For about the last year or so, investors have snapped up ASX shares of physical retailers, with the logic that they have excellent post-COVID recovery prospects.
So are there any retail sector stocks left that haven't already had their resurgence priced in?
TAMIM Asset Management head of Australian equities Ron Shamgar reckons there are still some gems if you look past the usual suspects.
"There's only so many TVs and couches you can buy," he told Switzer TV Investing.
"So we're looking at a few retailers that are not as obvious to most investors."
He added that retailers would benefit from a wave of "revenge spend" in the coming months.
"We're all sick of being stuck at home and being locked down for a few months," he said.
"People, as soon as they get the chance, they're going to spend, they're going to shop, they're going to go out. They're not going to spend a minute at home… There's going to be a huge boost to the economy."
Younger folks are ready to unleash after lockdown
Shamgar's first pick was youth apparel retailer Universal Store Holdings Ltd (ASX: UNI).
"They, in my opinion, will be one of the biggest beneficiaries of that revenge spending thematic," he said.
"The younger demographic, they're all going to go out to bars and restaurants… Everyone's going to want the latest fashion trends to go out [in]."
Shamgar also likes Universal's store growth potential.
"They have 68 stores currently in Australia, but they're targeting at least 100. And they have a clear path to those stores because they're not [yet] respresnted in all the main shopping centres," he said.
"We think they can get to 100 within 3 years. And the market loves a good store rollout growth story for a retailer."
The company showed positive results for the 2021 financial year, according to Shamgar.
"They reported 36% revenue growth to $210 million. And It's a very profitable business — EBIT was up 86% to $44 million."
The TAMIM team thinks Universal shares are worth $9. On Friday afternoon, they were trading for $7.95, which is more than 44% up for the year thus far.
These ASX shares smell good
Scented candle and diffuser merchant Dusk Group Ltd (ASX: DSK) is another retail chain Shamgar has high hopes for.
On Friday afternoon the stock was going for $3.12, which is a nice 56% lift from last year's initial public offer price of $2.
Shamgar's team reckons it has more to run though, calculating that it's worth $4.
"It's a really nice experience to go into the stores — it smells really nice," he said.
"10% of its current market valuation is in net cash… And it's paying a 10% dividend yield as well, so that's quite impressive."
Like Universal, Dusk has some store expansion potential.
"Longer term we think they're going to expand outside of Australia, into New Zealand and the UK, which is really the key for PE re-rate, because it is trading on a cheap multiple at the moment," said Shamgar.
This ASX share has a subsidiary that's worth double itself
Joyce Corporation Ltd (ASX: JYC) has been around for 135 years.
These days its big business is a 50% stake in Kitchen Connection, which is a retailer with 25 stores that sells kitchen and wardrobe parts and services. Joyce Corp's other assets include furniture retailer Bedshed, cash and property.
With the coronavirus pandemic triggering a boom in home renovations, the kitchen business has gone gangbusters.
"If Kitchen Connection was a separately listed company, we think it would trade at a $200 million market cap."
Joyce itself is only worth $100 million on a good day. On Friday afternoon, at $3.25 per share, its market capitalisation was $91.6 million.
So the maths is simple.
"With Joyce owning half of Kitchen Connection, it's essentially the current market cap. And then you get the cash, property and the Bedshed business essentially for free."
Shamgar's team reckons Joyce shares are actually worth $4.50.
"And there is the possibility that they will acquire the remaining part of Kitchen Connection over time, which will be a big boost to the share price."
