Daily ShareChat: Mainfreight

By Jenny Ruth

Monday 21st March 2011

Mainfreight's proposed $225 million purchase of European transport and logistics company Wim Bosman (WBG) is a game changer and “positions the group as a more serious contender in the global freight industry,” says Kar Yue Yeo, an analyst at First NZ Capital.

Mainfreight is using its previously under-geared balance sheet to buy a business which is forecast to add 17% to earnings per share in the year ending March 2012 and 15% the following year, Kar Yue says.

The purchase price implies an enterprise value-to EBITDA (earnings before interest, tax, depreciation and amortisation) multiple of six times compared with an average trading multiple of 8.2 times for listed freight and logistics businesses in Europe.

“Importantly, MFT believes the operating structure and culture of WBG is similar to Mainfreight itself – a critical success factor for Mainfreight (and WBG) to date,” he says.

The acquisition will add to Mainfreight's long-term scale and revenue growth opportunities.

Kar Yue expects Mainfreight's annual turnover will approach $2 billion in the year ending March 2012 compared with his previous $1.5 billion estimate.

“Over time, Mainfreight's ability to cross sell its services across Australasia, North America, Asia and now Europe will drive higher volume and sales, improves the competitiveness of its offering by negotiating cheaper freight rates with carriers and increase overall margin over time,” he says.

“This is not yet factored into our forecasts.”

Recommendation: outperform

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