I think value investors would love to buy these 2 cheap ASX shares

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man jumping for joy carrying shopping bagsShare prices are changing all the time, but value investors might be able to find standout opportunities in this uncertain time. I think there are some exciting, cheap ASX shares to consider.

I think that some of the smaller names on the ASX could be underrated by investors, particularly ones that aren’t highly followed.

Both of the below could deliver outperformance in the next year in my opinion.

Estia Health Ltd (ASX: EHE)

Estia is one of the largest aged care operators in Australia. It delivers services across 72 homes, with the company owning 66 of them. Those homes have 6,596 operational places.

The business recently reported its FY23 half-year result, which showed a 9% increase in revenue to $359.2 million. Its average occupancy increased from 90.6% to 91.9%.

The impacts of COVID-19 are easing and the business is seeing “positive momentum”. It continues to make bolt-on acquisitions, while the ASX share’s share buyback is expected to recommence in April.

The Estia Health CEO Sean Bilton said:

Opportunities for growth are expected to be available in keeping with our strategy to grow sustainably, including through the purchase of high quality homes with attractive upside.

We remain confident that the fundamental drivers of the sector will remain strong for those residential aged care providers who put residents at the centre of their operating model and perform in a financially sustainable manner.

According to Commsec numbers, Estia Health is valued at 17 times FY23’s estimated earnings with a potential forward grossed-up dividend yield of 6.7%. That valuation includes the business owning a large property portfolio worth hundreds of millions of dollars.

Metcash Limited (ASX: MTS)

Metcash is a diversified business that supplies IGA supermarkets around the country. It also supplies independent liquor businesses in Australia such as Cellarbrations, The Bottle-O, IGA Liquor, and Porters Liquor.

Finally, the business has a hardware division with brands in it like Mitre 10, Home Timbet & Hardware and Total Tools. Combined, its hardware network has more than 700 stores located in metro and regional areas.

I think of Metcash as a cheaper version of businesses like Wesfarmers Ltd (ASX: WES) and Coles Group Ltd (ASX: COL). According to Commsec, it’s only valued at 13 times FY23’s estimated earnings with a possible grossed-up dividend yield of 7.9%.

Metcash can benefit from ongoing store rollouts, improvements in its logistics and online offerings, and scale advantages.

I think that Metcash’s earnings (like food and liquor) can be resilient even in a downturn, so I think it could be a smart pick at today’s price.

The post I think value investors would love to buy these 2 cheap ASX shares 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 no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group and Wesfarmers. The Motley Fool Australia has recommended Metcash. 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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