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Daily ShareChat: Kathmandu

By Jenny Ruth

Monday 16th August 2010

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Kathmandu Holdings' profit downgrade was disappointing but not devastating, says First NZ Capital analyst Sarndra Urlich.

"Kathmandu has attributed the shortfall in operating earnings to a challenging retail environment combined with less-than-favourable weather conditions during the second half of 2010, its key seasonal period," Urlich says.

"In addition, the cycling of the (last year's Australian) fiscal stimulus period during March and April was clearly more of a problem than we had anticipated," she says.

While Urlich has downgraded her forecasts and valuation of the stock, "we do not take the view that the 'Kathmandu model' has now changed for the worst."

It could be argued that Kathmandu should now trade towards the low end of the earnings multiple range because of its seasonality and associated unpredictability, "we believe that fundamentally Kathmandu should be leveraged to those same macro/retail factors as other retailers in Australia and New Zealand," she says.

"The real problem lies in the lack of visibility going forward with regards to any bright light at the end of that macro/retail tunnel."

Urlich has cut her discounted cashflow valuation from $2.30 to $1.87 and her earnings forecast for the year ended July 31 by 21.9% to $28.4 million and her 2011 forecast by 10% to $31.5 million.

Recommendation: Neutral.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

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NZX Annoucements for KMD

31 Jan 2012	SSH: KMD: SSH - National Australia Bank Limited
24 Jan 2012	SSH: KMD: SSH Notice - (National Australia Bank Limited)
24 Jan 2012	SSH: KMD: SSH - AMP Capital Investors (New Zealand) Limited
11 Jan 2012	SSH: KMD: SSH Notice - (National Australia Bank Limited)
4 Jan 2012	OFFICE: KMD: KMD - General Manager Retail