The majority of ASX news tends to cover the biggest dozen companies on the market and the latest hot stocks.
Here, I look at two little-known ASX shares, Thorn Group Ltd (ASX: TGA) and Vitalharvest Trust (ASX: VTH), and why they might be in the bargain bin.
Vitalharvest Trust (ASX: VTH)
Vitalharvest is a real estate investment trust (REIT) that owns farmland which is used to produce various kinds of berries and citrus fruits.
The company also owns the water rights on the farms. The value of the water rights fluctuate depending on weather trends and the demand and supply of water at any point in time.
Including the current market value of the water, Vitalharvest’s net asset value (NAV) is approximately $1.05. With a current share price of just $0.86 this represents an 18% discount.
To sweeten the deal Vitalharvest has also paid distributions of 5.6 cents over the past year, constituting a trailing dividend yield of 6.5%
Thorn Group Ltd (ASX: TGA)
Thorn Group is a diversified financial services organisation which owns the Radio Rentals chain and provides alternative consumer and commercial financing solutions, consumer and commercial leasing products and fully integrated debt collection and receivables management.
It’s been a horrible year for Thorn Group with the share price down more than 60%. The CEO departed, there were multiple profit downgrades and the business has shown little to instill faith of an imminent turnaround.
Some investors were hoping that Thorn’s recently concluded strategic review would result in a decision to sell-off underperforming parts of the business (potentially all of it) and therefore realise the value that remains trapped in the business in the form of receivables from loans and lease payments.
Thorn’s management have instead decided to knock back an offer of $82 million to buy the business finance division, electing to pursue a capital raising and a risky turnaround strategy. I am not confident Thorn will be able to turn the fortunes of the company around but with shares trading at less than half its book value one might argue that investors are being handsomely compensated for that risk.
Which Would I buy?
Of the two shares I’d pick Vitalharvest as I think its earnings/profit will be a lot more reliable going forward and the geographic diversification of their assets provides some protection from the fickle nature of weather events.
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Disclosure: at the time of publishing, Luke does not have a financial interest in any of the companies mentiond.
