MoneyTalks: TMS Capital’s Ben Clark says these are the stocks set to grow post-COVID lockdowns
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MoneyTalks is Stockhead’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.
Today, TMS Capital portfolio manager Ben Clark talks about his favourite stock picks for 2021.
Clark’s first pick is Tyro Payments (ASX:TYR) – the fifth largest point of sale payment method after the four big banks.
“With Tyro, its biggest adjacency that it services is hospitality, and its biggest client is Justin Hemmes’ Merivale organisation which owns all the pubs and clubs in Sydney.
“But its clients are cafes, pubs and a lot of them have really been hit with COVID lockdowns and are either closed or they’re just doing takeaways.”
Essentially the payment volumes – which is what Tyro relies on – have fallen but Clark sees a near-term catalyst for the company.
“I’ve been really impressed with how well they’ve managed the company through this very difficult time,” he said.
“The thing with Tyro is that it’s running on a really good cost base, they’ve signed up Bendigo Bank and all of their business customers have moved on to the Tyro machines.
“It’s one of those companies that, as we come out of the lockdowns, will see an immediate improvement in the business because those payment volumes are going to start to accelerate really quickly.”
Clark also pointed to the long-term incentives (LTIs) of Tyro’s CEO Robbie Cooke.
“His LTIs have been built around increasing sales revenues, so he is highly incentivised over the next few years to grow the EBIT number quite significantly,” he said.
“There’s that old saying ‘show me the incentive and I’ll show you the outcome’ – and I think we’ll see the outcome in a few more years.”
Clark’s second pick is real estate player REA Group (ASX:REA) which has also been impacted by lockdowns.
“Last year Victoria had a very long lockdown and as a result, the volumes of people selling their residences fell significantly,” he said.
“You weren’t allowed to have open for inspections, auctions were online, then in Sydney, toward the end of the half the same thing happened.
“But ultimately, they’ve done a great job managing through that very difficult time.”
The outlook for the housing market post-lockdowns is looking strong.
“I think in late spring, early summer, in Sydney and Melbourne there’s going to be a boom of listings that come onto the market.
“And that’s the biggest thing that drives the REA businesses – the listing volumes.
“We’re probably going to see a really strong response in the next six to nine months.
“People were thinking about selling three months ago, it’s unlikely their plans have changed, they’ve just delayed them, so there should be a catch up.”
The final pick is Resmed (ASX:RMD) which happens to be TMS Capital’s largest holding.
The company also experienced COVID impacts in the US.
“Even though Resmed made ventilators and repurposed some of their CPAP machines into ventilators, the business had a tough year because even if patients were told they might have sleep apnoea, they didn’t want to go into hospitals to get tested,” Clark said.
“And doctors were focusing resources elsewhere, so it was a difficult time for them.”
But as the country has come out of lockdown and the economy has reopened, there’s been a boom in demand for the machines.
Clark said the company has just released its new CPAP machine, which typically has a five-year replacement cycle.
And added to this, Resmed’s biggest competitor – Philips – owns a division called Respironics which has had to globally recall their rival CPAP machine.
“I think the market is underestimating how big a deal this is for Resmed,” Clark said.
“The only issue that Resmed has is that supply chains are in chaos right now, they literally cannot keep up with the demand for their machines.
“So how good a year they have is going to come down to how well they can manage their supply chain.
“It’s an opportunity for them to really put their foot on the neck of their competitor because once patients go on to these machines, they won’t go back to the other player – they will stay with Resmed.”
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