Best calls to action – Thursday, 24 February
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 24 February 2022, 6:00 AM
- Sectors Covered:
- Equity Strategy and Quant
Domino Pizza - 1H22 result: A marginal miss; Upgrade to ADD
DMP's 1H22 result disappointed on operating margins, with its profitability in Asia underperforming expectations. This represents a reset of Asian margins after the COVID tailwinds of last year, but we believe margins will improve in the months ahead as the rush of new corporate stores matures.
We have lowered EBIT forecasts by 5% for FY22 and 4% for FY23. DMP remains a growth story. It has a platform to deliver a positive trajectory of sales and earnings as its store rollout strategy continues and network efficiencies increase.
After a period of sustained weakness in the share price, we think now is the time to give DMP another look. We upgrade to ADD.
Read our full reports and latest price targets on ASX:DMP here.
Healius - 1H beat - right price and well placed for a rebound
1H underlying results were above expectations, with solid revenue growth underpinned by COVID-related gains and cost outs, driving margins and OCF to record levels. Pathology posted triple-digit profit growth, on uplift in both COVID and non-COVID testing, while Imaging and Day Hospitals went backwards on COVID-impacted elective surgery restrictions and increased costs.
While no FY21 guidance was provided, as COVID uncertainty remains, we believe the company looks well placed to not only benefit from a likely "baseload" of COVID PCR testing going forward, but also from any rebound in demand from the backlog in diagnosis and surgery as the country opens up.
We adjust our FY22-23 forecasts, with our DCF/SOTP target price declining to (login to view). Add.
Read our full reports and latest price targets on ASX:HLS here.
Homeco Daily Needs - A new chapter
HDN's result reflected the solid underlying portfolio fundamentals, however it's now building on this foundation via the merger with Aventus (implementation 4 March).
The combined portfolio is valued at +$4.4bn across 51 assets with exposure to 'last mile' logistics, as well as a significant land bank with future development potential (38% site coverage with ~$500m future developments opportunities).
FY22 FFO guidance (merged group) has been upgraded to 9.3c (from 8.9c). DPS guidance is 8.3c which equates to a 6.1% distribution yield. NTA stands at $1.40. Near term catalysts include ASX 200 index inclusion. We retain an Add rating with a (login to view) price target.
Read our full reports and latest price targets on ASX:HDN here.
Karoon Energy Ltd - Making a real meal out of Brazil
Another bumper result from Karoon, with the oil producer delivering strong earnings growth, heavy FCF generation, and guidance upgrades. 1H22 EBITDA of US$89.5m (vs MorgE US$88.7m) was in line, for a solid EBITDA margin of %.
FY22 production/cost guidance were both upgraded. In the next 12 months Karoon will more than double current production while capex remains fixed given management locked in most contracts during peak COVID.
High-margin oil producer with growth and a good balance sheet. Maintain Add.
Read our full reports and latest price targets on ASX:KAR here.
Universal Store - 1H22 result: A steady hand on the tiller
UNI's trading gross margin improved by 60 bp in 1H22, reflecting the benefits of direct sourcing and good management through strong pricing discipline. Overall LFL sales were down (2.2)%, cycling +26.2% in 1H21, which we see as a good outcome.
In the first eight weeks of the second half, overall sales were up 5% and LFLs down (4.8)% (but up +23.5% on a 2-year stack). Given the impact of Omicron on consumer footfall, we regard this as resilient.
We have taken account of the effect of Omicron on 2H22 sales, resulting in a 2.8% reduction in our EPS forecast for FY22. We reiterate an ADD rating.
Read our full reports and latest price targets on ASX:UNI here.
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Disclaimer: Analyst may own shares. The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.