Respected fund manager Wilson Asset Management (WAM) has recently identified two ASX shares that it owns in its portfolio.
WAM operates several listed investment companies (LICs). Some focus on larger companies like WAM Leaders Ltd (ASX: WLE) and WAM Research Limited (ASX: WAX).
There’s also one called WAM Capital Limited (ASX: WAM) which targets “the most compelling undervalued growth opportunities in the Australian market.”
The WAM Capital portfolio has delivered an investment return of 16.5% per annum since inception in August 1999, before fees, expenses and taxes. This gross return outperformed the S&P/ASX All Ordinaries Accumulation Index return of 8.6% per annum over the same timeframe.
These are the two ASX shares that WAM Capital outlined in its most recent monthly update:
Viva Energy Group Ltd (ASX: VEA)
Viva Energy is a business that refines, imports and delivers energy across Australia and is the exclusive licensee of almost 1,300 Shell and Liberty service stations. The Geelong Refinery employs more than 700 people and supplies more than 50% of Victoria’s fuel requirements.
Viva Energy recently revealed its first quarter operational update to investors. In that, it revealed a strong performance in its retail service stations division, with volumes of petrol consumed in the quarter ending 31 March 2021 now only 17% below the prior corresponding quarter.
The CEO and managing director of Viva Energy, Scott Wyatt, said:
Viva Energy is making strong progress on our business recovery program with encouraging results in all parts of our business during the first quarter.
WAM Capital pointed out that the Australian Government announced a support package providing a production payment to support domestic refiners which should help with the profitability of the ASX share’s struggling refining business which has been impacted by lower demand for refined fuel through this COVID-19 pandemic period.
Downer EDI Limited (ASX: DOW)
The LIC outlined what the Downer business is about – it designs, builds and sustains assets, infrastructure and facilities. It has a large workforce, with approximately 50,000 staff across more than 300 sites, largely in Australia and New Zealand.
During April, Downer announced that it was going to divest its tyre management business to Bridgestone Corporation for $79 million.
WAM Capital said this sale by the ASX share represented a strategic step in Downer’s divestment of its portfolio of mining businesses. Downer’s sale of mining and laundries assets so far will deliver total proceeds of $605 million to the business.
After the announcement of the sale of Otraco, the company revealed its intention to do an on-market share-buyback of up to 70.1 million shares, which is around 10% of its issued share capital. This will return the divestment program proceeds to investors.