Key points
- Both of these ASX shares are predicted to achieve double-digit share price growth in 2022
- Temple & Webster is rapidly growing revenue, increasing its customer base and expanding its product range
- Brickworks is expecting long-term valuation gains for both its investments and industrial property trust
There is nearly always an opportunity to be found on the ASX share market. Share prices change all the time, opening up the potential for investors to jump on compelling businesses at better prices.
January 2022 was a volatile start to the year. But with the dust settling on that market correction, these two ASX shares look like opportunities:
Temple & Webster Group Ltd (ASX: TPW)
The homewares and furniture business is currently rated as a buy by the broker Morgan Stanley with a price target of $16.25. That implies a potential rise of the Temple & Webster share price of more than 80% over the next year.
Temple & Webster shares have dropped 27% over the last three months. But its long-term positives remain.
The ASX share's revenue continues to grow strongly. In FY22 to 15 October 2021, revenue had increased 56%.
It's still experiencing the strong tailwind of ongoing adoption of online shopping because of structural and demographic shifts, accelerated by COVID-19.
Temple & Webster's increasing scale is driving operating leverage, which is allowing it to increase its investment in future growth and take market share. This is leading to a better consumer proposition as well as better unit economics.
Profit margins are expected to increase over time as the business benefits from scale and can utilise its existing infrastructure more efficiently across more customers. Private label sales continue to grow as well.
The company continues to invest in technology to improve the online shopping experience, such as AI interior design technology.
Brickworks Limited (ASX: BKW)
Brickworks is one of Australia's largest building products businesses. It's currently rated as a buy by Ord Minnett, with a price target of $26.20.
The two biggest asset values within the Brickworks business is the 50% share of the joint venture industrial property trust and the shares of Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) that it owns.
Brickworks notes that Soul Pattinson has a history of long-term outperformance and this is expected to continue. The merger with listed investment company (LIC) Milton provides scale, diversification and liquidity to pursue additional investment opportunities.
Meanwhile, in partnership with Goodman Group (ASX: GMG), there is an unprecedented development pipeline within the property trust as it benefits from the huge demand in e-commerce and logistics facilities.
The completion of pre-committed facilities over the next two years will result in a "significant uplift in rental income and asset value" for the property trust. This in turn will add to Brickworks' cashflow and assist in the funding of higher dividend payments from the ASX share.
Work is finishing up, or finished, on a large Amazon distribution warehouse facility in Sydney. The trust is now working on a very large distribution centre for Coles Group Ltd (ASX: COL).
However, it must be noted that the building products divisions in Australia and the USA are seeing mixed conditions with COVID-19 effects impacting costs and the supply chain.
