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Why I love these hated FTSE 100 shares

Royal Mail Group (LSE: RMG) has proved to be rather unpopular amongst investors in recent months, shedding 23% of its value since the summer, and currently trading at two-year lows. It’s true that the number of letters being sent is in steady decline, and this has no doubt impacted the business in recent years. But there’s a lot more to Royal Mail than just delivering letters, and I think management is busy working behind the scenes to transform the business for the future.

Parcels up, letters down

In its most recent trading update, the UK’s leading provider of postal and delivery services praised its postmen and women for providing a great service over the Christmas period, with a staggering 138m parcels handled in the month of December alone. This helped to boost UK parcel revenue by 3%, with volumes up 2% for the first nine months of the financial year to 25 December. However, total letter revenue was down 5% with addressed letter volumes, excluding elections, declining by 6%.

Overall the UK Parcels, International & Letters (UKPIL) business delivered a disappointing 2% decline in revenue operating under the “Royal Mail” and “Parcelforce Worldwide” brands. The group’s General Logistics Systems (GLS) business fared much better, boasting 9% revenue growth and an 8% improvement in volumes. The lesser-known GLS international parcels arm operates one of the largest ground-based, deferred parcel delivery networks in Europe, and continues to perform strongly to help offset declines in the larger UKPIL division.

Healthy yield

Royal Mail is undergoing a massive transformation as it continues with its restructuring programme to help deal with the decline in the letters part of the business and boom in parcels as a result of the rise in internet shopping. Management are focusing on cutting costs to improve performance and are investing in services and products to help achieve this.

I remain bullish from an investment perspective. The group currently trades on a bargain valuation of just 10 times earnings for the current year, and supports a healthy dividend yield of 5.6%. Management’s efforts to transform the business should pay off in the long run.

The time is now

Also suffering from a share price slump recently is Sage Group (LSE: SGE). The leading accounting and payroll software provider has seen its shares come off highs of 756p in October to today’s levels around 643p. For a fairly defensive blue-chip like Sage, that’s quite a hefty drop in just four months. For those patiently waiting in the wings for a suitable entry point, I think the time is now.

In its latest trading update the Newcastle-based group reported a 5.1% increase in organic revenue for the first three months of the financial year to 31 December. Organic recurring revenue grew by 9.6%, driven by software subscription growth of 31%, bringing the total number of software subscription contracts to 1.1m.

Sage’s drive to increase revenues from subscriptions and cloud services is beginning to bear fruit, and I feel this is a good opportunity to buy the shares with the forward P/E of 20 much lower than recent levels.

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Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Sage Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.