Would you believe two media companies could see their shares rise because of a buoyant real estate market? Read how.
The post 2 not-so-obvious ASX shares to cash in on the property boom appeared first on The Motley Fool Australia. –
Real estate is booming, thanks to historic-low interest rates and pent-up savings from the COVID-19 pandemic.
Just this week, Sydney joined Brisbane, Adelaide, Canberra and Hobart in recording record-high house prices, past the previous 2017 peak.
So how does an ASX share investor take advantage of this?
There are the obvious real estate investment trust (REIT) shares, which directly invest in property.
Then there are secondary winners, such as the big banks or homewares retailers.
But two experts recently independently pointed out two media companies that are worth pursuing in light of soaring property prices.
Confused? Read on:
News Corporation (ASX: NWS)
Longwave Capital Partners portfolio manager David Wanis picked out News Corporation as an ASX share that’s enticingly undervalued.
According to Longwave’s analysis, News Corp’s ownership of real estate classifieds provider REA Group Limited (ASX: REA) makes up about 85% of the current share price.
But News Corp also has a US real estate business, Move Inc, plus its traditional operations for newspapers, Dow Jones, Foxtel, publishing and net cash.
So Wanis reckons the News Corp share price should be much higher if all these components are added up.
“We’re looking at a company where a reasonable sum of the parts’ value gives you almost twice the current share price,” he told a Pinnacle Investment webinar this week.
Shares for REA Group, the operator of realestate.com.au, have had an excellent 12 months. They have gone from $87 to $136.75 at the close of trade Thursday.
In a market where many companies are trying to get their future performance to match the current share price, Wanis finds News Corp is going the other way.
“In a market where people are focused on areas trying to get to the current share price — putting in bullish assumptions to try to even achieve some of the market caps that are being applied — you have a situation where, with a bit of digging, you can find a pretty attractive situation.”
Nine Entertainment Co Holdings Ltd (ASX: NEC)
Investors Mutual assistant portfolio manager Marc Whittaker this week singled out Nine Entertainment as a potential beneficiary of the real estate boom.
He posted on Livewire that the company is already growing recurring revenue, with subscriptions for streaming service Stan and digital newspapers growing.
But similar to News Corp, it owns a substantial part of property classifieds business Domain Holdings Australia Ltd (ASX: DHG).
“Domain’s ongoing listings recovery and the expectation of carriage fee agreements with Facebook Inc (NASDAQ: FB) and Google should also provide earnings tailwinds,” said Whittaker.
Domain shares, like REA, have gone from strength to strength in the past year. They traded at $2.44 a year ago, but ended Thursday on $4.41.
While Nine’s traditional television business will do nicely during the COVID-19 recovery, Whittaker said its digital assets are where the long-term growth will come from.
“Digital earnings grew 53% year-on-year and now account for 41% of earnings, which we expect to rise to around 60% over the next three years.”
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of Alphabet (A shares). The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Facebook, and REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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