2 ASX shares this fund manager thinks could be cheap

The fund manager Spheria thinks that the two companies in this article are rated as buys, including Monadelphous Group Limited (ASX:MND).

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Spheria Asset Management has identified two ASX shares that it believes could be good value.

The listed investment company (LIC) Spheria Emerging Companies Ltd (ASX: SEC) releases a monthly update and tells investors about which shares have performed well and shares some comments about them.

These two ASX shares are ones that were included in the latest update:

Monadelphous Group Limited (ASX: MND)

Monadelphous is one of the largest Australian engineering groups providing construction, maintenance and industrial service to the resources, energy and infrastructure sectors. It’s involved in some of Australia’s biggest and most complex projects and facilities.

Spheria said that the engineering business was the largest contributor to its performance over April 2021 after rising 23%.

The fund manager attributed some of the increase to the fact that it had successfully settle a large claim from Rio Tinto Limited (ASX: RIO) after a fire at the Cape Lambert iron ore processing plant that Monadelphous was providing maintenance operations on.

Monadelphous said it highly values its long-term business relationship with Rio Tinto, is pleased that this matter has been resolved amicably, and is looking forward to continuing to work closely with this very important customer into the future.

At the time of the update, Spheria said that Monadelphous still screened very cheaply to the fund manager. It estimates that it was valued at around 10.5x FY22’s the enterprise value to earnings before interest and tax (EBIT) (EV/EBIT). Spheria also said that Monadelphous is sitting on a net cash balance sheet of over $200 million by year end.

Universal Store Holdings Ltd (ASX: UNI)

Universal Store is a specialty retailer of youth casual apparel that operates 65 physical stores across Australia as well as an online store.

It aims to offer a frequently changing and carefully curated selection of on-trend apparel products to a target 16-35 year old fashion focused customer.

Spheria said that Universal Store’s recent share price performance came after reporting an exceptionally strong third quarter trading update with like for like store sales up 27.5% and online sales growth of 148.2%.

The fund manager pointed out that Universal Store has been growing strongly for a while but it’s still going from strength to strength.

Spheria believed that Universal Store was valued at 11x FY22’s EV/EBIT. It still screened attractively to the fund manager because of its “exceptional” return on invested capital (ROIC) and strong growth prospects through store rollout and online growth.

In the trading update, the business said that it’s seeing its customers resume more aspects of their social lives with CBDs continuing to recover along with a return to domestic tourism (including New Zealand).

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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