2 little-known ASX shares that this fund manager says have 'strong' outlooks

Wilson Asset Management is bullish about these two ASX shares, including IPH.

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Key points

  • The fund manager Wilson Asset Management has picked out two of its preferred ASX share ideas
  • One pick, intellectual property business IPH recently announced a Canadian acquisition
  • Diagnostic imaging provider Capitol Health is another pick that WAM identified

Wilson Asset Management (WAM) is one fund manager that likes to hunt for smaller ASX shares that could have solid investment outlooks.

WAM runs a number of different listed investment companies (LICs) including WAM Capital Limited (ASX: WAM), WAM Active Limited (ASX: WAA), and WAM Research Limited (ASX: WAX).

The fund manager likes to look for compelling, undervalued growth opportunities on the ASX share market. The below companies are two investment ideas that WAM recently highlighted.

IPH Ltd (ASX: IPH)

WAM described IPH as Asia Pacific's leading intellectual property (IP) services group with a network of member firms and clients in more than 25 countries.

Last month, IPH announced that it was buying Canadian IP agency Smart & Biggar for a total of $387 million.

The fund manager noted the acquisition will extend IPH's international secondary markets network beyond the Asia Pacific region for the first time and lift IPH "towards being a global leading IP services group".

IPH expects that the transaction will result in adding to underlying earnings per share (EPS) of approximately 10% in the first year of ownership and deliver access to more growth opportunities.

August was also reporting season. Last month, the company announced its full-year result, revealing a 14% year-over-year increase of underlying net profit after tax (NPAT) to $86.7 million as well as an 11% rise in underlying earnings before interest, tax, depreciation and amortisation (EBITDA).

Here is what WAM had to say about the company:

We remain positive on IPH and believe the business has a strong runway for organic and acquisition-led growth over the medium term.

Capitol Health Ltd (ASX: CAJ)

Capitol Health is described by the fund manager as a diagnostic imaging provider to the Australian healthcare market.

Last month, the ASX share announced the full-year result for its 2022 financial year which was better than the market was expecting. It also included the acquisition of Future Medical Imaging Group, a diagnostic imaging services provider, for a total cost of $56.1 million.

WAM pointed out the acquisition is expected to add to EPS in the high single digits. The fund manager said:

With a strong balance sheet and continued investment in well-defined growth opportunities, we believe the outlook for Capitol Health remains strong as diagnostic imaging providers recover from the coronavirus pandemic.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended IPH Ltd. The Motley Fool Australia has recommended IPH Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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