The August reporting season has already begun with some companies starting to report this week and next. However, the majority of companies will start to report in week 3, beginning on 10 August.
So in reality, you have a week to decide which ASX shares to buy to position yourself for the greatest impact.
Some ASX shares are obvious. Companies like Kogan.com Ltd (ASX: KGN) and Temple & Webster Group Ltd (ASX: TPW) have already given very positive market updates. It is also pretty clear that iron ore and gold companies are likely to report strong FY20 results.
Nonetheless, I believe there are a few ASX shares which the market has oversold that could see a more significant share price rise. Here are the top 2 ASX shares I think will outperform during the reporting season.
Australian real estate investment trusts
I am expecting a couple of Australian real estate investment trusts (A-REITs) to do well during reporting season, but my favourite share in this space right now is Centuria Office REIT (ASX: COF).
On the ASX today, Centuria Office is the largest listed pure-play office A-REIT. I believe the long average lease life of office A-REITs has provided resilience during the coronavirus lockdowns. In the case of Centuria Office, its lease term is 5.1 years.
Furthermore, it is trading at a market capitalisation that is just under half of its net tangible asset value. Therefore, theoretically, if you purchased the entire company, you could sell its assets for an immediate profit. In addition, the company has a trailing 12-month dividend yield of 9.3%.
Lastly, the company recently went ex-dividend. Income investors regularly purchase companies to capture the dividend, and then sell it off after the ASX share goes ex-dividend. So right now, the share price is lower than it normally is.
Online ASX shares
An ASX share I think is going to do well during earnings season is Jumbo Interactive Ltd (ASX: JIN), which is an online lottery business. I think the current noise around the buy now, pay later sector is overshadowing this growth share.
Jumbo has 3 potential paths to generate revenue. First, via charities. Charities do not need a license to sell lottery tickets. Second, via LotteryWest, the West Australian lottery commission. These negotiations are continuing. Third, under license from Tabcorp Holdings Limited (ASX: TAH). Jumbo and Tabcorp recently completed a negotiation that took their agreement from 2023 through to 2030, albeit with increased fees.
While this is a good share on many fronts, I think it will do well in reporting season for the following reason: In normal time, the company sells 26.7% of all lottery sales online, while newsagents and kiosks sell the remainder. As such, in my opinion there is a high likelihood of increases in revenue for Jumbo due to the coronavirus lockdown.
On closer inspection, Centuria Office and Jumbo have characteristics that I believe have enabled them to sail under the radar during the coronavirus pandemic. I expect both of them to surprise on the upside in a reporting season that will likely be marked with a lot of missed targets.
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Daryl Mather owns shares of Centuria Office REIT. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Jumbo Interactive Limited. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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