IOOF and Alliance Aviation Services are two ASX shares that brokers like.
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There are a group of ASX shares that brokers really like. The fact that so many analysts like these stocks could mean they are an opportunity.
These businesses are supposedly at good value and may be able to produce good returns over the next 12 months according to multiple brokers.
However, there is a chance that all of the brokers are wrong at the same time.
Here are two of those ideas:
Alliance Aviation Services Ltd (ASX: AQZ)
Alliance describes itself as Australasia’s leading provider of contract, charter and allied aviation and maintenance services.
Its clients come from industries like mining, energy, tourism and government sectors. The business is planning to have more capacity in the coming years. It has 25 additional E190s scheduled to be added to the fleet by the middle of 2022. The expansionary capital expenditure is $176 million which will result in an increase of up to three times annualised flight hours by the end of FY22.
Total flying hours for the year were stable at 37,913 hours and revenue increased 3% to $308.7 million. However, profitability increased over the year. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose 15% to $90.5 million and underlying profit before tax increased 25% to $51 million.
The ASX share’s management said that it has a positive outlook for FY22 with organic growth opportunities geographically and across the majority of revenue streams. Resource and energy sector services are expected to increase organically across the network during the year and will benefit from the capacity that five additional Fokker aircraft will bring.
It also said that it will continue to focus on cost management during the year, ensuring profit margins are maintained or increased where possible.
It’s currently rated as a buy by at least three brokers, including Morgans which has a price target of Alliance of $5.10.
IOOF Holdings Limited (ASX: IFL)
IOOF is another ASX share that’s well liked. Currently there are at least four brokers that like it, including Credit Suisse which has a price target on the business of $5.20.
The broker is attracted to the fact that IOOF is now a lot bigger with its acquisitions, including MLC from National Australia Bank Ltd (ASX: NAB). Synergies from these acquisitions could help with earnings growth over the next couple of years.
IOOF generated $147.8 million of underlying net profit after tax from continuing operations in FY21. This was an increase of 19%.
The board decided to pay a FY21 annual dividend of $0.23 per share, which included 5.5 cents per share of special dividends. The ordinary dividend of 17.5 cents per share translates to a trailing grossed-up dividend yield of 5.4%.
In FY22, IOOF is expecting to deliver annualised run-rate synergies of between $80 million to $100 million. It’s also expecting substantial improvement in financial performance of the advice business by leveraging technology and capabilities across the advice business and increasing revenue and cost efficiencies.
In the longer-term, the ASX share’s management said that it “continues to see significant opportunities through expanding its addressable market and changing demographics”. The business is aiming for growth of earnings and dividends.
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Motley Fool contributor Tristan Harrison 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.