The ASX200 (ASX: XJO) finished 0.47% higher yesterday, being pulled up partly by financials and utilities.
Our information technology sector continues to not fare so well, with the S&P/ASX All Technology (ASX: XTX) index down an additional 1.15% yesterday.
While it can be painful to check your portfolio balance in times like these, it might be the right time to get your shopping list out and try and pick up some quality companies at much more attractive prices. Here are three ASX shares I’m liking at the moment…
Xero
Xero Limited (ASX: XRO) is starting to look a lot more attractive at these levels in my view, with shares down roughly 30% since their highs late last year.
Coming across a company that has such strong unit economics, potential network effects and a great reputation amongst its users is rare to come by. Over the last twelve months, growth stocks have led the charge of the market recovery, and Xero’s lofty valuation has been the only thing holding me back from accumulating a position.
Fundamentally, nothing really stands out to me that would indicate the thesis no longer holds.
Its most recent acquisition of Planday appears to be an excellent opportunity for it to expand into new geographical regions and continue to build out its app ecosystem. While it’s estimated to contribute around NZ$30 million per year in revenue, the long-term value could be from further building out its accounting presence in many of these Scandinavian countries which are currently unexposed.
A potential reopening play might also head Xero in the right direction as economies continue to push through this vaccine-led recovery. While many small-medium businesses, unfortunately, won’t see the other side of COVID-19, it seems likely that new businesses will emerge from these recessions, further spurred on by loose monetary policy and low borrowing costs.
Business activity has never been more encouraged, and company’s like Xero may stand to be beneficiaries through increased demand for business services.
For more reading on Xero, click here to read: Down 28% in 3 months: Are Xero shares in bargain territory?
Objective Corporation
Another high-quality business that’s trading significantly cheaper is software-provider Objective Corporation (ASX: OCL), with shares down 15% since the start of the year.
It’s a provider to over 1,000 customers across 60 countries and helps to streamline efficiencies across bureaucratic activities.
I’m sure many of us could relate to horror stories of a document or an application being passed between different government departments for considerable amounts of time – Objective Corp’s value proposition involves the transition away from paper-based practices to automated content management, boosting efficiencies and reducing wait times.
While its valuation has trended down recently, this is certainly not indicative of its operational performance, with some impressive numbers coming out of its H1 FY21 results, which you can read about here.
Just a couple of highlights, however, was an increase in revenue and EBITDA of 40% and 73%, respectively, demonstrating some of that much loved operating leverage typical from a software-as-a-service (SaaS) business.
Annual recurring revenue grew by 30% to $70.1 million, and net profit after tax increased by 70% to $7.2 million. The balance sheet is debt-free with a cash balance of $27.7 million.
The sticky nature of government clients is a big tick for me, with the investment case further strengthened by recurring revenues that made up over 75% of revenue based on FY20 results. This number is expected to increase as its customers are transitioned from on-premise models to a more flexible SaaS offering.
You can read more about Objective Corp here.
CSL
Often described as one of the highest-quality shares on the ASX, biopharmaceutical company CSL Limited (ASX: CSL) is another that’s looking tempting at these levels. The stock is currently trading around $250 per share, representing a drop of nearly 20% over the last few months.
CSL is slightly different to Xero and Objective Corp in that its downwards trend isn’t solely the result of the broader tech correction, as there are some operational headwinds also causing the sentiment to shift around the company.
One of its biggest current challenges is the lack of plasma donations which are needed by CSL Behring to create lifesaving medicines for those living with serious illnesses.
Volumes are still down by roughly 20% of what they were a year ago, so the cost per litre of plasma is expected to increase in the meantime as the company spends more on marketing to hopefully incentivise people to donate more blood.
CSL’s shares have additionally been trading ex-dividend recently, and the appreciating AUD is an additional headwind that’s caused the share price to trend downwards.
The aforementioned issues appear to be temporary in my view with plasma collection volumes likely to normalise at some point, making the investment case fairly compelling for a long-term hold.
To read more on CSL, click here to read: Share price squeezed: Is it time to scoop up CSL shares?
