The three ASX shares in this article are poised to benefit from a recovery from COVID-19. One of those ideas is EML Payments Ltd (ASX:EML).
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There are some ASX shares that could be poised to recover from the impacts of COVID-19 in 2021.
Many different sectors were particularly hurt in 2020. Travel, shopping centres, cinemas, casinos and so on were all hit.
However, there are some ASX shares that could recover some more of the lost ground in 2021:
Sydney Airport Holdings Pty Ltd (ASX: SYD)
Sydney Airport is one of the largest infrastructure ASX shares.
Dion Hershan from Yarra Capital Management recently wrote that the ‘stay at home’ shares have outperformed the ‘out and about’ businesses by 21% since the market peak back in February. He thinks that with highly effective COVID-19 vaccines on the horizon and better treatment protocols, mobility will improve and confidence will rebound.
Yarra Capital has been looking for high quality businesses which have been de-rated to more appealing valuations through the sell-off. The fund manager said that it’s overweight to Sydney Airport as well other infrastructure shares like Transurban Group (ASX: TCL) and Atlas Arteria Group (ASX: ALX).
Sydney Airport recently told the market that there would be no distribution paid for the full year result because of the continued significant impact of COVID-19 on the business performance of the airport over the second half of the calendar year.
In terms of traffic, November 2020 showed the domestic passenger market is recovering for the ASX share, but international passenger numbers are still down heavily.
Total passengers were down 90.6% in November 2020 to 350,000. Domestic passengers were down 87.1% to 308,000 whilst international passenger numbers were down 96.9% to 42,000.
The modest recovery in domestic traffic in the month was driven by demand for NSW and Victoria interstate travel. Unrestricted travel between NSW and Victoria was permitted from 23 November 2020. The downturn in international passenger traffic is expected to persist until government travel restrictions are eased.
EML Payments Ltd (ASX: EML)
This ASX share has a number of different payment services for clients to use. EML Payments has general purpose reloadable offerings such as gaming payouts with white label gaming cards, salary packaging cards, commission payouts and rewards programs. EML Payments also offers physical gift cards, shopping centre gift cards and digital gift cards. Finally, it offers virtual account numbers.
The company boasts of a high retention rate with 99% of clients being retained through the three years to 2020. It also says there are high levels of barriers to entry, with necessary regulatory and compliance across the world being one of the main elements. It also has a high level of IT capability, with platforms for customer services.
Its gift and incentive volumes recovered significantly in the first quarter of FY21 after the initial impacts of COVID-19. Total FY21 first quarter revenue grew 20%, compared to the fourth quarter of FY20, to $40.6 million.
Earnings before interest, tax, depreciation and amortisation (EBITDA) generated in the FY21 first quarter was $10 million, which was 69% higher than the fourth quarter of FY20.
At the current EML Payments share price it’s valued at 30x FY23’s estimated earnings according to Commsec numbers.
Audinate Group Ltd (ASX: AD8)
Audinate is an ASX share that owns the Dante platform, which distributes audio signals across computer networks. The company boasts about being the lead supplier of digital and audio video networking for the professional AV industry.
Some of Audinate’s main customer groups, being live sound and large events, are still being impacted because of COVID-19 impacts.
However, the recovery is on course within the sectors of corporate conferences and higher education. There has been a steady improvement in trading conditions since May.
In the first quarter of FY21, it generated revenue of US$5.2 million and EBITDA of AU$0.3 million.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AUDINATEGL FPO. The Motley Fool Australia has recommended AUDINATEGL FPO and EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.