S&P/ASX 200 Index (ASX: XJO) shares get a lot more media and analyst attention than companies in the small-cap space.
But not all ASX 200 shares are household names.
Speaking to Livewire recently, Anthony Aboud, portfolio manager at Perpetual, and Sean Fenton, managing director at Sage Capital, tipped two ASX 200 shares they believe the market has overlooked.
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A bounce back in earnings ahead
Aboud named Event Hospitality and Entertainment Ltd (ASX: EVT), citing the strength of the management team and the ASX 200 share's bounce back potential from the pandemic.
"It is a founder-led business and if you could get three worse industries to be hit by COVID: it is cinemas, hotel and ski lodges. And they've got the trifecta there. So, they've been hit really badly," he said.
Aboud continued:
We feel that they went into COVID though with a very strong balance sheet and have managed to take costs out of their business structurally. They've actually started some new revenue streams, but also reinvest in all of their systems. I believe that they're going to make materially more money on the other side of COVID than they did going in.
Looking at some strengths over the next few years, Aboud noted that there are good lead indicators in its hotels business, with bookings "looking very good".
Just in Sydney with the light show on at the moment, Vivid, Sydney hotels are above 80% occupancy. Just for some lights, you know? We're starting to see those lead indicators come through.
Addressing its ski related business, Aboud said, "This will be probably the most profitable snow season they'll ever have."
As for the cinemas business, he added, "And don't forget Top Gun."
Summing up why Perpetual likes this overlooked ASX 200 share, Aboud said, "We feel that they're going to really have a bounce back in earnings."
He said analysts still have earnings forecasts in 2023 and 2024 some 30% below pre-COVID levels.
"We think they'll beat those earnings. We think the market's overlooking it. We think it's a quality management team with quality assets [and] a good balance sheet," he said.
An overlooked ASX 200 share with growth opportunities
Fenton tipped Nufarm Ltd (ASX: NUF) as the ASX 200 share the market is overlooking.
Noting that we're heading into a period of economic downturn, he said Sage Capital looks for companies whose business is "unrelated and resilient to that".
Namely, the agricultural sector.
We've got a global energy crisis, which feeds through to fertilisers, driving soft commodity prices higher. Nufarm is a global crop protection business so it does all the herbicides, fungicides, pesticides. With increasing value of crops, you want to protect those as a farmer. That's a good base business.
Fenton said that long-term shareholder Sumitomo had sold down their holdings which "crunched the price down a little bit… I think there's a good opportunity to enter it at the moment".
Fenton also noted the ASX 200 share offers growth opportunities:
They've got some R&D [research and development] and a broader seeds business. Within that [they have] some omega-3 canola IP [intellectual property], and that's been approved by the FDA to go into fish food, but also into human consumption.
Over the next few years, there's a real opportunity for them to grow that business, good IP, a high margin business, and that's one that's being overlooked a bit by the market.
