Best tactical calls around February results
About the author:
- Author name:
- By Andrew Tang
- Job title:
- Analyst - Equity Strategy
- Date posted:
- 28 January 2021, 9:00 AM
- Sectors Covered:
- Equity Strategy and Quant
Tactical buys
Acrow Formwork (ASX:ACF)
Cyclical tailwinds – We forecast 1H21 EBITDA to be up 25% supported by an incremental 4-month contribution from the Uni-span acquisition and further contract wins in civil/ infrastructure.
Alliance Aviation (ASX:AQZ)
Earnings upside – We expect a strong 1H21 result to be well received, driven by higher flight hours relative to 2H20 as clients seek further flexibility through more charter services.
Beach Energy (ASX:BPT)
Cyclical tailwinds – We expect investors to look past a soft 1H result to a 2H earnings recovery on higher energy prices and to the growth projects in BPT’s pipeline.
BHP (ASX:BHP)
Capital management – BHP is likely to channel surplus cash flow into strong cash dividends, with some potential for a share buyback (although this is reduced by recent share price strength).
Breville (ASX:BRG)
Earnings upside – We expect a strong 1H21 result which could make FY21 guidance look increasingly conservative, linked to buoyant consumer conditions and geographical rollout.
Booktopia (ASX:BKG)
Solid outlook – Despite re-opening of bricks and mortar retailers, we expect strong growth on pcp, predicated on consumer moves to online retailers and BKG share gains.
Domino’s (ASX:DMP)
Earnings upside – We see upside risks to our forecasts linked to the store rollout tracking ahead of our assumed run-rate, driving strong top-line growth further complemented by margin expansion.
Eagers Automotive (ASX:APE)
Solid outlook – Key to result trading will be early indications of demand/trading into FY21 and insights into inventory conditions given this has buoyed margins materially.
Inghams (ASX:ING)
Solid outlook – We expect a solid 1H result to be well received despite COVID-19 challenges.
Lovisa (ASX:LOV)
COVID-19 exit/ trading update – We expect the market to look through a tough 1H (closures) at the trading update for key markets like A/NZ where we expect a strong uptick, providing a guide for how quickly sales can normalise post COVID-19 re-openings.
Maas Group (ASX:MGH)
Cyclical tailwinds – We expect reasonable 1H growth will be well received, driven by the Real Estate segment and the Plant Hire & Civil business.
NextDC (ASX:NXT)
Solid outlook – We expect Revenue/EBITDA guidance to be reiterated, supporting compelling value.
Origin (ASX:ORG)
Cyclical tailwinds – We expect investors to look through a soft 1H result to a 2H earnings recovery on higher energy prices.
Ramelius Resources (ASX:RMS)
Cyclical tailwinds – A robust EBITDA result helped by higher production should remind investors of RMS’ robust cash flows despite the gold pullback, and RMS’ appeal on valuation grounds.
Sonic Healthcare (ASX:SHL)
Solid outlook – We expect a strong result, underpinned by COVID-19 testing across all key geographies more than offsetting weakness in the base business.
Universal (ASX:UNI)
Solid outlook – We expect a solid outlook re early 2H21 trading (LFL sales), general margin comments and the outlook for resumption of the store rollout.
Virtus Health (ASX:VRT)
Solid outlook – We expect positive commentary around steady cycle volumes into 2HFY21.
Zip Co (ASX:Z1P)
Solid outlook – We expect Z1P to point to a significant long growth pathway ahead of it, and likely a solid pipeline of merchants and customers.
Stocks to avoid
CSL (ASX:CSL)
Difficult outlook – We expect resilient demand for plasma, recombinant products and vaccines, but see risk to the outlook reflecting continued plasma collection challenges.
IPH (ASX:IPH)
Difficult outlook – While we believe IPH’s operating businesses are well positioned heading into CY21, we note currency headwinds for the stock given the strong appreciation in the AUD relative to the USD and the company’s revenue sensitivity of $1.9m for a 1c move in the exchange rate.
Ramsay Health Care (ASX:RHC)
Earnings risk – We expect surgical restrictions, regional outbreaks and lower demand, combined with higher operating costs in the current environment to retain pressure on reported results.
ResMed (ASX:RMD)
Cyclical headwinds – We expect fading gains from ventilators, reductions (albeit still improving) in sleep patient diagnosis, but with resilience in masks supported by a large installed base.
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Disclaimer: Analyst may own stocks. The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.