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  • Leading fund manager names 3 undervalued Chinese shares to buy

    If you’re looking to diversify your portfolio with international shares, then you might want to take a look at the three shares listed below.

    Jacob Mitchell, the Chief Investment Officer at Antipodes Global Investment Company Ltd (ASX: APL), has been running the rule over the Chinese share market and has found a few gems which he believes are undervalued.

    Yum China

    The first share that Antipodes rates highly is Yum China. It is the largest operator of quick service restaurants in China, with a number of popular brands including KFC and Pizza Hut.

    Mr Mitchell believes the company offers a compelling opportunity for investors, particularly given its long runway for growth.

    He explained: “Chain restaurant penetration in China is only 5% versus the US at 65%, so there is a long runway for growth and a major opportunity to take market share. With a sustainable growth rate approaching 10%, we believe the company is cheap on a normalised P/E of about 22x.”

    Another reason to like Yum China is its lead over the competition. This is in respect to its delivery network and its digital footprint.

    The chief investment officer commented: “… it has built a big digital distribution platform, with 180 million digital users. It is also receiving about 30-40% of all online orders through its own app, which is a significant lead versus other online players.”

    Alibaba

    The second share which Antipodes believes is undervalued is ecommerce giant Alibaba.

    The fund manager notes that Alibaba is 14x the size of the largest offline player and hugely dominant across all retail. This is very different to the U.S. market where Amazon’s retail business is only half the size of Walmart.

    Despite Alibaba’s size, Antipodes sees plenty of opportunities to grow in this post-COVID-19 world.

    Mr Mitchell explained: “Organised channels for fresh grocery sales are hugely under-developed in China compared to those in the US, where established super/hypermarkets account for more than 90% of sales.”

    “In China, wet markets – the Asian equivalent of farmers markets – still account for more than 70% of fresh grocery. Given the COVID-19 outbreak likely originated in a wet market, China will now permanently modernise its fresh food supply chain. Alibaba is deploying multiple strategies to attack this opportunity,” he added.

    Alibaba is currently priced on a CY21 price to earnings ratio of 20x, which Antipodes believes is an attractive multiple relative to its forward growth profile. Especially when compared to other large retail and internet platform peers globally.

    Ping An

    A final Chinese share which Antipodes believes is undervalued is Ping An Insurance. It is a life insurance powerhouse and the leader in digital distribution.

    Mitchell notes: “Life insurance in the largely underpenetrated market is the safety net for Ping An, which is an innovator of protection products. It also has industry leading tech and the fact it holds data on +750m Chinese residents leads to competitive advantages – including the effective cross-selling of insurance products.”

    And despite the company growing its earnings at 20% per annum, with a return on capital employed of 30%, its shares are changing hands at just 10x earnings today. Another positive is that the company holds an investment portfolio worth 15% of its market capitalisation.

    How can you invest in these shares?

    If you don’t have direct access to the Chinese market, don’t worry.

    Antipodes has an exchange traded fund (ETF) which give you exposure to a wide range of quality global businesses, including the three listed above. That ETF is the Antipodes Global Shares ETF (ASX: AGX1).

    And here are more exciting shares which could be future market beaters…

    5 stocks under $5

    We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.

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    Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

    The post Leading fund manager names 3 undervalued Chinese shares to buy appeared first on Motley Fool Australia.

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  • Is a Fortescue Metals mega-merger on the cards?

    2 people at mining site, bhp share price, mining shares

    Fortescue Metals Group Limited (ASX: FMG) has been one of the best shares to own in 2020. Whilst the S&P/ASX 200 Index (INDEXASX: XJO) is still down around 10.7% year to date, the Fortescue share price is actually up nearly 30% since 1 January.

    High iron ore prices, a supply squeeze in Brazil and an ultra-low-cost basis have all helped Fortescue achieve multiple all-time highs in a year where most ASX shares have tanked.

    When a company is flush with cash and surrounded by potentially distressed competitors, the merger and acquisition (M&A) rumour mill often go into overdrive. And that’s what we are being treated to a slice of today.

    A Fortescue merger down south?

    According to reporting in the Australian Financial Review (AFR), analysts at Citi Bank have been running the numbers on a potential merger of Fortescue Metals with South32 Ltd (ASX: S32).

    South32 is a ~$10 billion diversified ASX miner that was spun out of BHP Group Ltd (ASX: BHP) back in 2015. Back then BHP’s management restructured the businesses to focus on its ‘core’ assets of oil, coal, copper and iron ore.

    Everything else was shunted off into the newly-formed South32, which became a separately listed entity in its own right. Today, that ‘everything else’ includes metallurgical coal, lead, alumina, aluminium, nickel, zinc and silver operations.

    Fortescue gets more than 95% of its earnings from purely iron ore mining. Citi Bank analysts clearly see South32 complementing Fortescue, diversifying the company away from iron ore.

    Would Fortescue shares benefit from a merger?

    In a sense, this could be a great move by Fortescue in my view. You have to make hay while the sun shines. Right now, Fortescue is getting so much sun it’ll soon have the best winter tan in Australia. The company is cashed up and is benefitting from the highest iron ore prices in years.

    Iron ore is also a highly volatile commodity. It has whipsawed between US$40 and US$120 a tonne over the past 5 years. Diversifying through M&A right now makes great sense from this perspective.

    However, South32 has had problems of its own in recent years. Its shares are sitting not too far from 4-year lows right now. The company is not benefitting from the same kind of commodity pricing tailwinds as Fortescue. It’s coal mines in South Africa have also faced significant production issues in recent years and the company is now trying to exit the market completely.

    Foolish takeaway

    Fortescue is one of the best ASX miners in the country in my view, and I think that its shareholders would benefit enormously if this rumoured acquisition comes to pass. Andrew Forrest, Elizabeth Gaines and the rest of Fortescue’s management team have almost as many runs on the board as Sir Donald and would bring some fresh energy to South32 in my view. But we’ll have to wait and see if Fortescue acts on this idea or looks for greener grass elsewhere.

    For some more ASX shares you might want to check out today instead, take a look at the report below!

    5 ASX stocks under $5

    One trick to potentially generating life-changing wealth from the stock market is to buy early-stage growth companies when their share prices still look dirt cheap.

    Motley Fool’s resident tech stock expert Dr. Anirban Mahanti has identified 5 stocks he thinks are screaming buys. And you can buy them now for less than $5 a share!

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    *Extreme Opportunities returns as of June 5th 2020

    More reading

    Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

    The post Is a Fortescue Metals mega-merger on the cards? appeared first on Motley Fool Australia.

    from Motley Fool Australia https://ift.tt/2By8rim

  • Ackman seeks $3 billion for largest-ever blank-check company

    Ackman seeks $3 billion for largest-ever blank-check companyAckman, whose New York-based hedge fund manages more than $10 billion in assets, can make additional commitments and boost the size of the capital raise to $6.5 billion, according to a filing with the U.S. Securities and Exchange Commission. The special purpose acquisition company (SPAC), Pershing Square Tontine Holdings, Ltd, plans to go public with 150 million units at $20 each, according to the filing. Reuters first reported Ackman’s plans earlier this month.

    from Yahoo Finance https://ift.tt/2YYSWYT

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