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 13.6% per annum since the strategy changed in July 2010, which is superior to the All Ordinaries Total Accumulation Index (ASX: XAOA) return of 8% per annum.
These are the two ASX shares that WAM outlined in its most recent monthly update.
Myer Holdings Ltd (ASX: MYR)
Myer is a department store retailer that has 58 locations across Australia, as well as an online presence.
The fund manager pointed out that last month Myer announced its FY22 result, which showed total sales growth of 12.5% to almost $3 billion. There was also a year-on-year increase of net profit after tax (NPAT) of 103.8% to $60.2 million, after excluding JobKeeper. Its net cash position improved by $74 million to $186 million.
WAM pointed out that the second half was the ASX share's best second half in almost a decade thanks to "strong multi-channel execution", with the online segment beating expectations. The investment team also highlighted that the company's FY23 started strong.
The fund manager is "positive" on the outlook because "management continue to execute on their vision and deliver the turnaround".
APM Human Services International Ltd (ASX: APM)
The other business that was named as an opportunity in the WAM Research portfolio was this international human services provider, which has more than 1,000 locations across Australia, New Zealand, the UK, Europe, North America, and Asia.
Last month, APM announced the strategic acquisition of Equus Workforce Solutions, an employment services provider in the US. WAM explained this will allow the ASX share to "materially expand its existing footprint in the North American market".
The cash consideration for this acquisition is $225 million. In FY22, this business generated $47 million of earnings before interest, tax, depreciation and amortisation (EBITDA) which implies it would add low double-digits to APM's earnings.
WAM said:
The US is an attractive market for APM with funding increasing across most major government programs and the acquisition accelerating growth opportunities.
