3 Aussie reopening opportunities now

Are there any opportunities left to invest in undervalued companies on the ASX? Well, that’s a good question.

Travel, tourism, entertainment, and shopping centre share prices all seem to have factored in the recovery, but even in these sectors, there are still some opportunities that may be overlooked.

In this wire, senior analyst Gaston Amoros and I discuss the half-year reporting results of Unibail-Rodamco-Westfield (ASX: URW) and how the reopening of other countries has improved the performance of this business. 

It’s also halfway through the process of disposing of assets in Europe, which may not be reflected in how their share price is performing.

With a clear line of sight to reopening across Australia once more, the team is also looking at some of the smaller listed companies in our Australian Shares Fund, including AMA Group (ASX: AMA) and Viva Leisure (ASX: VVA)

Both the panel-beating company and the gym operator have been hit hard by the most recent lockdowns, However, both businesses have raised capital in order to sustain their balance sheets and are likely to be in a position to strongly reopen.

Edited transcript

Alex Shevelev: Hello everybody, and welcome to this week's Forager video. My name is Alex Shevelev, senior analyst on the Australian Shares Fund. And today I've got with me Gaston Amoros, also a senior analyst on the Australian Shares Fund. Hi Gaston.

Gaston Amoros: Hi Shev. How are you?

Alex Shevelev: Well, thank you. So today we'll be talking about reopening. I'm handing it over to you now, Gaston.

Gaston Amoros: Thank you, Shev. Yeah, so we get the question a lot about the reopening trades and whether there are any opportunities left on the ASX. People normally reference things like in travel and tourism, Webjet or Flight Centre. In entertainment, you have things like Ardent Leisure and Star Group, and in shopping malls, you have things like Scentre Group and Vicinity Centres. 

These talks are all up and to the right and they're working very nicely, but the question is, do we have any opportunities left in the ASX? There is one that we like, Unibail Westfield. They are the owner of the Westfield malls in the USA and UK and Unibail Malls in Europe. It's not really performing in line with the other stocks at this time -

Alex Shevelev: Well, that's on the share price, right, Gaston? What about the actual underlying business? Have they said much recently?

Gaston Amoros: You're absolutely correct. So the business is actually trading well. It's recovering. They told us in August, at the time of the half-year results, they told us that both sales and traffic are actually recovering quite quickly once the countries open up. In the case of the US, sales are back to pre-COVID levels in the last few months, and in the case of Europe, they are about 80 or 90% of pre-COVID levels, which is a nice trajectory, considering where they're coming from. 

So the businesses are performing well, but the stock is not performing well, and the reason why it isn't is that it is European. In Europe, these reopening trades are not working at the moment. That's a separate question as to why they're not working, but the business itself is trading well.

What's also interesting about Unibail is that in the process of disposing of assets, they're halfway through the disposals in Europe, which they're doing close to book value, and the more assets you sell, the more your leverage comes down, which contributes towards their rerating of their shares. 

And they have another process to dispose of assets in the US. We think it's quite an interesting opportunity.

Alex Shevelev: That's right. I think the ones that you mentioned, Gaston, are pretty well known larger businesses. We do have a couple that are not necessarily on the travel side, but also very much fall into the bucket of reopening. 

The two investments we have there are AMA Group, which is a panel beating business, and Viva Leisure, which is an owner of gyms. Now, understandably, both of those businesses have been quite hard hit by the most recent lockdowns. No one driving and fewer accidents, and definitely no one heading into the gyms.

But interestingly, what has happened over those last couple of months is both those businesses, in order to sustain their balance sheet and to be in a position to strongly reopen, have raised capital. 

And it's really this reaction from the capital raise that was particularly interesting. So AMA Group was mooted as a potential capital raise candidate for a while, raised $100 million-plus a $50 million convertible note, and is now trading 33 odd percent higher than the initial raise price in a matter of a month. 

And Viva, much the same, in a matter of a couple of months has rallied more than 50%. It's really interesting to see how investors, now we've got vaccine news that's positive. We've got a very clear line of sight to the reopening. These reopening plays, even if they require capital, are then being very strongly supported subsequent to that.

Gaston Amoros: That's right. And maybe on the other end of the spectrum of these reopening trades versus COVID beneficiaries, we could talk about software and online marketplaces, which is, as we said, the other end of the reopening trades. But maybe we leave that for another session.

Alex Shevelev: That's a good teaser for next time, Gaston. Thanks for talking today. And we'll see you all next time.

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Alex Shevelev
Senior Analyst

Alex is a Senior Analyst at Forager Funds Management, responsible for researching stocks for the Forager Australian Shares Fund.

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