2 compelling ASX shares to buy in May 2021

There are a few very compelling ASX shares that could be working looking into for May 2021, including ASX retail share Adairs Ltd (ASX:ADH).

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There are some very attractive looking ASX shares to look at right now in May 2021.

Businesses that are delivering good earnings growth have the potential to also produce good shareholder returns

These two ASX shares could be good considerations to think about:

Adairs Ltd (ASX: ADH)

Adairs is one of the leading homewares retailers in the country. It operates both the Adairs and online-only Mocka businesses. It sells products through both a national store network and online.

COVID-19 accelerated Adairs’ online penetration and growth rate with long-term benefits as new customers acquired during COVID return and more customers shop in both channels. It said that 15% of sales in the fourth quarter of FY20 were to existing customers shopping online for the first time and 30% of sales during the store closure period were to new customers.

The ASX share’s membership program called Linen Lovers drove store sales when they re-opened and there’s still more than 60% of members that have not shopped with Adairs online yet.

Linen Lovers is a loyalty program that over 900,000 people pay for. They pay a $20 membership fee for a 2-year period. They get a $20 voucher (on a purchase worth at least $50), 10% off full price items and 5% off sale items, exclusive offers and bi-annual shopping events, as well as free online delivery and extended return terms.

The average transaction value for a Linen Lover member is 1.5 times higher than a non-member.

The ASX share has seen a big step up in the profit margin and net profit during this difficult COVID period. The FY21 first half saw group sales rise 34.8%, with Adairs online sales rising 95.2% to $90.2 million, representing 37.1% of group sales.

The gross profit margin increased by 500 basis points. This helped underlying earnings before interest and tax (EBIT) jump 166% to $60.2 million. The statutory net profit soared 233.4% to $43.9 million.

Growth appears to continue to be strong in the second half. In the first seven weeks of the second half of FY21, total sales were up 25%.

Betashares Asia Technology Tigers ETF (ASX: ASIA)

This is an exchange-traded fund (ETF) ASX share which is focused on both a geographic region and an industry.

It gives investors exposure to the 50 largest Asian technology companies, excluding Japan. This comes at an annual management fee cost of 0.67%.

The Asian region offers good growth for technology businesses. Due to its younger, tech-savvy population, Asia is surpassing the West in terms of technological adoption and the sector is anticipated to remain a growth sector, according to BetaShares.

There are some very recognisable Asian giants in this portfolio of 50 names. Those include: Samsung Electronics, Taiwan Semiconductor Manufacturing, Tencent, Meituan, Alibaba and JD.com.

There are only four places that have a weighting of more than 5% in the ETF: China (just over 50%), Taiwan (around 24%), South Korea (around 20%) and India (close to 6%).

The big Asian businesses have done very well over the last few years. Betashares Asia Technology Tigers ETF has delivered an average net return per annum of 30.5% per annum since inception in September 2018.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends ADAIRS FPO. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended ADAIRS FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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