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It is sometimes hard for investors to commit to ASX shares with eyewatering valuations. Buying ASX shares that are value orientated can feel more tangible with the added benefit of dividends. Here are two cheap ASX shares for those who like to stick to the fundamentals.
1. Bell Financial Group Ltd (ASX: BFG)
Bell Financial Group is an Australia-based provider of stockbroking investment and financial advisory services to private, institutional and corporate clients. Across its companies, Bell Potter Securities, Bell Potter Capital and Third Party Platform, it services over 600,000 clients with funds under advice exceeding $58.4 billion.
In the company’s half year announcement on 12 August, it announced a 7.4% increase in revenue to $129.6 million, a profit after tax of $23.5 million and $88 million net cash with no core debt. The Bell Financial share price trades at a relatively cheap price-to-earnings (P/E) ratio of just 12, despite a strong track record of growth, with a compound annual growth rate (CAGR) of 8.1% for revenue and 15.6% for NPAT between 2015 to 2019. Its consistency towers over many other ASX shares in the financials sector. The reliability of Bell Financial shares could make them a worthwhile value pick backed up by modest growth. The company also pays a generous, fully franked dividend yield of 6.20% at today’s prices.
2. Pact Group Holdings Ltd (ASX: PGH)
Pact Group is a leading provider of specialty packaging solutions in Australasia, servicing both consumer and industrial sectors. It specialises in the manufacture and supply of rigid plastic and metal packaging, materials handling solutions, co-manufacturing services, recycling and sustainability services.
Pact Group represents a recovery story following significant higher input costs and a one-off restructuring cost in late 2018. The company delivered a sound FY20 performance driven by solid organic growth in contract manufacturing for hygiene category items and in-crate pooling services. Its sales fell 1% to $1,809 million while NPAT improved to $92 million, up from a $290 million loss in FY19.
The concept of Pact Group being a turnaround business is prevalent in its FY20 presentation with the business focused on transforming its Australian packaging segment, pivoting towards recycling and creating a competitive platform in the ANZ fresh food segment.
The business estimates that by 2022, it will be the largest PET recycler in the ANZ region. It aims to use local recycled material to differentiate its packaging products to meet the increasing demand for more sustainable packaging solutions. Sticking with the theme of recycling, the business wants to establish a leading position for the supply of locally sourced recycled packaging to the fresh food segment. The company has entered into an agreement to acquire Flight Plastics NZ, a leading provider of plastic trays and containers for the fresh food segments. This acquisition will give Pact access to over 5,000 tonnes of recycled PET to sell into food grade packaging in the ANZ region.
With an improvement in earnings and a clear vision for the future, I believe Pact Group could be a turnaround ASX share for value investors.
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Returns as of 6th October 2020
Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.
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