Small and mid-cap ASX shares have belied the lockdown paralysing much of Australia to enjoy an excellent reporting season.
That's the view of Wilson Asset Management portfolio managers Catriona Burns, Matthew Haupt and Oscar Oberg, who noted company forecasts were generally "cautious" because of the current COVID-19 delta outbreak.
"While outlook statements for Australian small-to-mid cap companies remain tempered as the Delta variant grips NSW and Victoria, we expect economic growth and company earnings to bounce back strongly with inoculation rates demonstrating solid progress," they said in a memo to clients.
"We believe some of the most compelling opportunities continue to exist in sectors benefiting from global reopening, such as tourism and entertainment, and those exposed to local infrastructure projects such as mining services."
Having said this, the trio singled out Domino's Pizza Enterprises Ltd (ASX: DMP) and Carsales.Com Ltd (ASX: CAR) as ones to watch right now.
Who wants pizza? Everyone, apparently
The Wilson fund managers were impressed with Domino's 14.6% annual growth in network sales and its 27.2% boost in underlying earnings. It also entered its 10th consumer market when it opened its first store in Taiwan in June.
This all led to a 62% increase in the final dividend from the pizza chain.
"The strong result was underpinned by a record number of new store openings and strong same-store sales growth," the Wilson team said.
"The company also upgraded its medium-term outlook targets, lifting the roll-out of new stores to 9-12% per annum, up from 6-9%, and now expects to be operating 6,650 stores by 2023, suggesting a more than doubling of the network."
Wilson Asset Management holds Domino's shares in multiple funds and remains upbeat on its prospects.
"We remain positive on Domino's Pizza, with key growth markets such as Japan, Germany and France reaching an inflection point underpinning a robust organic growth profile, while latent capacity remains for further earnings accretive acquisitions."
Who wants cars? Everyone, apparently
With people all around the globe shying away from public transport in the coronavirus era, ASX shares involved in selling private vehicles are going gangbusters.
And Australia's carsales.com was no different, said the Wilson fund managers.
"Online automotive marketplace carsales.com delivered the highest annual net profit growth in 7 years and strong earnings growth with adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) up 10%, driven by ongoing pricing and yield optimisation domestically and strong results in international markets, particularly South Korea and Brazil."
Haupt, Burns and Oberg were positive about carsales.com's acquisition of US company Trader Interactive.
"A US vehicle marketplace business [provides] carsales.com with exposure to the US market and a strong platform for additional offshore growth," they said.
"We believe the accelerated digitisation of the automotive retail industry has the potential to create significant medium-term growth opportunities."
