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The leading investors from Wilson Asset Management (WAM) have shared thoughts on two ASX shares.
WAM operates several listed investment companies (LICs). Some, like WAM Leaders Ltd (ASX: WLE), focus on larger companies.
Meanwhile, WAM Capital Limited (ASX: WAM) targets “the most compelling undervalued growth opportunities in the Australian market”.
But does WAM have a claim of stock-picking pedigree? The WAM Capital portfolio has delivered an investment return of 15% per annum since its inception in August 1999. That’s before fees, expenses, and taxes. This gross return outperformed the All Ordinaries Accumulation Index (ASX: XAOA) return of 8.3% per annum over the same timeframe.
With that in mind, here are the two ASX shares WAM Capital has outlined in its recent monthly update.
Flight Centre Travel Group Ltd (ASX: FLT)
WAM described Flight Centre as a leisure and corporate travel business operating in 24 countries.
The fund manager noted that in July the business upgraded its profit guidance for FY23, with the company revealing that it now expects underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to be between $295 million to $305 million.
The mid-point of $300 million represents a 7% increase compared to the previous mid-point range, and a $483 million improvement on the underlying $183 million loss in FY22.
The fund manager also noted that total sales volume for FY23 is expected to be $22 billion, which would represent 115% growth year over year. It’d be the second-best result in the company’s history, with FY19 being the best.
Explaining the fund manager’s positive outlook on the ASX share, WAM said:
Going forward, we believe Flight Centre Travel Group can achieve higher levels of profitability than it experienced prior to the coronavirus pandemic due to extensive cost and efficiency savings.
We note that market expectations are yet to incorporate Flight Centre Travel Group’s target in FY25 of a 2% profit before tax margin, and for these reasons, we continue to expect upcoming catalysts of earnings upgrades as the year progresses.
Virgin Money UK (ASX: VUK)
WAM describes Virgin Money as a bank that operates in the UK which is listed on the London Stock Exchange and the ASX.
The fund manager noted the bank recently announced that it had performed “resiliently” under the Bank of England’s annual cyclical scenario stress test, which is designed to assess how a bank would perform in an adverse scenario more severe than the GFC.
After completing that test, Virgin Money UK will look to restart its share buyback program, which is expected to return “up to £175 million” to shareholders in FY23.
In its recent quarterly update, the company revealed what WAM described as “solid financial performance”, driven by “growth in customer accounts, increased business and unsecured lending, and costs being in line with market expectations.”
The fund manager concluded its thoughts on the ASX share with the following:
We look forward to Virgin Money UK providing further updates on the performance of its buyback program and see the potential that cost-to-income forecasts by analysts improve as we enter the 2024 financial year.
