Daily ShareChat: Freightways

By Jenny Ruth

Wednesday 2nd June 2010

A likely lack of a pick-up in courier volumes from retail customers has led him to slightly lower his forecasts for Freightways, says ASB Securities analyst Florian Burch.

"Going by retail sales statistics and comments from retailers (demand remains patchy, consumers remain cautious), Freightways' retail sector-dependent economy courier brands Post Hast and Castle Parcels have probably not experienced the pick-up in volumes that we were expecting when we revised our second-half forecasts in February," Burch says.

He expects Freightways will fully pass on the increase in GST from 12.5% to 15% from October.

He has revised his net profit forecast for the six months ended June 30 from $15 million to $14.2 million with the full-year forecast now at $28.6 million.

Nevertheless, his positive long-term view of the company remains unchanged. It has strong brands and good customer loyalty, a diversified customer base and good recurring revenue streams with growth potential in the document and data storage businesses, Burch says.

Its stable management team has delivered steady increases in earnings over the last 10 years through continual operational improvements, a tight grip on costs and a prudent growth strategy, he says.

However, Australia-based Toll Holdings' recent entry into the intercity slow-express package market presents a risk of more intense competition.

Investment rating: outperform (upgraded from marketperform).

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