Leading fund manager Wilson Asset Management (WAM) has revealed two ASX shares that it rates as buys within the WAM Research Limited (ASX: WAX) portfolio.
WAM operates several listed investment companies (LICs). Two of those LICs are WAM Capital Limited (ASX: WAM) and WAM Leaders Ltd (ASX: WLE).
One of the LICs is called WAM Research, which looks at smaller businesses on the ASX.
WAM describes WAM Research as a LIC that invests in the most compelling undervalued growth opportunities in the Australian market.
The WAM Research portfolio has delivered gross returns (that’s before fees, expenses and taxes) of 16.8% per annum since the strategy changed in July 2010, which is superior to the S&P/ASX All Ordinaries Accumulation Index return of 9.9% per annum.
These are the two ASX shares that WAM outlined in its most recent monthly update:
City Chic Collective Ltd (ASX: CCX)
City Chic is one of the ASX shares that WAM likes and owns. It’s a ASX retail share that sells clothes, accessories and footwear to women in its ANZ store network and a global online presence, as well as partnerships with northern hemisphere businesses.
The fund manager noted that the company delivered “strong sales” and customer acquisition growth in FY21. WAM pointed out that City Chic generated sales growth of 33%, a 61% increase of customers and a 68% rise in customer website traffic compared to FY20.
This strong result was attributed to City Chic’s expanded online product offering and entry into the UK market by buying Evans, which is the leader in the UK.
WAM believes that City Chic’s global operations helped mitigate the cost of the store closures in Australia due to COVID-19 lockdowns. Approximately 44% of sales were made outside of Australia and New Zealand.
The fund manager believes the company is positioned well to grow its market share and benefit from the supposed strength of both the Australia and global consumer.
According to Commsec, the City Chic share price is valued at 32x FY23’s estimated earnings.
Event Hospitality and Entertainment Ltd (ASX: EVT)
Event Hospitality is a business that owns and operates cinemas in Australia, New Zealand and Germany. It also operates over 70 hotels and leisure venues in Australia.
It was another ASX share that revealed its full year result during reporting season in August 2021.
In that result, Event Hospitality and Entertainment was able to achieve normalised earnings before interest, tax, depreciation and amortisation (EBITDA) of $27.2 million.
WAM pointed out that Event Hospitality and Entertainment’s hotels located across Australia saw “significant” quarter on quarter growth.
The ASX share’s leisure venue, the Thredbo Alpine Resort, saw record full year revenue with the 2020-2021 summer mountain biking and hiking season resulting in a record number of visitors as well as mountain biking revenue.
The fund manager is still positive on the business because of the “robust” property portfolio, potential further divestments of non-core assets as well as a recovery of cinema visitors after the lockdowns.
According to Commsec, the Event Hospitality and Entertainment share price is valued at 22x FY23’s estimated earnings.