COVID-19 has created many tailwinds for adaptive sectors such as tech, retail and consumer staples. Here are three ASX shares that could represent good value at today’s prices and continue to deliver shareholder value throughout and post the COVID-19 pandemic.
1. Dicker Data Ltd (ASX: DDR)
Dicker Data is a wholesale distributor of computer hardware, software, cloud and emerging technologies in Australia. In the company’s AGM market update on 23 July, it highlighted that the recent surge in remote work has resulted in a significant increase in demand for the company’s remote and virtual working solutions across its hardware and software portfolios. For the company’s unaudited half-year results, its revenue was up 18.1% and net profit after tax up 23.5%. The new status quo of working from home will bring about continued demand for remote and virtual working solutions. I believe Dicker Data’s earnings tailwinds makes it a better pick than similar ASX shares such as Rhipe Ltd (ASX: RHP).
2. Electro Optic Systems Holdings Ltd (ASX: EOS)
EOS manufactures products within the aerospace and defence markets. The company has faced a challenging first half as its earnings have been materially impacted by COVID-19. Its customers, suppliers and EOS itself have faced significant volatility around the timing of contracts being signed and delivered. As such, Electro Optic Systems expects to report a first half loss of negative $18.2 million and a net loss after tax of $12.7 million.
Electro Optic Systems forecasts that the FY20 profit will likely fall in the range of $20-$30 million EBIT. This is somewhat consistent with its prior guidance of $27 million EBIT. Despite the challenges with the timing of contracts and cash flows, it believes the risk-weighted pipeline remains strong at $3 billion, with the order backlog unchanged. Its outlook for FY21 is for strengthening growth as activity deferred from FY20 is caught up, backlog is processed and pipeline awards are made. I believe the near-term volatility of the Electro Optic Systems share price could present a good buying opportunity given the ‘stickiness’ of earnings in the defence market and the upbeat FY21 outlook.
3. People Infrastructure Ltd (ASX: PPE)
People Infrastructure provides workforce management and human resources outsourcing services in the health and community care, information technology and general staffing sectors. The business faces potential near-term risks for sectors that are dependent on government funds and employer support schemes, and a broader reduction in demand for staffing services. This could dampen its earnings in 2020.
Notwithstanding the risks, its revenues could also accelerate given an increase in staffing service demand and a recovery of key sectors such as IT and nursing. All things considered, the company currently expects its FY2020 normalised earnings before interest, taxes, depreciation and amortisation (EBITDA) to be in the range of $24 to $25 million. This would represent a year-on-year increase of 34.8% to 40.5%. The company currently trades at a price-to-earnings (P/E) ratio of approximately 12. Given its valuation and growth potential, I believe the People Infrastructure share price could be a cheap ASX share to buy amid COVID-19.
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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited and People Infrastructure Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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