Sharechat Logo

Daily ShareChat: Freightways

By Jenny Ruth

Thursday 26th August 2010

Text too small?
 Jenny Ruth

A positive aspect of Freightways's annual result was organic volume growth returned to its courier operations in the six months ended June but its economy brands continue to struggle against subdued demand from retailers, says Marcus Curley, an analyst at Goldman Sachs JB Were.

"Despite lower volumes during (the 12 months ended June) 2010, margin pressure was limited to 20 basis points through cost savings in overheads and fleet," Curley says.

Evidence of the company's pricing power returning is the 3.2% price increase its New Zealand Couriers brand pushed through successfully in July and its Post Haste and Castle Parcel brands should follow suit in November, he says.

A recovery in international prices for recycled paper drove the information management division's profit margins up in the second half and should help counter higher rental costs from new facilities in Sydney, Auckland and Perth during 2011, Curley says.

Curley says Freightways shares are trading at a big discount to his $3.95 discounted cash flow valuation and the shares also deliver an attractive cash yield of 6% (with the shares at $2.75). "However, it may take some time before cautious investors, previously beaten down by regular earnings downgrades, buy into Freightways' earnings recovery story."

Recommendation: Buy.


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Freightways meets guidance with 6 percent gain in profit before items, sees similar 2014 growth
Freightways profit to increase 6 percent in 2013 and 2014, lagging expectations; shares drop
Freightways 1H profit rises 11 percent to record, meeting estimates, see slow growth ahead
Freightways lifts September quarter profit by 14 percent
Freightways beats estimates gain 24% in FY profit, sees growth in 2013
Freightways buys Dataprint for up to $6.5 million
Freightways first-half profit jumps 20%, lifts dividend
Freightways continues buy-up of info management firms with Australian acquisition
Freightways reports strong first quarter, seeks directors' fee hike