There could be some cheap ASX share opportunities in December 2021 for investors to take advantage of.
These are businesses that brokers think look good value and have longer-term growth potential.
Here are two potential choices:
Bapcor Ltd (ASX: BAP)
At the time of time of writing, the Bapcor share price has fallen 17% from 22 November 2021.
Bapcor shares took a dive after it was announced that the long-serving managing director was going to leave the auto parts business.
There are some brokers that rate Bapcor as a buy, such as UBS with a price target of $8.50. The broker thinks that conditions remain positive for demand for car parts.
UBS believes that the Bapcor share price is valued at 16x FY23’s estimated earnings.
The ASX share has various plans to grow the business.
It wants to grow its network footprint, with both its physical store and online presence. That includes growing its store network from around 1,100 locations to 1,500 over the next five years. Geographic expansion in Asia is part of the plan.
Another area of planned growth is supplementing the brands sold by its businesses like Autobarn and Burson, with Bapcor’s own brand products which comes with higher profit margins. It wants to grow own brand sales from around 30% to 45% of sales.
Bapcor also wants to realise the benefits and efficiencies of the businesses, including investing in key systems, achieving even better purchasing terms and improving its logistics capability even further.
Management points out that more people are using their cars to holiday and that the average age of vehicles continues to rise, requiring more maintenance.
Nick Scali Limited (ASX: NCK)
Nick Scali is a leading furniture retailer in Australia and New Zealand.
According to Citi, the ASX share is trading at 16x FY23’s estimated earnings and rates it as a buy with a price target of $16.80.
Nick Scali says that its future growth will be primarily driven by the continuation of the new store rollout and increasing online penetration. It’s accelerating initiatives to capture these opportunities.
At the end of FY21, Nick Scali had 61 stores across ANZ, with a long-term target of 86 stores.
In terms of online, in FY21 it achieved online revenue of $15.3 million with earnings before interest and tax (EBIT) of $8.8 million. A lounge visualisation tool was launched in July 2021.
Citi is also very attracted to the potential with the recent acquisition of Plush-Think Sofas for an enterprise value of $103 million.
Nick Scali says that the two businesses have highly complementary product offerings and business models. It’s a “strong strategic fit expected to deliver material synergies to the combined business after a two-year integration period” according to Nick Scali.
Management say that there are opportunities for a new store rollout for both businesses.
Citi also expects that Nick Scali will pay a big dividend in the coming years. The ASX share could pay a grossed-up dividend yield of 6.7% in FY23 according to Citi.