The fund manager Wilson Asset Management (WAM) has told investors about two ASX shares that it has in its portfolio.
WAM operates several listed investment companies (LICs). Some, like WAM Leaders Ltd (ASX: WLE), focus on larger companies.
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 16.7% 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 8.8% per annum over the same timeframe.
These are the two ASX shares that WAM Capital outlined in its most recent monthly update:
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Carsales.Com Ltd (ASX: CAR)
Carsales owns and operates the biggest online automotive classified business in Australia. If someone wants to buy a vehicle, then there's a good chance they may use a Carsales digital offering to research or find it. The website reportedly has a monthly unique audience of 4.35 million. There are 29.5 million monthly sessions by users.
Readers may have heard of carsales.com.au, but it also has a similar website for bikes, boats, construction vehicles, caravan camping sales, trucks, tyres and farm machinery.
The ASX share is increasingly becoming a global player in the auto world. It operates leading auto websites in countries with sizeable populations such as South Korea, Brazil, Chile, Mexico and Argentina.
WAM noted that Carsales' FY21 result showed a 10% increase in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) to $254 million. Carsales also achieved the highest annual growth in net profit after tax (NPAT) in seven years. Adjusted net profit rose 11% to $153 million and reported net profit grew 9% to $131 million.
The fund manager said that car buyers and sellers in Australia, South Korea and Brazil used its sites at record levels as the COVID-19 pandemic accelerated the shift to buying and selling cars online.
The classifieds business also announced the 49% acquisition of Trader Interactive, a US-based marketplace business that has a leading position in the recreational vehicle, powersports, commercial truck and equipment markets. This acquisition was founded through a combination of debt and a $600 million fully underwritten pro-rata accelerated renounceable entitlement offer.
City Chic Collective Ltd (ASX: CCX)
City Chic was the other ASX share that WAM named in its portfolio. This business is a global retailer that sells plus-size clothes, footwear and accessories for women. It has a store network in Australia and New Zealand, whilst also selling a large amount of products online.
WAM pointed out that it achieved "strong" sales and customer growth in FY21. Sales increased 33%, customers rose 61% and customer website traffic grew 68% year on year.
The fund manager stated that this result reflected the company's expanded online product offering and the acquisition of local UK leader Evans, which gave it entry into the UK plus-size market.
The ASX share's diversified global footprint has minimised the impact of lockdown enforced store closures in Australia, with 44% of sales recorded outside of Australia and New Zealand, according to WAM.
In the fund manager's eyes, City Chic is well positioned to expand its market share and benefit from the strength of the Australian and global consumer.
