Toll Holdings

Friday 26th August 2011

Macquarie Securities have downgraded Toll Holdings (ASX: TOL) to Underperform, and although it believes the company is faring relatively well in a tough environment, "we don't believe it should be trading at a premium to the market just yet."

Macquarie Securities raises TOL’s target price to A$4.70 from A$4.37, noting the company's full year result ending 30 June 2011 (FY11) was in-line with market expectations, with only minor upgrades to the house's numbers and no visible sign of an improvement in economic conditions. TOL reported FY11 net profit after tax of A$281 in FY11, in-line with the house's forecast for A$279 million.

TOL reported sales revenue of A$8.2 billion in FY11 with EBIT of A$436 million, up 7%. Toll Global Resources made great progress in the year, although second half earnings were depressed by weather related issues across a number of its businesses. TOL reported growth opportunities arising from both the mining and oil and gas sectors which it sees as encouraging, with a number of key contract wins to support long term earnings growth.

Toll Global Logistics saw revenue growth with excellent results from its Australian businesses in2store and Contract Logistics, and its South/Southeast Asian region. Toll Global Forwarding continued to follow its strategic growth path, having completed a number of bolt-on acquisitions during the year. Despite global market conditions remaining challenging, good growth in revenue was achieved, including 5% organic growth. Toll Global Express had an excellent result in Australia with Toll Priority and Toll IPEC both performing very well.

TOL reports that the outlook for the year to 30 June 2012 is challenging to predict, although generally it expects that conditions look to have stabilized. TOL will continue to focus on its strategic growth path, achieving the necessary scale in Toll Global Forwarding, incrementally improving the performance of Footwork Express in Japan and continuing to grow its exposure to the strong resources sector.

TOL last traded at $4.52.

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Recommendation sourced from the IRESS software trading platform

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