The three ASX shares in this article could be some of the most interesting businesses to monitor in 2021.
Here are those three ASX stocks:
Pacific Current Group Ltd (ASX: PAC)
Pacific Current is a business that takes stakes in investment managers. The company then helps with its resources to grow the business. It can use capital, institutional distribution capabilities and operational expertise to help partners. It has around 15 boutique asset managers globally.
Dean Fremder of Perpetual Limited (ASX: PPT) said when Pacific Current shares were approximately 10% lower: "The stock's really cheap. It's on nine times earnings. It's growing earnings at double digits, so more than 10% a year. It's paying a 6.5% fully franked yield. And most excitingly, we think they can pay out a much larger portion of their earnings as dividends. We see no reason, given the surplus franking credits they have on the balance sheet, they can't be paying a 10 or 11% fully franked yield in the next 12 months. So, really excited about that one."
In FY20 the ASX share grew its underlying earnings per share (EPS) by 18% to $0.51. This was driven by funds under management (FUM) reaching $93.3 billion at 30 June 2020. FUM increased 52% when excluding the boutiques that were sold or acquired during the year. Fund manager GQG grew strongly with FUM rising from US$25.1 billion to US$44.6 billion.
In the quarter for the three months ending 30 September 2020 Pacific saw FUM grow by 14% to $106.4 billion. The vast majority of the FUM growth came from GQG.
According to estimates on Commsec, Pacific Current is valued at 9x FY23's estimated earnings. It also has a grossed-up dividend yield of 8.3%.
Temple & Webster Group Ltd (ASX: TPW)
This ASX share is a furniture and homewares business that sells a wide variety of items through its online-only offering.
Temple & Webster has gained market share during this year as more shoppers move to online buying.
The company generated a lot of growth in FY20, it achieved revenue growth of 74% to $176.3 million. Second half revenue grew by 96% and fourth quarter revenue went up 130%.
Temple & Webster saw accelerated leverage in FY20 with earnings before interest, tax, depreciation and amortisation (EBITDA) soaring 483% to $8.5 million. The adjusted EBITDA margin improved from 2.5% to 5.3%.
However, growth didn't stop in the first quarter of FY21, even when most of Australia was able to shop at physical retail locations again. At the time of its AGM, it reported year to date revenue growth of 138% in the year to 19 October 2020. October revenue growth was still more than 100%.
The FY21 first quarter EBITDA was $8.6 million, which was more than the whole of FY20. The contribution margin stayed ahead of its 15% target and customer satisfaction remains high with a net promoter score of around 70% and newer customers continue to perform better than historical comparisons.
The ASX share's management is focused heavily on growth. The company said that it's committed to a high growth strategy to take advantage of the structural shift towards online, capitalising on both organic and inorganic opportunities.
At the current Temple & Webster share price it's valued at 35x FY22's estimated earnings.
Pushpay Holdings Ltd (ASX: PPH)
Pushpay is an ASX share that's exposed to the growing theme of payments shifting from cash to digital.
The idea behind Pushpay is that it helps connect the church with the congregation with tools like livestreaming. It helps facilitate electronic donations to large and medium US churches. The business is aiming for a 50% market share of this sector. This should translate into around US$1 billion of revenue.
This ASX share combines revenue growth with rising profit margins. The gross margin increased from 65% to 68% in the interim FY21 result.
Pushpay is also showing that its new combined offering is resonating with customers. ChurchStaq, the service which combines the features of both Pushpay and Church Community Builder, is quickly convincing customers to switch to that offering.
In FY21 it is expecting to generate earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) of between US$54 million to US$58 million.
At the current Pushpay share price it's valued at 31x FY22's estimated earnings.
