Domino Pizza (ASX:DMP)
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.
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.
Healius (ASX:HLS)
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.
Homeco Daily Needs (ASX:HDN)
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).
We retain an Add rating.
Karoon Energy Ltd (ASX:KAR)
Another bumper result from Karoon, with the oil producer delivering strong earnings growth, heavy FCF generation, and guidance upgrades.
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.
Universal Store (ASX:UNI)
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.
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.
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