Value investors will increasingly need to look at the ASX dogs of FY21 to find bargains for the new financial year, and three stand out as they are named the latest buys by leading brokers.
The fact is, the hunt for attractively-priced ASX shares is getting more difficult. The S&P/ASX 200 Index (Index:^AXJO) is sitting on a stellar gain of nearly 30%.
If it closes at these levels on June 30, it will mark its best performance in years.
The ugly ducking could be a swan in FY22
Those sifting through the FY21 laggards for gems to pick up for the next 12-months might want to look at the A2 Milk Company Ltd (ASX: A2M) share price.
You’d be hard pressed to find a bigger dog. The A2 share price has taken a shocking shellacking and has shed more than 70% of its value over the past year.
But UBS is growing increasingly confident in its turnaround and reiterated its “buy” recommendation on the A2 share price.
Buy this ASX share as its glass is half full
“Average price for best seller a2 Platinum SKUs on major direct CBEC online platforms increased from CNY205/tin to CNY214/tin in April,” said UBS.
“At the same time, a2 Platinum share of best seller declined from 18% to 15% in April, but still remains above pre COVID-19 levels of 13%.
“We have also seen a sequential lift in Australian distributor pricing proxy for a2 Platinum. Collective, this is consistent with our analysis pointing to significant channel inventory tightening in 2HFY21.”
The broker’s 12-month price target on the A2 share price, which is also listed on the New Zealand stock exchange, is NZ$13.50.
Green shoots of earnings recovery
Meanwhile, the Nufarm Ltd (ASX: NUF) share price is another FY21 underperformer that got a tick of approval from Morgans.
The broker repeated its “add” recommendation on the Nufarm share price after the seeds and fertiliser group posted a better-than-expected result.
“NUF’s 1H21 result materially beat expectations as sales occurred earlier than normal given favourable operating conditions and COVID uncertainty/supply chain disruptions,” said Morgans.
“The strong result (EBITDA up 118% on pcp) was led by its ANZ, Europe and Seed Technologies businesses.”
The broker’s 12-month price target on the Nufarm share price is $6.50 a share.
Spoon full of sugar makes this ASX share a buy
While the API share price is holding a 7% gain over the past year, that’s still way behind the broader market.
But Macquarie thinks this could soon change after it signed a non-exclusive deal to distribute Pfizer’s PBS medicines.
Pfizer distributes its medicines to over 5,600 pharmacies in Australia and the deal does not include Pfizer’s COVID-19 drug. But Macquarie thinks this could change if the government enlists the help of pharmacies to administer the vaccines.
“API expects the additional volume provided by Pfizer Australia’s agreement will result in an uplift in EBIT of ~$4m p.a., which is an increase of +4.8% on our current FY22 estimates to ~$88m,” said Macquarie.
“API’s agreement with Pfizer’s will be generating a higher margin than its existing pharmacy distribution business.”
The broker’s 12-month price target on the API share price is $1.45 a share.