The fund manager Wilson Asset Management (WAM) has picked out one of the S&P/ASX 300 Index (ASX: XKO) shares it's excited about in its portfolio: Kelsian Group Ltd (ASX: KLS).
WAM runs a number of listed investment companies (LICs) and a couple of trusts that are targeted at finding some of the most compelling businesses on the ASX for their respective investment areas.
Kelsian is a pick inside the WAM Active Ltd (ASX: WAA) portfolio. WAM Active targets mispricing opportunities in the ASX share market.
The fund manager describes Kelsian as Australia's largest integrated land and marine transport operator and an emerging player in the US motorcoach market. It also has a presence in the UK and Singapore.
It has more than 5,800 buses, 115 vessels, and 24 light rail vehicles. One of its businesses is SeaLink Marine & Tourism, which operates a number of routes for Australian holiday destinations and experiences.
Let's take a look at why the WAM investment team believe Kelsian is mispriced despite rising around 17% in June, as the chart below shows.
Image source: Getty Images
Strong performance by the ASX 300 share
WAM said the recent rise in the Kelsian share price has been driven by the company's winning of two new significant contracts, which helped rebuild investor confidence after two years of downgrades.
The June wins announced by the ASX 300 share were two new contracts in the state of Louisiana, USA. The contracts have a value of US$59 million and US$82 million.
WAM's investment team is excited by these wins because they add scale, diversify revenue, reinforce the growth potential of the company's 2023 All Aboard America! acquisition, and provide a "key catalyst behind improving investor sentiment".
The fund manager then explained:
Further, management plans to divest non-core tourism assets to streamline the business and reduce debt, which we believe will drive stronger shareholder returns.
Earlier this year, Kelsian said it's looking to divest its tourism portfolio.
Other target areas for management of the ASX 300 share include driving efficiencies, spending discipline, and reducing costs.
Kelsian also wants to focus on capital-light growth opportunities, increase return on invested capital (ROIC) when 'growth capital' is deployed, and optimise returns from recent capital expenditure investments.
