The two ASX shares in this article are rated as strong buys by brokers, including charter flight stock Alliance Aviation Services (ASX:AQZ).
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ASX share brokers are always on the lookout for opportunities to buy which could be undervalued.
If there’s an ASX share that is liked by many brokers at once. A business that’s seen as an opportunity by many brokers could be worth looking at.
Here are two that several brokers like right now:
Alliance Aviation Services Ltd (ASX: AQZ)
Alliance Aviation describes itself as a leading air charter services operator, dedicated to providing specialised services for the resources industry, and inbound and domestic group travel.
It’s currently liked by at least three brokers. Credit Suisse has a price target of $5.40 for the charter flight business, which suggests a potential upside of around 35% over the next 12 months.
The broker is impressed by how quickly the company seems to be improving and its cashflow also seems to be going well.
In the FY21 half-year result it saw operating revenue go up 2.3% to $154.8 million, underlying profit before tax increased by 72.3% to $26.7 million and operating cashflow surged 225.3% to $47.5 million.
Net debt reduced to just $6.9 million at the end of the period.
The number of aircraft in service continues to increase and it’s becoming more efficient when it comes to revenue per employee.
Alliance Aviation has a positive outlook for FY21 and is forecasting growth into FY22 and beyond.
The ASX share is expecting to see contract revenue continue to increase as the annualised impact of increased schedules is realised. Revenue streams impacted by COVID-19 in the second half of FY20 are showing signs of growth now.
HomeCo Daily Needs REIT (ASX: HDN)
This is a real estate investment trust (REIT) that mostly owns city-located property assets relating to local shopping centres, large format retail real estate and health and services.
Morgans rates the ASX share as a buy, with a price target of $1.45. It’s liked by at least two other brokers right now.
It has a portfolio worth almost $1 billion with tenants like Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL), Wesfarmers Ltd (ASX: WES), Super Retail Group Ltd (ASX: SUL), IGA, Spotlight, Aldia, Chemist Warehouse and Petstock.
The ASX share continues to buy new assets, such as a Bunnings location for $56 million and the Marsden Park Shopping Centre for $48 million.
It has an occupancy rate of 98.7% and a ‘trading occupancy’ of 96.7%, which has improved from earlier disclosures.
For FY21 it’s expecting to generate funds from operations (FFO) of $20.5 million, or 4.2 cents per unit, which was a 9% increase of its previous forecast. It’s also expecting to pay a FY21 distribution of 4.2 cents per unit.
That translates to a yield of 3.25% for FY21. In FY22, Morgans is expecting a payout of 8 cents per unit, which is a yield of 6.2%.
The business has $22 million of brownfield development projects scheduled for opening in FY22, which is expected to deliver a cash yield of more than 10% per annum.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.