By Jenny Ruth
|
Tuesday 13th July 2010 |
Text too small? |
Hellaby Holdings' earnings have been depressed for the last 18 months by tough local trading conditions and restructuring costs but the emerging recovery and benefits from the recovery should increase earnings but that isn't reflected in the current share price, says Craigs Investment Partners.
"Although first-half 2010 sales remained sluggish, where restructuring was complete, margins increased strongly and net debt was down 32%," Craigs says.
Hellaby has since said core bank debt at June 30 was $25 million, 51% lower than a year earlier. The company also has $50 million in capital notes.
Craigs says its forecast earnings before interest, tax, depreciation and amortisation for the company of $33 million are still 40% below historic earnings. "We believe a more robust local economy should see a gradual earnings recovery."
The key downside risk is the pace of the recovery and how quickly it is reflected in Hellaby's equipment and shoe retailing divisions, the broker says.
While shoe retailing sales have been maintained, margins collapsed under competitive pressure while the equipment division sales fell 35% over the last two years and it has been making losses.
Craigs has a 12-month share price target of $2.24 which is a 25% discount to its discounted cashflow valuation to reflect the current lack of earnings visibility.
Recommendation: Buy
No comments yet
Hellaby buys Sydney-based Ryde Batteries for about A$12 mln to boost largest unit
Hellaby FY profit falls 5.8 percent , meets guidance; Contract helps lift sales
Hellaby shares fall 2.7 percent after halt for $40M placement lifted
Hellaby halts shares for $50M capital raising at 10 percent discount
Hellaby first-half profit falls 21 percent on weaker shoe sales, corporate costs
Hellaby finally finds acquisition in Contract Resources
Hellaby lifts FY profit 26 percent on equipment, automotive divisions
Former Frucor head Mark Cowsill named to Hellaby board
Hellaby Holdings
Hellaby lifts 1H net profit 42%
