There are some compelling ASX shares to look at in January 2021.
These are two businesses liked by experts:
Pacific Current Group Ltd (ASX: PAC)
Pacific Current describes itself as a business that is a global multi-boutique asset management business committed to partnering with exceptional investment managers. It combines capital — offered through bespoke economic structures — with strategic business development to help businesses grow.
Dean Fremder of Perpetual Limited (ASX: PPT) said when Pacific Current shares were a bit lower: "The stock's really cheap. It is on nine times earnings. It's growing earnings at double digits, so more than 10% a year. It's paying a 6.5% fully franked yield. And most excitingly, we think they can pay out a much larger portion of their earnings as dividends. We see no reason, given the surplus franking credits they have on the balance sheet, they can't be paying a 10 or 11% fully franked yield in the next 12 months. So, really excited about that one."
In FY20 the ASX share grew underlying earnings per share (EPS) by 18% and it increased the dividend by 40%. In the three months to 30 September 2020, Pacific Current said that its funds under management (FUM) grew by a further 14% to $106.4 billion, largely driven by the investment in fund manager GQG.
Pacific Current is hoping to launch a new fund to invest external funds into other investment managers – it would earn a management fee of this fund. Pacific Current is also hoping that its managers will be able to win more investment mandates as life (hopefully) starts returning to normal in 2021.
According to Commsec, the Pacific Current share price is valued at 10x FY22's estimated earnings.
Pushpay Holdings Ltd (ASX: PPH)
Fund manager Ben Griffiths from Eley Griffiths said: "Over the last 12 months it has become clear Pushpay is at an inflection point for both cashflow and earnings. Under the stewardship of CEO Bruce Gordon, Pushpay has transitioned from a founder-led investment phase into an optimize/monetization phase. What is more surprising is the very conservative nature of the accounts (a rarity in small cap tech, outside Iress Ltd (ASX: IRE)). We believe the next few years for Pushpay will be rewarding and that COVID-19 will accelerate the already entrenched trend to digital giving/engagement from cash."
The electronic donation ASX share has a lower price/earnings (p/e) ratio than some other technology shares. According to Commsec, the Pushpay share price is valued at 23x FY23's estimated earnings.
In the FY21 interim result Pushpay reported that its operating revenue for the six months to 30 September 2020 increased by 53% to US$85.6 million. Pushpay is hoping to achieve US$1 billion of annual revenue down the track. Pushpay is expecting to achieve continued revenue growth as it continues to execute on its strategy and gain further market share in the US faith sector.
That HY21 result also showed expanding operating leverage. The gross profit margin went up from 65% to 68%. Whilst operating revenue grew 53%, operating expenses only grew by 16%. This helped the earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin increase from 17% to 31%. Management expect "significant operating leverage to accrue as operating revenue continues to increase, while growth in total operating expenses remains low."
Pushpay now expects EBTIDAF to be in the range of US$54 million to US$58 million for FY21, which would be growth of more than 100%.
Over the long term, Pushpay is targeting a market share of over 50% in the medium and large church segments in the US.
The ASX share also continues to evaluate additional potential strategic acquisitions that broaden the current proposition and would add significant value to the current business.
