I think that reporting season can be a catalyst to go hunting for ASX shares. August is a good month to find hidden opportunities.
Some share prices are up and some share prices are down. I think that there are some great-looking businesses that could be good picks for the long-term, like these two:
Brickworks Limited (ASX: BKW)
Brickworks is the leading brickmaking business in Australia. It’s also involved with other building products including roofing, masonry and precast.
But that’s not why I recently decided to invest in the business.
I did so because of the big discount to the asset value of Brickworks, and I think those assets are really good.
A big chunk of the asset value is Washington H. Soul Pattinson and Co Ltd (ASX: SOL) shares. Brickworks owns 26.1% of the investment conglomerate which is diversified across numerous industries including telecommunications, financial services, agriculture and resources. WHSP is a business that is steadily growing its asset value and dividends for shareholders.
I also like the exposure to industrial property that the Brickwks has.
It owns a lot of land (some of it unused) for its building product manufacturing purposes.
Brickworks has an industrial property trust which it owns 50% of alongside the ASX share Goodman Group (ASX: GMG). Huge warehouses are being built for tenants like Coles Group Ltd (ASX: COL) and it has a few years of projects already lined up for more land within the trust.
Brickworks also just announced a manufacturing property trust, which will own a portfolio of Brickworks properties that make building products. It has sold 49.9% of its ownership of these properties to Goodman. Brickworks benefits from the cash received as well as the uplift in value.
The ASX share has had a very reliable dividend – it hasn’t been reduced in over 40 years. Including franking credits, the last 12 months of Brickworks dividends amounts to a yield of 4%. But, I expect the next 12 months of dividends will be a bit more than that.
Volpara Health Technologies Ltd (ASX: VHT)
Volpara is a leading business in the breast screening and practice administration space.
I think one of the best things to know about this business is that it has a market share of more than a third of US women where at least one Volpara product is used on their images.
The company has been working on growing its capabilities when it comes to identifying risk as early as possible for patients. There are also useful advantages when it comes to integrating with electronic health records (EHR).
The ASX share boasted in its latest quarterly update of a low amount of churn with its software as a service (SaaS) clients. It means that its annual recurring revenue can steadily grow.
Volpara has a very high gross profit margin, meaning that most of the new revenue can fall onto the next level of profit, like a layered waterfall. Combine that with high retention and strong revenue growth and this can produce good financial results, particularly in the future.
In FY23, customer revenue is expected to be between NZ$31.5 million to NZ$33 million. That would be growth of between 20% to 25% compared to FY22.
The company also said it’s aiming to be operating at cash flow breakeven status in the fourth quarter of FY24, which is a promising sign that’s what the company is working towards. It’s also looking to reduce costs, become more efficient and grow the company’s high margin products.
The 38% fall of the Volpara share price in 2022 makes it look much more attractive as an investment.
