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2 ASX shares with compelling futures: fund manager

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Wilson Asset Management (WAM) is a fund manager that likes to search the stock market to find ASX shares that look like opportunities.

Typically, WAM likes to hunt for businesses where a catalyst could drive the company’s valuation higher.

One of the funds that it operates is the listed investment company (LIC) WAM Active Limited (ASX: WAA).

The idea behind WAM Active is to find market mispricing opportunities on the Australian market.

Since its inception in January 2008, this LIC has delivered a gross return of 11% per annum, that’s before expenses, taxes and fees.

These are the two ASX shares outlined in the most recent WAM Active update:

Wilson Asset Management described Steadfast Group as the largest general insurance broking network and group of underwriting agencies in Australasia, with growing operations in Asia and Europe.

Last month, the insurance ASX share announced its FY22 half-year result, which beat expectations, according to WAM. The fund manager noted that Steadfast’s underlying net profit after tax (NPAT) grew by 26.4% to $76.3 million.

WAM explained that a positive environment for the pricing of commercial insurance policies and the successful integration of previous acquisitions contributed to the company beating forecasts. Explaining why Steadfast is in the WAM Active portfolio, the fund manager said:

We remain positive on the outlook for Steadfast Group and believe that a strong balance sheet can give the company the ability to continue to make earnings accretive acquisitions.

Wilson Asset Management said that this company is focused on the construction of core telecommunications infrastructure. It’s also the owner and operator of fibre cable networks across Australia.

In February 2022, the company announced its FY22 half-year result, showing a 98.4% rise in revenue to $109.5 million and a 130.3% increase in operating cash flow to $65.4 million. Uniti’s half-year earnings before interest, tax, depreciation and amortisation (EBITDA) grew 140.3% to $70.5 million.

WAM noted that the result was in line with market expectations, yet the report disappointed the market – the Uniti share price fell following the announcement.

The fund manager thinks that Uniti has the ability to make earnings accretive acquisitions because of its “strong” balance sheet. The ASX share also recently commenced an on-market share buyback.

WAM isn’t the only investor that thought Uniti looked good value.

Uniti has entered into exclusive discussions with HRL Morrison & Co, a New Zealand asset manager. There is a non-bonding, conditional indicative proposal for an indicative price of $4.50 per share.

There is also speculation that Macquarie Group Ltd’s (ASX: MQG) Vocus Group could be interested in making a bid for Uniti.

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