The fund manager Contact Asset Management has outlined two S&P/ASX 200 Index (ASX: XJO) shares that could be great value investments and could outperform.
With its Contact Australian Ex-50 Fund, it aims to find businesses that can deliver a mix of growth and income by looking at businesses that are quality Australian companies outside of the S&P/ASX 50 Index (ASX: XFL).
The strategy seeks to invest in founder-led businesses and tomorrowâs leaders within the universe of mid and small-cap ASX shares.
The fund manager said that reporting season is an interesting time for stock pickers like Contact Asset Management. It saw consistent themes from company results in February: tight labour supply, rising interest expense, a cautious consumer and ongoing inflation.
Smartgroup Corporation Ltd (ASX: SIQ)
This ASX 200 share offers salary packaging, fleet management and a range of other services to organisations across Australia. Itâs committed to delivering an âexceptional experienceâ.
Contact pointed out that over the prior two years, Smartgroupâs operating conditions were challenging, but the latest report showed that operating momentum is âimprovingâ.
The fund manager said that novated leasing leads have been âbuoyantâ, while supply chain pressures on vehicle availability are âonly just beginning to abate.â
As the environment normalises, the fund manager is expecting the ASX 200 shareâs sales to improve as orders are converted. Costs are also expected to drop, as redundant service expenses are removed at a faster-than-expected pace.
Contact said that growth in electric vehicles is an âunappreciatedâ additional boost to activity, as well as benefits from the recent investments in digital platforms.
The fund manager believes that Smartgroup has a âstrongâ balance sheet with near zero debt forecast.
Contact pointed out that the better-than-expected dividend highlights managementâs confidence in the outlook.
In the fund managerâs opinion, a forward-looking price/earnings (P/E) ratio of between 11 to 12 suggests âexcellent value.â
Flight Centre Travel Group Ltd (ASX: FLT)
Flight Centre is one of the largest ASX travel shares. It offers both leisure and business travel for travellers.
Contact revealed that it added Flight Centre shares to the portfolio recently.
It pointed out that the corporate business is seeing emerging strong momentum, which now accounts for âover 50% of earnings.â
The fund manager also noted that leisure is also recovering, yet âstill has upside with Australian arrivals at around 70% of pre-COVID levels.â
Contact also thinks that the resumption of Chinese tourism âwill help drive growth.â
On top of that, the fund manager said that the ASX 200 shareâs balance sheet is in a âsound positionâ after the recent capital raising.
Contact said that it expects the founder-led business to return to dividend payments in the next financial year.
The post 2 ASX 200 shares to buy for ‘excellent value’: fund manager 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 Smartgroup. The Motley Fool Australia has recommended Flight Centre Travel Group. 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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