Tim Boreham: Strap in, it’s going to be a wild ride

Profit reporting season is reaching a crescendo, and the dramatic ups and downs of these battling stocks will be fascinating, says Tim Boreham.

Like its patrons, Dreamworld has been on a rollercoaster ride. But is it currently heading up or down? Picture: Supplied

The local profit reporting jamboree reaches a crescendo next week as the remaining large chunk of ASX stocks report before the end-of-month deadline – and we expect the pattern of earnings surprises to continue.

Can some other notable laggards please the market when they lift their financial kimono next week?

The owner of the Gold Coast theme parks Dreamworld and WhiteWater World, Ardent Leisure (ASX:ALG) has been in the doghouse since the 2016 Thunder Rapids disaster – and the pandemic didn’t help either.

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Ardent last year sold its US family entertainment chain, Main Event – its perceived key growth driver – for $1.1 billion.

That leaves Ardent with the theme parks, at a time of intense competition and lagging discretionary spending – not a fun ride.

Nonetheless, Ardent’s patronage – and revenues – have rebounded strongly.

While few brokers have a kind word about the stock, the slimmed-down Ardent could be worth the admission price.

Meanwhile, most of us are back to the grindstone and in need of a pep talk.

Speaking of which, the US-based employee engagement house Limeade (ASX:LME) is well placed as employers coax “work from home” zealots and moody Millennials back to the desk. Limeade facilitates programs and employee surveys for global companies, proving “immersive wellbeing and engagement software”.

But if Limeade were a worker, it would be on performance review, with the shares tumbling more than 80 per cent over the past two years.

Shaw and Partners expects sales of $US62 million for the calendar 2022 year – a slight increment on 2021 – and a $US13.5 million loss.

Closer to home, former dairy co-op Bega Foods (ASX:BGA) has expanded its scope beyond the raw milk pail, such as acquiring the venerable Vegemite brand.

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But Bega has been a cow of a stock, with its earnings impacted by the increased farm gate price it has been forced to pay its dairy farmers given the global milk shortage.

Last October management confirmed normalised underlying earnings (EBITDA) of $160-$190 million for the full year to June 2023, compared with $180 million previously.

We’ll learn next week whether Bega has moo-ved on this guidance, for better or for worse. Speaking of ‘worse’, the housing market looks crook and online property admin platform Pexa Group (ASX:PXA) accounts for 86 per cent of all property settlements (competing only with paper conveyancing).

Pexa shares have retreated 25 per cent since listing in mid-2021 and broker Morgans expects the company’s volumes to decline 10 per cent in the 2022-23 year, with only one per cent growth in 2023-24.

But has the death of the great Australian dream been exaggerated, for about the millionth time?

A key benefit of Pexa’s business model is that fees are linked to inflation.

Finally, the cash-rich The Reject Shop (ASX:TRS) looks well placed as shoppers turn to cheap and cheerful options in the face of interest rate-induced misery.

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The stock is down 10 per cent calendar year-to-date and 44 per cent over the past 12 months, so investors aren’t yet convinced the company is on track after a recent revamp.

Early this month, the company announced the sudden departure of CEO Phil Bishop, who had only been in the role for seven months. Never a good look.

Management also pre-announced the key morsels of its half-year numbers: a 2.4 per cent rise in comparative sales and underlying earnings of $22.5-$23.5 million – 15 per cent higher at the midpoint.

The company also said the first four weeks of the current half had been strong, but investors really want to hear what CFO and acting CEO Clinton Cahn has to say about the outlook at next Thursday’s prezzo.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

Find more Boreham wisdom at stockhead.com.au

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Originally published as Tim Boreham: Strap in, it’s going to be a wild ride