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There’s a pair of S&P/ASX 200 Index (ASX: XJO) shares right now that are in a dip that the team at Morgans reckons presents a great chance to pounce.
Let’s take a look at these companies that could be fruitful long-term prospects:
On track for a long-term duopoly
Wealth platform provider Hub24 Ltd (ASX: HUB) last week revealed it had acquired client portal tech company Myprosperity for $40 million in shares.
Morgans senior analyst Scott Murdoch noted that the takeover would take some time before it had a positive impact on Hub24’s numbers.
“Hub24 expects an EPS [earnings per share] drag through FY24 to 25, neutral in FY26, and ~4% to 5% accretive from FY27, which includes some broad assumptions on wider benefits to Hub24,” Murdoch said on the Morgans blog.
Myprosperity was purchased for 10 times its 2023 revenue, making it seem “fully priced”.
The Hub24 leadership isn’t worried, though.
“Management expressed high confidence in the strategic rationale to accelerate its ‘platform of the future’ strategy and strengthen the group’s leadership position and wider relevance.”
These short-term integration pains and the general volatility in the investment market seem to have conspired to send the Hub24 share price down 10.4% since 6 March.
For Murdoch, this presents a tempting buying opportunity for those willing with a long investment horizon.
“Longer-term we expect Hub24 to continue to entrench a market leading position (along with Netwealth Group Ltd (ASX: NWL)) in the platform sector, which is a key attraction.”
‘The building blocks are in place’
Debt buyer Credit Corp Group Limited (ASX: CCP) has watched its share price fall almost 25% since its 2 February peak.
“Australian debt buying volumes remain subdued, with cost management in focus to preserve margins,” Murdoch said on the Morgans blog.
“In the USA, both operational and industry conditions have improved incrementally. Volumes are improving — price adjustment will be key.”
He reminded investors that the company had reaffirmed its financial year 2023 guidance, with net profit after tax and amortisation expected to be between $90 to $97 million.
“Consumer lending is on track to deliver the expected 2H23 earnings skew and drive the majority of FY24 growth,” said Murdoch.
“The building blocks are in place for Credit Corp to return to delivering growth from FY24: profitability uplift from the increased loan book (in place); scale and improved operational effectiveness in the USA (execution required); partially offset by a rebasing of Australian earnings (ongoing as subdued volumes persist).”
The stock price has now dipped to 11 times financial year 2024 earnings, urging Morgans analysts to rate Credit Corp as an add.
“Improved operational performance and sector conditions are required in the USA to increase conviction in the outlook, with 1Q23 showing enough incremental evidence this can occur.”
