Adairs could be one of the ASX shares to look at right now.
The post Got money to invest? Here are 2 ASX shares that could be buys appeared first on The Motley Fool Australia. –
There are a number of ASX shares that could be good ideas to look at right now.
Businesses and investments that are trading at an attractive valuation might be worthwhile considering.
These two ASX shares could be options:
Adairs Ltd (ASX: ADH)
Adairs is one of leading retailers in Australia. The ASX share sells a variety of different products including bedding, bath, homewares and furniture.
According to Commsec, it’s currently trading at 11x FY21’s estimated earnings.
It’s planning to grow revenue, profit and efficiency further with some initiatives.
The ASX share points to its proven and resilient business model as a key driver with strong brands, a large and loyal customer base and a vertical supply chain. That model leads to higher margins and gives it more control. It now has more than 900,000 ‘Linen Lover’ club members that visit more often and spend more on each visit compared to non-members.
Another future profit driver is the digital transformation that the business is going through, as well as its omni-channel leadership. In the first half of FY21, Adairs online sales was up 95.2% and Mocka sales were up 44.4%, with total online sales now at 37% of total online sales.
Mocka is a division that management believe has a lot of potential. Mocka’s last 12 months of sales amounts to $21.9 million from New Zealand, with a population of 5 million. That compared to $31.7 million of sales in Australia. Adairs said if Mocka Australia achieves the same sales-to-population parity with New Zealand, that could mean sales of over $110 million. Mocka’s brand awareness is growing quickly, it just expanded its Australian warehouse facilities to support growth. There are also product category expansion opportunities.
With its stores, Adairs said that all stores are profitable, and that larger stores are more profitable with higher margins, so there are significant upsizing opportunities within the current portfolio. However, there are still profitable new store opportunities remaining.
Finally, the construction of its DHL-operated national distribution centre in Melbourne is on track to be operational in the first quarter of FY22. This is expected to deliver annual savings of $3.5 million per annum for the ASX share once fully operational. It will also improve stock flow and online order fulfilment. Management say this will support business growth well into the future.
VanEck Vectors Morningstar Wide Moat ETF (ASX: MOAT)
This is an exchange-traded fund (ETF) that is offered by VanEck. The concept of the ETF is that Morningstar analysts give over 1,000 US businesses a moat rating, which is how long that business’ competitive position is expected to endure.
Companies that have an economic moat that is expected to endure for many years are given a ‘wide moat’ rating.
Then, of those businesses with a wide moat rating, the Morningstar analysts picks businesses that are attractively lower than the estimated fair value.
There are approximately 50 holdings in the portfolio. The top 10 are currently Biogen, Wells Fargo, Cheniere Energy, Alphabet, Northrop Grumman, Philip Morris, Blackbaud, Raytheon Technologies, General Dynamics and Berkshire Hathaway.
Those holdings are fairly evenly spread across different industries. There are currently five sectors with a weighting of more than 10%: healthcare (20.3%), information technology (16.6%), industrials (15.4%), financials (13.3%) and consumer staples (11.1%).
Past performance is no guarantee of future performance. Over the last five years, the ETF has delivered an average return per annum of 17.1%, which is just over 2% per annum better than the S&P 500 over that same time period.
The ASX share comes with an annual management fee of 0.49%.
The post Got money to invest? Here are 2 ASX shares that could be buys appeared first on The Motley Fool Australia.
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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 recommended ADAIRS FPO. The Motley Fool Australia has recommended ADAIRS FPO and VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.