Morgans says these ASX shares are buys (with special dividends to come)

Here's what the broker is saying about these shares.

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The team at Morgans has been working extra hard this month, running the rule over results when they're released.

Two ASX shares that have fared well are listed below. Here's why the broker believes they are buys:

Super Retail Group Ltd (ASX: SUL)

Morgans responded to this retailer's half-year update by upgrading its shares to an add rating with a $17.50 price target.

The broker thinks the company is outperforming the competition and appears to believe it will continue. It expects this to allow Super Retail to pay a special dividend in August. As a result, it expects a generous 6% dividend yield for FY 2024. Morgans said:

The strength of Super Retail Group's (SUL) portfolio was apparent in a strong 1H24 result in which sales increased 3% despite cycling strong comps. In our opinion, the business is outperforming the competition across most of its retail operations as it leverages its brand equity, strong omnichannel credentials, well subscribed loyalty programmes and extensive network of stores. PBT was down only (5)% compared, for example, with JB Hi-Fi's (20)% decline. Although there is some work to do at rebel, in particular, we believe SUL will continue to deliver strong returns and remains likely to declare a special dividend in August.

Suncorp Group Ltd (ASX: SUN)

Morgans still sees value in this insurance giant's shares despite a strong gain last week.

That gain was driven by news that the sale of its banking business to ANZ Group Holdings Ltd (ASX: ANZ) has been approved by the Australian Competition Tribunal.

The broker has retained its add rating and lifted its price target to $16.42. It commented:

ANZ has won on its appeal with the Australian Competition Tribunal for the right to buy Suncorp's bank, overturning the ACCC's previous decision to block the deal. We have always thought the SUN bank sale price (~12.5x earnings and ~1.3x NTA when announced) was reasonably solid, and the deal value is above Morgans current valuation for the bank (1x NTA).

Morgans believes some of the proceeds of the sale will be returned to shareholders. It adds:

We remove the bank from our SUN earnings forecasts from August, and factor in a pro-rata capital return and a A$300m special dividend from the net sale proceeds.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended Jb Hi-Fi. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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