Once a month, analysts at Morgans pick out their best ASX share ideas.
These are the ASX shares that the broker thinks offer the highest risk-adjusted returns over a 12-month timeframe. They are also supported by a higher-than-average level of confidence.
Among its best ideas for the month of August are the two ASX 200 shares listed below. Here's what the broker is saying about them:
Aristocrat Leisure Limited (ASX: ALL)
Morgans has this ASX 200 gaming technology share on its best ideas list again in August.
It believes Aristocrat is well-positioned for solid long-term growth thanks to three key reasons. These are its organic growth potential, strong cash generation, and M&A opportunities. It explains:
We have three key reasons for being positive on ALL. They are: (1) long-term organic growth potential. ALL is better capitalised than many of its competitors and has what we regard as a strong platform to continue investment in design and development in both its land-based gaming and digital businesses; (2) strong cash conversion and ROCE. ALL is a capital-light business despite its ongoing investment in Gaming Operations capex and working capital. It has a high level of cash conversion and ROCE; and (3) strong platform for investment. ALL has funding capacity for organic and inorganic investment in online RMG, even after the recent buyback. Its current available liquidity is $3.8bn.
Morgans has an add rating and a $45 price target. This implies a potential upside of over 12% from current levels.
Telstra Group (ASX: TLS)
Morgans continues to rate this ASX 200 telco share as a buy. This is because it feels Australia's largest telecommunications company is positioned for sustainable growth following its turnaround.
In addition, the broker believes that the sum of its parts is worth more than what the current share price implies. Morgans explains:
After a major turnaround, TLS has emerged in good shape with strong earnings momentum and a strong balance sheet. In late CY22 shareholders voted on Telstra's legal restructure, which opens the door for value to be released from the separation of TLS's infrastructure and core mobile business. TLS currently trades on ~8x EV/EBITDA. However, some of TLS's high quality long life assets like InfraCo are worth substantially more, in our view. We don't think this is in the price so see it as value generating for TLS shareholders. This, free option, combined with progressive price rises underpins positive earnings momentum and means TLS remains well placed for the year ahead.
The broker has an add rating and a $4.70 price target on Telstra's shares. This suggests a potential upside of over 10%.
