as the world's largest operator of toll road networks with operations in Australia, Canada and the US. According to the ASX, it has a market capitalisation of $37 billion. Transurban is a position in the WAM Leaders portfolio.
WAM says that the ASX share is the beneficiary of record low interest rates, improvement in economic activity as coronavirus restrictions ease and the growing preference for private transport over public transport. The fund manager pointed out that the recent federal budget included increased infrastructure investment.
Sealink Travel Group Ltd (ASX: SLK)
Sealink is Australia's largest tourism and public transport provider across ferry, bus and light rail networks with established operations in London and Singapore, according to WAM Research. The company is a position in the WAM Research portfolio.
The fund manager explained that the company completed the acquisition of bus operator Transit Systems Group earlier this year and in September it was announced that it was awarded, in Singapore dollars, a $1 billion contract to operate public bus services in Singapore following a competitive tender process.
WAM Research stated that the ASX share has benefited from state borders reopening during the month, and the fund manager sees the potential for earnings upgrades and further acquisitions as catalysts for the company in the future.
At the current Sealink share price, it's valued at 16x FY23's estimated earnings, according to CommSec.
Healius Ltd (ASX: HLS)
WAM Capital described Healius as the second largest pathology and third largest radiology provider in Australia. Healius is a position in the WAM Capital portfolio.
The fund manager pointed to the recent news that the Australian Government announced an extension of COVID-19 testing reimbursement and Medicare-subsidised telehealth and pathology services through to March 2021.
WAM Capital expects the extension to support the ASX share's earnings, particularly as it operates drive-though testing for COVID-19. It also sees cost reduction opportunities and efficiency savings to improve margins over the long term and WAM also sees the potential for acquisitions which can add to earnings after the recent divestment of its medical centres division.
At the current Healius share price, it's valued at under 22x FY22's estimated earnings according to Commsec estimates.
Qantas Airways Limited (ASX: QAN)
Qantas is another business that has been negatively impacted by COVID-19 with a severe drop-off of flights and passengers. The Qantas share price is still down by 36% from where it was on 17 January 2020.
The ASX share is a position in the WAM Leaders portfolio. WAM Leaders explained that Qantas shares went up in September as total Australian coronavirus cases declined, the scheduled reopening of interstate borders and a trans-Tasman travel bubble forming.
WAM Leaders said that Qantas has restructured effectively and negotiated with trade unions to drive costs down over the past six months, mitigating the drop in total revenue in the June 2020 quarter. The fund manager believes the company will be able to deliver domestic profits at much lower capacity levels and an increase in domestic tourism will offset weakness in corporate and international travel on the path to gradual normalisation.
