We're almost at the end of reporting season, so it's time to think about which ASX shares might have the best prospects after the flurry of numbers.
Morgans analyst Andrew Tang cast his eyes over the company results and has nominated six ASX stocks as his "best calls to action":
- Wesfarmers Ltd (ASX: WES)
- Ramsay Health Care Limited (ASX: RHC)
- Universal Store Holdings Ltd (ASX: UNI)
- Peter Warren Automotive Holdings Ltd (ASX: PWR)
- Jumbo Interactive Ltd (ASX: JIN)
- Monash IVF Group Ltd (ASX: MVF)
Image source: Getty Images
A core holding for long-term investors
Tang liked ASX share Wesfarmers' second-half "bounce back".
"We continue to view Wesfarmers as a core portfolio holding for long-term investors," he said on the Morgans blog.
"Kmart Group earnings recovered strongly in 2H22 after being heavily impacted by lockdowns in 1H22."
In fact, the latest dividend exceeded all expectations.
"FY22 dividend per share of 180 cents was above our 164.8 cents per share forecast and Bloomberg consensus (169.5cps)," said Tang.
"Group return-on-equity rose 330 basis points to 29.4%."
The takeover story isn't done yet
Notwithstanding the KKR consortium's takeover proposal falling over last week, the team at Morgans now rates Ramsay Health as a buy.
"Despite lingering volatility and FY24 a 'normal' trading year, it takes a back seat to KKR's now revised offer, which we believe is likely to get up in some form," said Tang.
"We have adjusted our FY23-24 earnings, rolled forward our valuation multiples, and maintained a takeout premium."
Meanwhile Peter Warren's enjoying an industry-wide sweet spot.
"Demand/supply imbalance continues to drive strong margin outcomes for the sector," said Tang.
"Industry consolidation will continue — we expect Peter Warren to be a participant (primary growth driver), or even a potential target in time."
The stock price remains cheap, the Morgans team reckons.
"Peter Warren is trading on ~7x FY23 PE and ~10x our assumed 'more normalised' conditions (FY24/25)."
Growth-a-thon for these two ASX shares
Lotteries resellers Jumbo Interactive reported a year of "solid growth", according to Tang.
"The business continued to diversify its earnings base, with SaaS now making up nearly half of group EBITDA," he said.
"We expect Jumbo Interactive to continue to achieve steady growth in the years ahead through a combination of organic contract wins, M&A and diversification."
Tang has a positive outlook on clothing retailer Universal Store.
"We believe Universal will deliver double-digit growth in sales and earnings in FY23 as an expanded store network plays into the resilience of demand for fashion apparel from a young customer cohort experiencing high levels of employment, higher wages and more and more opportunities to go out and socialise."
As such, the Universal share price is just too cheap to resist at the moment.
"The FY24F P/E is 10x, which we believe is far too low for a business with the quality and growth potential of Universal."
