With the economy on the decline, this reporting season it's been a win to just find ASX companies that you can retain your faith in.
Morgans analyst Andrew Tang named five such stocks this week that his team is happy to continue backing:
- Domino's Pizza Enterprises Ltd (ASX: DMP)
- Corporate Travel Management Ltd (ASX: CTD)
- Karoon Energy Ltd (ASX: KAR)
- Qualitas Ltd (ASX: QAL)
- EBOS Group Ltd (ASX: EBO)
Let's check out what he had to say about some of these ASX shares:
Profit slashed, but on the way up again
The 2023 financial year was unflattering for Domino's Pizza, with net profit plunging 74%.
But that just gives it upside, as far as Tang is concerned.
"We get the sense the worst has passed for Domino's," Tang said in his Best Calls To Action memo.
"Order counts are starting to move up following the removal of delivery service fee and reset of the menu to appeal to the value-focused customer."
The company was in serious trouble over the past year, with Tang noting it went perilously close to breaking its banking covenant.
"Domino's Pizza has stated that debt is now on the way down and it is 'confident' there will be no breach — and no capital raise — in FY24."
Investors can already see "green shoots of recovery", he added.
"Growth swung positive in ANZ and Europe in early FY24, driven by better volumes. It will take longer in Asia, but we think Domino's Pizza will achieve its 3% to 6% same store sales target in FY24."
Timing is everything
Corporate Travel Management shares have sunk more than 11% since the start of the month.
"Stock is oversold, and we maintain an add rating," said Tang.
"There were few surprises in Corporate Travel's FY23 result given its recent trading update. However, cash flow was materially weaker than expected due to a timing issue. 4Q23 trends bode well for strong earnings growth in FY24."
The targets for the current year are well within reach.
"While there is now a guidance range for FY24, we still think $265 million of EBITDA is achievable."
Meanwhile, the 2024 financial year could end up "a bumper year" for Karoon Energy, with "increased production, lower unit costs and much lower capex".
Tang was pleased with what he saw in reporting season.
"Karoon delivered a strong FY23 result ahead of expectations.
"Not rushing into an acquisition demonstrates good capital discipline. Karoon Energy finished FY23 with cash of US$74.8m and next to no debt."
The company remains Morgans' top pick in the energy sector.
