The team at Morgans has been running the rule over a number of ASX shares once again.
Among its best ideas for May are the shares listed below. Here's why the broker rates these ASX shares as buys with price targets implying over 20% upside potential:
Santos Ltd (ASX: STO)
If you're looking for exposure to the energy sector then Santos could be the way to do it. Morgans currently has an add rating and $10.00 price target on the company's shares.
The broker likes the company due to its diversified earnings base and attractive growth profile. Morgans said:
"We expect the resilience of STO's growth profile and diversified earnings base see it best placed to outperform against a backdrop of a broader sector recovery. While pre-FEED, we see Dorado as likely to provide attractive growth for STO, while its recent acquisition increasing its stake in Darwin LNG has increased our confidence in Barossa's development. PNG growth meanwhile remains a riskier proposition, with the government adamant it will keep a larger share of economic rents while operator Exxon has significantly deferred growth plans across its global portfolio."
South32 Ltd (ASX: S32)
Not so keen on energy but looking at resources? Then South32 could be a quality option according to the broker. Especially following the transformation of the mining giant's portfolio.
Morgans currently has an add rating and $6.10 price target on South32's shares. The broker explained:
"S32 has transformed its portfolio divesting South African thermal coal and acquiring an interest in Chile copper, substantially boosting group earnings quality, as well as S32's risk and ESG profile. Unlike its peers amongst ASX-listed large-cap miners, S32 is not exposed to iron ore. Instead offering a highly diversified portfolio of base metals and metallurgical coal (with most of these metals enjoying solid price strength). We see attractive long-term value potential in S32 from de-risking of its growth portfolio, the potential for further portfolio changes, and an earnings-linked dividend policy."
Treasury Wine Estates Ltd (ASX: TWE)
A final ASX share that is rated highly by Morgans is Treasury Wine. It is the wine giant behind a range of brands including Penfolds and 19 Crimes.
Morgans currently has an add rating and $13.93 price target on its shares. Morgans commented:
"TWE owns much loved iconic wine brands, the jewel in the crown being Penfolds. We rate its management team highly. The company recently reported an impressive 1H22 result despite facing a number of material headwinds. The foundations are now in place for TWE to deliver strong double-digit growth from 2H22 over the next few years. Trading at a material discount to our valuation and other luxury brand owners, TWE is a key pick for us."
