The fund managers at Wilson Asset Management (WAM) have told investors about two compelling ASX shares that are in the portfolio.
WAM operates several listed investment companies (LICs). Some, like WAM Leaders Ltd (ASX: WLE), focus on larger companies.
WAM Capital Limited (ASX: WAM) targets "the most compelling undervalued growth opportunities in the Australian market".
The WAM Capital portfolio has delivered an investment return of 15.8% per annum since its inception in August 1999, before fees, expenses and taxes. This gross return outperformed the All Ordinaries Total Accumulation Index (ASX: XAO) return of 8.7% per annum over the same time frame.
These are the two ASX shares that WAM Capital outlined in its most recent monthly update:
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ALS Ltd (ASX: ALQ)
ALS is described by WAM as a business that provides laboratory testing, inspection, certification, and verification solutions and services across multiple industries in more than 65 countries.
The fund manager noted that last month ALS revealed an upgrade to its guidance for FY22. The underlying net profit after tax (NPAT) guidance is now for a range between $260 million and $265 million.
WAM noted that the midpoint of this net profit guidance represents a 6.3% increase on the previous guidance. The cause of the increased guidance was "strong" geochemistry sample volume growth and price improvements within the ALS minerals division. There was also additional volume growth above pre-pandemic level volumes in the ALS life sciences division.
Wilson Asset Management's outlook for the company remains "strong," and it believes the ASX share will continue to benefit from increased demand for mineral exploration services over the medium-term.
Brickworks Limited (ASX: BKW)
Brickworks was the other business named by WAM. It makes a diverse range of building products in Australia and North America.
In March 2022, Brickworks announced its FY22 half-year result which included a record half-year statutory NPAT of $581 million. This was a 720% increase from the prior year and was reportedly better than what the market had been expecting.
WAM also noted that the ASX share's building material manufacturing division in Australia saw earnings before interest and tax (EBIT) jump by 66% to $27 million. The fund manager pointed out this was due to increasing sales momentum after COVID-19 lockdowns.
The fund manager believes that the industrial trust that Brickworks owns half of with Goodman Group (ASX: GMG) continues to be undervalued by the market even though there has been sustained growth which has been fuelled by the stronger tailwind for e-commerce.
Wilson Asset Management is positive on Brickworks, particularly because further sales of land into the property trust will lead to a large rise in rental income, helping grow earnings by double-digits for this division.
