Are there any opportunities left to invest in undervalued companies on the ASX? Well that’s a good question.
Travel, tourism, entertainment, and shopping centre share prices all seem to have factored in the recovery, but even in these sectors, there are still some opportunities that may be overlooked.
Senior Analysts Alex Shevelev and Gaston Amoros discuss the half-year reporting results of Unibail-Rodamco-Westfield (URW) and how the reopening of other countries has improved the performance of this business. It’s also halfway through the process of disposing of assets in Europe, which may not be reflected in how their share price is performing.
With a clear line of sight to reopening across Australia once more, the team is also looking at some of the smaller listed companies in our Australian Shares Fund, including AMA Group (AMA) and Viva Leisure (VVA). Both the panel beating company and the gym operator have been hit hard by the most recent lockdowns, however, both businesses have raised capital in order to sustain their balance sheets and are likely to be in a position to strongly reopen.
Read the full interview here
Hello everybody and welcome to this week’s Forager video my name is Alex Shevelev, Senior Analyst on the Australian Shares Fund and today I’ve got with me Gaston Amoros, also Senior Analyst on the Australian Shares Fund.
So today we’ll be talking about reopening, I’m handing it over to you now Gaston.
We get the question a lot about the reopening trades and whether there are any opportunities left in the asx. People normally reference things in travel and tourism like, Webjet or Flight Centre. In entertainment you have things like Star Group, and in shopping malls you have things like Scentre Group and Vicinity Centres. These stocks are all up and to the right and they’re working very nicely. The question is do we have any opportunities left in the asx? There is one that we like that we own. Unibail Westfield is the owner of the Westfield malls in the USA and UK and Unibail malls in Europe and it’s not really performing in line with the other stocks at this time.
But that’s on the share price right Gaston? What about the actual underlying business, have they said much recently?
You’re absolutely correct. So the business is actually trading well. It’s recovering. In August at the time of the half year results they told us that both sales and traffic are actually recovering quite quickly. Once the countries open up, in the case of the US sales are back to pre-covid levels in the last few months and in the case of Europe they are like 80% or 90% of pre-covid levels which is a nice trajectory considering where they’re coming from.
So the businesses are performing well but the stock is not performing well and the reason why it isn’t is because this type of trades in Europe are not working at the moment and that’s a separate question why they’re not working. But the business itself is trading well and what’s also interesting about Unibail is that it is in the process of exposing assets. They’re halfway through the disposals in Europe which you’re doing close to book value and the more assets you sell the more your leverage comes down which contributes towards the re-rating of the shares and they have another process to dispose of assets in the US.
We think it’s quite an interesting opportunity. The reason why we’re talking about it is it has a line in the ASX. It’s listed both in Europe and in the ASX and the line here is not as liquid but you can still trace a decent amount.
That’s right I think the ones that you mentioned are pretty well-known larger businesses. We do have a couple that are not necessarily on the travel side but also very much fall into the bucket of reopening. The two investments we have there are AMA Group, which is a panel beating business, and Viva Leisure which is an owner of gyms.
Now understandably both of those businesses have been quite hard hit by the most recent lockdowns. No one driving and fewer accidents and definitely no one heading in to the gyms. But interestingly what has happened over those last couple of months is both those businesses, in order to sustain their balance sheet and to be in a position to strongly reopen, have raised capital and it’s really this reaction from the capital raise that was particularly interesting.
So AMA Group was mooted as a potential capital raised candidate for a while and they raised 100 million dollars plus a 50 million dollar convertible note and is now trading 33 odd percent higher than the initial raised price in a matter of months. Viva is much the same, in a matter of months it has rallied more than 50 percent.
It’s really interesting to see how investors, now we’ve got vaccine news that’s positive, we’ve got a very clear line of sight to the reopening, these reopening plays even if they require capital are then being very strongly supported subsequent to that.
Maybe on the other end of the spectrum of these reopening trades versus corporate beneficiaries we could talk about software and online marketplaces which is as we said the other end of the reopening trades but maybe we’ll leave that for another session.
That’s a good teaser for next time Gaston. Thanks for talking today and we’ll see you all next time
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.