The current reporting season has put up its share of surprises, both pleasant and unpleasant.
To help you sort through the information overload, Morgans analyst Andrew Tang this month has been regularly posting which ASX shares are the best buys, based on the latest reporting.
Here are six of his latest recommendations:
'Perplexed' at why this stock is still on the runway
The Qantas Airways Limited (ASX: QAN) share price has rocketed 44.8% since July, but it's still below pre-COVID highs.
The latest results have convinced Tang that there are further gains to come.
"We continue to view the discount being applied to Qantas vs pre-COVID multiples as unwarranted," he said on the Morgans blog.
"Qantas' 1H23 result was strong with underlying net profit before tax at the top end of its guidance range driven by strong travel demand, high airfares, and cost improvements from its $1 billion transformation program."
According to Tang, cash flow, balance sheet and capital management were all highlights.
But despite the positive report, Qantas stocks tumbled on the day.
"We are perplexed at Qantas' share price reaction today. It provided bullish outlook commentary around the strength of travel demand likely continuing well into FY24, which we thought would have driven a rerating."
Prospects are 'so strong'
With the economy potentially tanking in 2023, retailers are currently on a hiding to nothing.
But Tang rates Universal Store Holdings Ltd (ASX: UNI) as a buy.
"Universal reported strong growth in 1H23, with sales up 35% — 5% above forecast. And post-AASB 16 net profit after tax up 44% — 4% above forecast," he said.
"Our post-AASB 16 EBITDA estimates are effectively unchanged in FY23 and rise 2% in FY24."
Meanwhile Tourism Holdings Ltd (ASX: THL), which listed on the ASX in early December after a merger with Apollo Tourism, reported a "strong" result.
"[It] materially beat our forecast as the business is recovering strongly from the COVID tourism downturn, while benefiting from historically high rental yields and record vehicle sales margins."
The profit projections were upgraded, and so have Morgans' expectations.
"The prospects for the merged group are so strong that THL will now resume dividends with the FY23 result — one year earlier than expected," Tang said.
"We continue to believe that the merger synergies are conservative and will be upgraded over time."
And the shares are still cheap, in Tang's opinion.
"Trading on an FY25F (recovery year) PE of 8.8x, we believe THL is materially undervalued."
'Building a sustainably higher earnings base'
A few days ago, Tang singled out car dealership business Peter Warren Automotive Holdings Ltd (ASX: PWR) as a buy.
Similarly, this time he likes the look of Eagers Automotive Ltd (ASX: APE).
"Eagers' underlying profit before tax of $405.2 million (+1% on pcp) slightly beat expectations. 2H22 PBT of $210 million was up 7.7% half-on-half."
Pleasingly, the order book growth is continuing at around 30% per half.
"The order book has over a two-year run off period (yet to commence) providing solid near-term visibility," said Tang.
"Cycle aside, Eagers is executing on building a sustainably higher earnings base via further consolidation, ongoing efficiency, new OEM strategies and new sales channels."
Rural construction goods and services provider Maas Group Holdings Ltd (ASX: MGH) is also a buy for Tang.
"Maas Group delivered HY23 earnings at the top end of guidance and re-affirmed full year guidance for pro forma EBITDA of $150 to $180 million," he said.
"In reaffirming guidance, the company flagged that residential lot sales would be lower than the pcp of 270 lots (incl build-to-rent), with this weakness offset by strength across the other divisions."
Tang admitted the latest report reflected "a challenging period" that included heavy rains and a plummeting real estate market.
One for patient investors
Private hospital provider Ramsay Health Care Ltd (ASX: RHC) has had a drama-filled few years with COVID-19 lockdowns killing elective surgeries and a takeover suitor walking away last year.
Tang was happy with the reporting season update though.
"1HFY23 results beat [expectations], with revenue gains across all regions on increased surgical activity, although profit was aided by NRIs, acquisitions and government payments."
The post-pandemic recovery is slow going though, due to labour shortages and supply cost inflation.
It will get there eventually though, Tang reckons.
"We continue to view a gradual uplift in volumes and improving leverage, given improved payor terms, better recruitment/retention, likely French government revenue guarantee extension (until 31 Dec 2023), and additional capacity gains."
