Key points

• Aristocrat is aiming to acquire UK listed Playtech for $5 billion
• Rival bidder, JKO Play, has withdrawn its higher offer
• There are concerns that a large group of Asia-based investors wouldn’t accept JKO Play’s higher offer
• This could mean the lower Aristocrat offer is not approved by Playtech shareholders next week

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The Aristocrat Leisure Limited (ASX: ALL) share price will be on watch this morning.

This follows the release of an update on its proposed $5 billion acquisition of UK listed real money gaming company Playtech.

Why is the Aristocrat share price on watch?

The Aristocrat share price will be on watch today after it revealed that one of its biggest rivals in the pursuit of Playtech has pulled out of the race.

According to the release, on Friday rival suitor JKO Play confirmed that it does not intend to make an offer to acquire Playtech.

This could be a big win for Aristocrat as JKO Play was proposing an offer of 750 pence per share for Playtech, which is higher than its own offer of 680 pence per share.

The company said: “The Playtech Board Recommended Acquisition remains the only firm offer available to Playtech shareholders, despite the substantial amount of time provided to potential bidders to make alternative proposals. Aristocrat further confirms that the regulatory approvals process remains well on track, and it is committed to completing the acquisition as quickly as possible. Aristocrat reiterates that the terms of the Recommended Acquisition provide full and fair value for Playtech shareholders, with attractive cash certainty.”

What’s next?

Playtech shareholders will soon vote on Aristocrat’s proposal at a meeting on 2 February.

However, what will happen at the shareholder meeting remains uncertain. This is because, as the Financial Times has reported, a large group of Asia-based investors have been building a ~27% stake in Playtech.

These investors are understood to be planning to obstruct any deal that does not meet their valuation of the company and are believed to be the reason why JKO Play and a previous bidder withdrew offers.

Given that JKO Play has withdrawn a higher offer than Aristocrat’s proposal, if these reports are accurate, it seems unlikely that this group will vote in favour of its proposal.

Aristocrat appeared to acknowledge this risk. It commented: “Aristocrat also notes comments in Playtech’s announcement regarding a number of material investors who have not to date engaged meaningfully about their views on the Recommended Acquisition. Aristocrat urges all Playtech shareholders to vote in favour of the Recommended Acquisition at the relevant shareholder meetings to be convened on 2 February 2022.”

All eyes will be on that vote early next month.

The post Why the Aristocrat Leisure (ASX:ALL) share price is one to watch today appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• 2 outstanding ASX 200 shares to buy this month according to analysts
• 3 top ASX 200 shares to buy in January
• Why Afterpay, Altium, Aristocrat Leisure, and Pro Medicus shares are sinking
• Why the Aristocrat Leisure (ASX:ALL) share price is tumbling lower today

Motley Fool contributor James Mickleboro 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• PointsBet shares have fallen heavily over the last 12 months
• Goldman Sachs believes this has created a buying opportunity
• The broker’s price target implies potential upside of over 80%

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The PointsBet Holdings Ltd (ASX: PBH) share price could be a bargain buy after recent weakness.

That’s the view of one of Australia’s leading brokers, which has reiterated its buy rating on Monday morning.

Why is the PointsBet share price a bargain buy?

According to a note out of Goldman Sachs, its analysts have reiterated their buy rating with a trimmed price target of $11.00.

Based on the current PointsBet share price of $6.05, this implies potential upside of 82% over the next 12 months.

Goldman believes that the company’s shares could rerate to higher multiples this year, particularly given the transformational year that it has ahead of it.

What did the broker say?

Goldman feels the weakness in the PointsBet share price has created a buying opportunity for investors.

It commented: “Online sports-betting stocks significantly sold off in CY21, particularly US listed peers, which we believe can be attributed to: i) concerns around competition and sustainability of the sector, ii) generally slower-than-expected new state openings, and iii) market inflation concerns and rotation from these high-growth names. That said, we see this as an attractive entry point for PBH given the lowered expectations and transformational year ahead wherein it is targeting a tripling of North American state exposures.”

“In our view CY22 will be a transformational year for PBH, given a confluence of some US states maturing, rationality playing out between competitors, potentially consolidation across the industry as well as PBH’s target of almost tripling its North American state exposure from the 8 currently operational in Q2FY22E. Some of the next states set to be announced will include New York where PBH already had success in previous tenders, Ontario Canada, Pennsylvania, Maryland, Tennessee and Louisiana,” the broker added.

Looking ahead, Goldman is expecting PointsBet’s second quarter update later this month to “continue to highlight strong momentum across its domestic franchise.” The broker expects the company to be “firmly 4th place in terms of market share across digital wagering domestically noting its target of 10% share by 2025 (~4% now).”

The post Top broker tips 80% upside for the PointsBet (ASX:PBH) share price appeared first on The Motley Fool Australia.

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• Here’s why the PointsBet (ASX:PBH) share price stormed 5% higher today
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• Why is the PointsBet (ASX:PBH) share price winning today?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Pointsbet Holdings Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• One leading expert has said that investors shouldn’t buy this market dip
• Morgan Stanley fund manager Andrew Slimmon thinks that investor sentiment could leave the growth names for a while
• Better priced tech names like Microsoft and Alphabet are more attractive to him

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In the last few weeks, there has been widespread declines for plenty of ASX shares as well as the global share market.

Looking at the S&P/ASX 200 Index (ASX: XJO), it has fallen 5% since the start of the year. But plenty of ASX shares have fallen even more.

For example, the Xero Limited (ASX: XRO) share price has dropped 20% this year. The REA Group Limited (ASX: REA) share price has fallen 14% in 2022. Buy now, pay later business Zip Co Ltd (ASX: Z1P) has seen its share price fall 23% in 2022. The Temple & Webster Group Ltd (ASX: TPW) share price has fallen 23% this year.

It has been a rough start to 2022 for the names that are known as growth stocks. 

One common saying in the investment world is ‘buy the dip’. But one leading fund manager does not think that the current decline of (international) high-growth shares is an opportunity.

A warning against buying the dip

Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management, recently spoke on the “What Goes Up” Bloomberg podcast.

The key line he said was: “Avoid the temptation to step in and buy into the selloff in high-growth stocks. My experience is: Once the fever breaks, it’s done for quite a while.”

He doesn’t think that many ultra-growth shares are going to see a V-shaped recovery because if share prices start to recover, there will always be someone looking to get out at a breakeven price to what they bought it for.

Mr Slimmon doesn’t think that this is quite the same as the dotcom bust in 2000. The big tech names like Microsoft and Alphabet are not trading at extremely high earnings multiples. However, the ‘uber-growth shares’ are/were as expensive as they were in 2000.

When could prices recover?

He went on to say on the podcast that there could be a bit more of a decline to come with the share market, or at least these high-growth names:

Well, I think it’s first seller exhaustion, where stocks stop going down on bad news because there’s no one left to sell them. And I’m just not sure we’re there yet. I haven’t seen big capitulation. I mean, the stocks are down a lot, but there hasn’t been big capitulation in these stocks. The other way I think about it is when no one believes that they can buy the dip anymore. That’s when the bottom happens, right? When people say, “I don’t want to touch them. These are un-investible,” that’s when I get interested. But when people are saying, “Hey, well, what do you think?” Because the memory of making a lot of money is too recent and that leads people to try to bottom fish.

Mr Slimmon said that once those shares stop having ‘counter trend rallies’ and people aren’t interested in that investment any more, that’s when it could be kind of interesting to him.

What shares look good?

According to the fund manager, some of the out-of-love names that look good at the moment are Microsoft, Alphabet and Danaher.

However, the sectors that have an outsized allocation in the portfolio he manages are: financials, real estate investment trusts (REITs) and energy shares. But bear in mind, he is not an Australian-based fund manager.

The post Top fund manager says don’t buy the share market dip appeared first on The Motley Fool Australia.

More reading

• 5 things to watch on the ASX 200 on Monday
• Is the prospect of rising interest rates battering ASX shares?
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• Does the NAB (ASX:NAB) share price make it the best value bank right now?

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. owns and has recommended Temple & Webster Group Ltd, Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Xero. The Motley Fool Australia has recommended REA Group Limited and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Megaport has been rated as a buy by Goldman Sachs
• It believes the company has a massive $129 billion market opportunity
• Goldman sees 35% upside for its shares in 2022

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The Megaport Ltd (ASX: MP1) share price could be great value according to the team at Goldman Sachs.

This follows a sharp pullback in the elastic interconnection services provider’s shares last week following the tech selloff and the release of its second quarter update.

What did Goldman say about the Megaport share price?

According to the note, Goldman believes the Megaport share price is trading on attractive multiples compared to historical levels.

In light of this, the broker has initiated coverage on Megaport’s shares with a buy rating and $20.00 price target.

Based on the current Megaport share price of $14.80, this implies very attractive potential upside of 35% over the next 12 months.

Why is the broker bullish?

Goldman Sachs is bullish on the company due to its first mover advantage as a global provider of cloud connectivity and networking solutions. This is a massive market, with the broker estimating that Megaport has a $129 billion opportunity in current geographies.

Its analysts commented: “MP1 is benefiting from its first-mover advantage, and two structural tailwinds that accelerated through covid-19, including: (1) The adoption of public cloud & multi-cloud usage; and (2) The growth in Networking as a Service (NaaS).”

“Although volatile on a quarterly basis, MRR growth has remained robust at > 40% (cc) for 6 qtrs, and is now annualizing $110mn. However, the opportunity for further growth is immense (GSe A$129bn p.a. spent on fixed enterprise networking across MP1 geographies). Hence with +35% upside to our TP (A$20), and attractive current trading multiples (vs. history), we initiate at Buy,” it added.

In addition to Megaport, Goldman is a fan of NEXTDC Ltd (ASX: NXT) in the cloud space. It has a conviction buy rating and $14.40 price target on its shares.

The post Goldman says Megaport (ASX:MP1) share price has 35% upside appeared first on The Motley Fool Australia.

More reading

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• ASX 200 (ASX:XJO) midday update: BHP’s update, Megaport sinks, HUB24 impresses
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Motley Fool contributor James Mickleboro owns NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended MEGAPORT FPO. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Telstra Corporation Ltd (ASX: TLS) share price will be one to watch on Monday.

This follows news that one of Australia’s leading brokers has downgraded the telco giant’s shares.

Who downgraded the Telstra share price?

According to a note out of Goldman Sachs this morning, its analysts have downgraded the company’s shares to a neutral rating but held firm with their price target of $4.40.

Based on the current Telstra share price of $4.09, this implies potential upside of 7.6% for investors.

However, this was deemed to be insufficient for Goldman to maintain its buy rating, hence its downgrade to neutral this morning.

What did the broker say?

Goldman made the move on valuation grounds, believing that the risk/reward on offer with the Telstra share price was no longer attractive enough following a very strong gain in 2021.

The broker explained: “Following strong share price performance in 2021, TLS now trades: (1) at a premium to global peers; (2) a 2.0% yield spread vs. 10Y AU, > 1std below its LT avg; and (3) broadly in-line with our 12m TP of A$4.40. Hence we downgrade our rating to Neutral (from Buy), given a more even risk/reward.”

Though, it is worth noting that Goldman has provided a few scenarios that pose upside risk to its valuation.

It said: “We see upside risk from: (1) continued mobile strength; (2) infrastructure valuations; (3) Capital management, given strong FCF; and (4) Improved NBN pricing/FWA penetration.”

But for each of those potential positives, the broker has named a downside risk for investors to consider as well.

Goldman explained: “We see downside risk from: (1) FY25 targets requiring strong execution and market rationality; (2) concern around NBN re-sale margin targets; (3) Enterprise headwinds from SD-WAN, NBN & HyperOne; and (4) timing of infrastructure monetisation (we prefer data centre operator Nextdc Ltd (ASX: NXT) (on CL, +41% upside) for digital infra exposure).

The post Why this leading broker just downgraded Telstra (ASX:TLS) shares appeared first on The Motley Fool Australia.

More reading

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• 2 killer ASX shares to buy for a volatile 2022

Motley Fool contributor James Mickleboro owns NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Although the outlook for interest rates is improving, it looks likely to be some time until rates rise to a sufficient level for income investors. In light of this, dividend shares could remain very important for income investors for a little while to come.

With that in mind, here are two dividend shares that offer good yields:

BWP Trust (ASX: BWP)

The first dividend share to look at is BWP. It is a commercial property company and the largest owner of Bunnings Warehouse sites in Australia.

Thanks to strong demand for hardware products and Bunnings being able to open during lockdowns, the hardware giant has been a positive performer over the last couple of years. This has allowed BWP to collect rent largely as normal during the entirety of the pandemic.

In FY 2021, BWP paid was able to pay shareholders a 18.29 cents per unit distribution. It also plans to pay a similar distribution in FY 2022. Based on the current BWP share price of $3.96, this will equate to a 4.6% dividend yield.

National Storage REIT (ASX: NSR)

Another dividend share to look at is National Storage. It is one of the ANZ region’s largest self-storage operators. It has a portfolio of over 210 centres providing tailored storage solutions to over 85,000 residential and commercial customers.

As with BWP, National Storage was on form in FY 2021. It delivered a 28% increase in underlying earnings to $86.5 million. This was driven by both organic growth and the benefits of acquisitions. This allowed the company to pay a full year distribution of 8.2 cents per share.

Management is guiding to 10% earnings growth in FY 2022. If it grows its dividends by the same margin, this will mean a 9.02 cents per share. Based on the current National Storage share price of $2.48, this will mean a yield of 3.6%.

The post 2 top ASX dividend shares with good yields appeared first on The Motley Fool Australia.

More reading

• Why this expert sees an opportunity for ASX property shares in 2022
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• Here are 2 ASX dividend shares with attractive yields

Motley Fool contributor James Mickleboro 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Friday the S&P/ASX 200 Index (ASX: XJO) finished the week deep in the red following a market selloff. The benchmark index fell a disappointing 2.3% to 7,175.8 points.

Will the market be able to bounce back from this on Monday? Here are five things to watch:

ASX 200 expected to fall again

The Australian share market looks set to start the week with another decline. According to the latest SPI futures, the ASX 200 is expected to open the day 49 points or 0.7% lower this morning. This follows a poor end to the week on Wall Street, which saw the Dow Jones fall 1.3%, the S&P 500 drop 1.9%, and the Nasdaq tumble 2.7%.

Oil prices fall

Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could come under pressure today after oil prices pulled back on Friday. According to Bloomberg, the WTI crude oil price fell 0.5% to US$85.14 a barrel and the Brent crude oil price fell 0.55% to US$87.89 a barrel. Despite this, oil prices rose for the fifth consecutive week amid supply concerns.

Aristocrat acquisition update

The Aristocrat Leisure Limited (ASX: ALL) share price will be one to watch today after the release of an update on its proposed $5 billion acquisition of UK listed real money gaming company Playtech. On Friday, rival suitor JKO Play advised that it does not intend to make an offer. This means that Aristocrat’s offer is the only firm one available to Playtech shareholders. Playtech shareholders will vote on the offer, which is being recommended by its board, at a meeting on 2 February

Gold price softens

Gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could start the week in the red after the gold price softened on Friday night. According to CNBC, the spot gold price fell 0.35% to US$1,836.1 an ounce. The gold price recorded a 2.7% weekly gain despite its soft finish.

Fortescue update

The Fortescue Metals Group Limited (ASX: FMG) share price will be on watch today following a late announcement on Friday. That announcement reveals that it has signed an agreement with China’s state-owned Sinosteel. The two parties have signed a binding Memorandum of Understanding to complete a rapid project assessment of Sinosteel’s Midwest Magnetite Project in Western Australia. This includes a rail and port development at Oakajee.

The post 5 things to watch on the ASX 200 on Monday appeared first on The Motley Fool Australia.

More reading

• Is the prospect of rising interest rates battering ASX shares?
• These were the best performing ASX 200 shares last week
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• Does the NAB (ASX:NAB) share price make it the best value bank right now?
• Fortescue (ASX:FMG) share price on watch amid Sinosteel Oakajee agreement

Motley Fool contributor James Mickleboro 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Both the ASX and global share markets have had a tough few months
• Many are blaming this on inflation and the prospect of rising interest rates
• But why would higher rates affect ASX shares?

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As many ASX investors would know by now, the S&P/ASX 200 Index (ASX: XJO) has been in a bit of a funk for a few months now. Friday in particular saw the ASX 200 shed a nasty 2.27% to finish the trading day at 7,175.8 points. That leaves the ASX 200 below where it was 6 months ago, and at its lowest point since June last year. Ouch.

Over in the United States, markets haven’t been quite as gloomy. But even so, the flagship S&P 500 Index is now down around 6.5% from its last peak. Many investors have blamed the prospect of inflation, and the higher interest rates that come with it, for the slump in global markets that we’ve seen.

Indeed, the 40-year high inflation reportedly hit earlier this month in the US aligns rather well with the share market slump we have seen across the US and Australian markets since then.

But why is this the case? Wouldn’t the debt-destroying powers of inflation be good for markets?

Why do inflation and higher interest rates spook investors?

Well, not exactly. Sure, inflation does normally mean that both corporate and government debt can be ‘inflated away’. But it’s what normally walks hand-in-hand with inflation that could be spooking markets. That would be higher interest rates.

As the great Warren Buffett once said, interest rates are like financial gravity, pulling everything down to earth. Over the past few years, interest rates around the globe have been at virtually zero. This was a deliberate consequence of central bank intervention to assist the global economy in dealing with the COVID-19 pandemic. Lower rates typically result in cheaper loans, helping to give consumers a spending boost.

But as rates start rising, so too does the cost of borrowing money for every participant of the economy. That includes consumers, businesses, and governments.

If rates were to rise, so too would the cost of a business wanting to borrow money to expand its operations. And that goes for homeowners too. If the Reserve Bank of Australia (RBA) were to raise our own cash rate from the current 0.15% to say 1% or even 2% over the next couple of years, it would mean anyone with a home loan would see their mortgage repayments increase substantially.

So in an inflationary environment, businesses would have to watch their own borrowing costs rise, as well as the purchasing power of many of their consumers fall. All while inflation is driving up the cost of production and labour. So you can see why investors might be spooked by the prospects of inflation and higher rates today.

That is possibly the reason why we have seen both the ASX and the global share market go through some pretty nasty volatility over the past few months. But only time will tell how the macro-economic environment will treat shares in 2022.

The post Is the prospect of rising interest rates battering ASX shares? appeared first on The Motley Fool Australia.

More reading

• These were the best performing ASX 200 shares last week
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• Does the NAB (ASX:NAB) share price make it the best value bank right now?
• 2 cheap ASX 200 shares rated as top buys
• ASX 200 (ASX:XJO) midday update: Whitehaven sinks, BHP to unify

Motley Fool contributor Sebastian Bowen 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It has been a difficult month for growth investors. But every cloud has a silver lining. That lining is that the shares of some quality companies have pulled back meaningfully, potentially making them attractive investment options today.

Three ASX growth shares that could be in the buy zone are listed below. Here’s why they are rated as buys:

Adore Beauty Group Limited (ASX: ABY)

The first growth share to look at is Australia’s leading online beauty retailer, Adore Beauty. Although the company has been growing at a rapid rate since being founded in a Melbourne garage in 2020, it still has only a modest slice of the Australian beauty and personal care (BPC) market. This market is estimated to be worth $11.2 billion a year at present. This means Adore Beauty has a long runway for growth, which will be supported by the structural shift online and its growing customer base which is approaching 1 million.

UBS currently has a buy rating and $6.00 price target.

Goodman Group (ASX: GMG)

Another growth share to look at is Goodman Group. It is a leading integrated commercial and industrial property company which focuses on investing in and developing high quality industrial properties in strategic locations. These are global locations close to large urban populations, particularly around major gateway cities, where demand is strong and transformational changes are driving significant opportunities. This strategy is working wonders and has been driving strong and sustainable growth for years.

Citi believes Goodman is well-placed to continue its growth and is tipping it to outperform its earnings guidance in FY 2022. The broker has a buy rating and $27.50 price target on its shares.

Hipages Group Holdings Ltd (ASX: HPG)

Another ASX growth share to look at is Hipages. It is a leading Australian-based online platform and software as a service (SaaS) provider connecting consumers with over 30,000 trusted tradies. It was a strong performer in FY 2021, delivering a 22% increase in revenue to $55.8 million. Pleasingly, it built on this with a 14% increase in first quarter revenue to $14.9 million despite lockdowns. Looking ahead, the company has an enormous market to grow into, which bodes well for the future.

Goldman Sachs is very bullish on its growth prospects and sees opportunities for Hipages to win a significant share of industry advertising spend. As a result, it currently has a buy rating and $5.15 price target on its shares.

The post 3 ASX growth shares to buy after the market meltdown appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Adore Beauty Group Limited. The Motley Fool Australia owns and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia has recommended Adore Beauty Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Key points

• Some quality ASX shares have taken a dive in recent weeks
• Fast food business Collins Foods is achieving compelling progress in Europe
• Pro Medicus shares have seen a sharp decline, but profit and its client base continue to grow

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January 2022 has been a rough month for plenty of ASX shares. Does that make them now buys?

Well, just because a share price drops it doesn’t automatically make it better value or a buy. Sometimes shares of businesses drop because they genuinely are worth less than they used to be because of a problem.

However, a decline in the share price can provide an opportunity to buy good businesses at better prices.

With that in mind, here are two that have suffered recently:

Collins Foods Ltd (ASX: CKF)

The Collins Foods share price has fallen by 16% since 4 January 2022.

Collins Foods is a large franchisee of KFCs. It has 260 outlets in Australia, 16 in Germany and 35 in the Netherlands. But it also has a small but growing network of Taco Bells in Australia as well, there are 13 in Queensland, four in Victoria and one in Western Australia. Its goal is to expand these networks across the regions it operates.

At the end of November, the company reported another period of growth for the first of FY22. It said that the result was underpinned by a return to growth in its European operations. Total revenue increased 8.5% to $534.2 million, whilst underlying net profit after tax increased 31.6% to $28.9 million.

Collins Foods also recently announced its corporate franchise agreement in the Netherlands commenced on 31 December. It now has full responsibility for developing, marketing, operating and support the KFC business in the Netherlands.

Is the ASX share a buy now? Macquarie thinks so, with an ‘outperform’ rating and a price target of $14.80. The broker notes that inflation and other short-term issues could be problematic, but continuing growth of its restaurant numbers will help in the longer-term.

Macquarie’s projections put the Collins Foods share price at 21x FY22’s estimated earnings.

Pro Medicus Limited (ASX: PME)

The Pro Medicus share price has fallen 28% since 4 January 2022.

This business is a healthcare IT company which specialises in enterprise imaging and radiology information system (RIS) software.

It has a global presence which is growing, particularly in the US as well as the EU. In FY21 it had six major client wins, with five in North America. The business also received FDA clearance for the breast density algorithm.

Pro Medicus has a very high earnings before interest and tax (EBIT) margin, it was 63.2% in FY21. This helped underlying revenue rise by 19.5% whilst profit after tax jumped 33.7%. The company is debt free and continues to grow its full year dividend by double digits.

Its cloud services give it a “huge strategic advantage” over competitors according to the company. Pro Medicus also believes it’s strategically positioned to leverage AI. Management are expecting to win more contracts – the pipeline continues to grow strongly.

Morgans currently rates the ASX share as a hold. However, the price target is $54.49, which implies a rise of around 20% over the next year.

The post Are these 2 beaten-up quality ASX shares now buys? appeared first on The Motley Fool Australia.

More reading

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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. owns and has recommended Pro Medicus Ltd. The Motley Fool Australia owns and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Collins Foods Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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