Some ASX shares have seen their prices fall amid the economic uncertainty of recent times, making them now look like bargain investments.
This means some undervalued businesses could see a significant boost when inflation stabilises and interest rate cuts occur.
But here are two ASX shares trading at such a cheap valuation that I think they could beat the market even if rates were never lowered.
Image source: Getty Images
Centuria Industrial REIT (ASX: CIP)
This real estate investment trust (REIT) owns a large portfolio of industrial properties across Australia, including distribution and logistics warehouses.
But is the ASX share's stated underlying net asset value (NAV) reliable, given the backdrop of interest rate rises?
This week, the REIT announced it was divesting a regional asset in the ACT for $28.1 million. This is a 21% premium to the $23.3 million stated value on the balance sheet in December 2023. The property was acquired in January 2017, providing an internal rate of return (IRR) of 16% during ownership.
Centuria Industrial REIT has divested around $120 million of non-core industrial facilities in FY24 at an average premium of 4% to the balance sheet value. These sales have 'underpinned' its net tangible asset (NTA) backing.
At 31 December 2023, the business had a NTA of $3.89, so the Centuria Industrial REIT share price is at a 19% discount to this.
In the third quarter of FY24, the business said it had achieved re-leasing spreads of around 50% in the 2024 financial year to date, implying strong organic growth of its rental income for the same properties.
Its FY24 distribution yield is around 5.1%, which is a solid starting point, in my opinion.
Australian Ethical Investment Ltd (ASX: AEF)
This ASX share is a funds management business that aims to provide highly ethical investment products for customers.
As the chart below shows, the Australian Ethical share price has fallen 25% in the last six months and more than 70% since November 2021.
The Australian Ethical share price has dropped this year, while other growing funds management businesses, such as GQG Partners Inc (ASX: GQG) and Pinnacle Investment Management Group Ltd (ASX: PNI), have seen their share prices rise.
The ASX share continues to see pleasing positive net inflows, providing a tailwind for funds under management (FUM) growth. In the three months to June 2024, it saw net flows of $211 million. This helped FUM reach $10.4 billion at 30 June 2024, up 13% from 30 June 2023.
If FUM keeps rising, then I think this ASX share is one to watch, with its valuation close to a 52-week low.
