I think that there are some ASX shares are trading really cheaply and could be worth buying today.
COVID-19 has caused a lot of volatility over the past seven months. Many businesses have recovered strongly from the crash like JB Hi-Fi Limited (ASX: JBH). However, some other ASX shares haven’t rebounded with the same vigour. I think they could be buying opportunities if you take a medium-term outlook:
Vitalharvest Freehold Trust (ASX: VTH)
Vitalharvest is a agricultural real estate investment trust (REIT) which owns some of the largest berry and citrus farms in Australia.
Those farms are exclusively leased to the biggest horticultural company in Australia, Costa Group Holdings Ltd (ASX: CGC).
Vitalharvest generates rent from Costa in two different ways. It receives fixed rental income and it also receives variable rent in the form of a 25% share of the profit generated by those farms.
The last couple of years have been tough for those farms because of the Australian drought and also individual issues like crumbly berries and fruit flies. Problems like that are going to happen now and again, but I think it’s very unlikely that all of those things will happen simultaneously again for the ASX share.
I believe it’s a good time to buy when there are problems for a cyclical business. Based on the net asset value (NAV) per unit of $0.91 at 30 June 2020, the Vitalhavest share price is trading at a 15% discount to the NAV. It also offers a distribution yield of just over 6%.
I think the ASX share’s variable earnings will return closer to normal in FY21 and the new manager could acquire more food-related properties that would deliver more consistent rental income.
NAOS Small Cap Opportunities Company Ltd (ASX: NSC)
This is a listed investment company (LIC) that invests in small caps, as the name might suggest. Generally, it targets ASX shares with market capitalisations between $250 million and $1 billion.
Some of its investments include businesses like MNF Group Ltd (ASX: MNF), Macquarie Telecom Group Ltd. (ASX: MAQ), BSA Limited (ASX: BSA), FINEOS Corporation Holdings PLC (ASX: FCL) and Over The Wire Holdings Ltd (ASX: OTW).
I think the above list of names is a quality group of ASX shares that collectively should be able to do well over the next few years.
The LIC is committed to paying a solid dividend. So even if the net tangible asset (NTA) discount doesn’t materially close up, investors can still receive a solid return just from the dividend income.
At the current Naos Small Cap share price it’s trading at a 18% discount to the pre-tax NTA at 31 August 2020. It also offers a grossed-up dividend yield of around 10%.
Brickworks could be one of the best value industrial ASX shares at the moment.
Looking at the projected earnings for FY22, the Brickworks share price is trading at around 11x FY22’s estimated earnings.
The company has a number of exciting factors that could make it a good buy today. Firstly, the industrial property trust that it owns half of is building two large warehouses for Coles Group Limited (ASX: COL) and Amazon. Completing these buildings will lead to a large increase in the asset value of the trust and will generate more rental income.
Whilst there is currently COVID-19 difficulties for the Australian and US economies, I expect that FY22 could be a good year for construction as economies rebound. This may be good news for Brickworks’ various building products divisions like bricks, precast, roofing and so on.
Finally, the ASX share is heavily invested in quality investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which has been growing its asset value and dividend for Brickworks for decades. I think that Soul Patts could keep growing for many more decades to come.
As a bonus, Brickworks hasn’t cut its dividend for four decades and it currently offers a grossed-up dividend yield of 4.4%.
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Tristan Harrison owns shares of NAO SMLCAP FPO and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Over The Wire Holdings Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends FINEOS Holdings plc. The Motley Fool Australia owns shares of and has recommended Brickworks, COSTA GRP FPO, MNF Group Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended FINEOS Holdings plc and Over The Wire Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.