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 15.4% per annum since the strategy changed in July 2010, which is superior to the All Ordinaries Total Accumulation Index (ASX: XAOA) return of 8.9% per annum.
These are the two ASX shares that WAM outlined in its most recent monthly update:
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Credit Corp Group Limited (ASX: CCP)
Credit Corp was described as a business that provides debt purchase and collection, and consumer lending services in Australia, New Zealand and the US.
The Credit Corp share price outperformed during January 2022 in the lead-up to the FY22 interim result, which was released at the start of February.
WAM said that investor expectations were growing ahead of a positive result. That result delivered, according to the fund manager. There was an 8% increase in the underlying net profit after tax (NPAT) in the half-year report thanks to strong collections activity.
The period included record investment driven by the US purchased debt ledger (PDL) acquisitions alongside the acquisition of Radio Rentals in Australia.
Credit Corp's consumer lending demand accelerated to record levels over the three months to 31 December 2021. Key markets emerged from COVID lockdowns whilst pilot projects continued to demonstrate "promising results".
WAM liked the confidence that the ASX share's management showed by increasing the FY22 guidance, with PDL investment increasing to a range of between $300 million to $320 million and net profit between $92 million to $97 million.
The fund manager believes there is still upside to the given guidance and remains positive on the medium-term outlook as unsecured credit balances are "set to accelerate" as consumer stimulus fades and the impacts of COVID eases.
The above-mentioned impacts are expected to underpin organic growth, while a strong balance sheet positions the company to capitalise on further acquisitions that would add to earnings with a range of opportunities currently in the market.
BWX Ltd (ASX: BWX)
WAM describes BWX as an Australian-based company that is engaged in developing, manufacturing and marketing beauty and personal care products.
The company's expansion into the US and UK is gaining traction. When coupled with new products and a larger distribution network, this is driving growth of the market share.
It was announced in January 2022 that CEO Dave Fenlon had resigned. Mr Fenlon is going to change to be a non-executive director position on the BWX board.
WAM wasn't too concerned because the appointment of his successor is Rory Gration. Mr Gration was the chief operating officer. This demonstrated the continuity of the ASX share's management team.
BWX recently expanded its portfolio with the acquisition of a 50.1% majority stake of Go-To Skincare for $89 million. In FY21, this business generated $36.8 million of revenue and $11.6 million of earnings before interest, tax, depreciation and amortisation (EBITDA).
