Daily ShareChat: Mainfreight

By Jenny Ruth

Wednesday 16th March 2011 1 Comment

The $205 million Mainfreight is paying for Wim Bosman, a privately-owned transport and logistics provider based in the Netherlands and Belgium, is about 5.7 times its expected earnings before interest, tax, depreciation and amortisation (EBITDA), says Geoff Zame, an analyst at Craigs Investment Partners.

"Mainfreight has historically traded around 8.5 times," Zame says. "The acquisition appears well-timed, given relative New Zealand dollar strength."

The acquisition will materially change the composition of Mainfreight's earnings and will account for about 28% of EBITDA in the year ending March 2012.

"The owner of the businesses' namesake is 69 years of age and hence the transaction reflects succession. Synergies are likely to be driven from the top line, reflecting the relative strengths of Mainfreight in international freight forwarding and Bosman in intra-European freight forwarding," Zame says.

Incorporating the acquisition increases his valuation of Mainfreight shares by about 10% to $8.13 and he has a one-year price target of $9.12.

Key upside or downside risks include general economic growth, mergers and acquisitions, competition in a fragmented industry and currency movements, he says.

Zame is forecasting EBITDA will rise to $91 million in the year ending this month from $76 million last year and that it will rise to $136 million in 2012 and $146 million in 2013.

Recommendation: Hold.

Comments from our readers

On 16 March 2011 at 11:25 am Howie said:

On the face of it a good deal. Pity stakeholders haven't been given a bit of a profit history of Wim Bosman. While the two company cultures merge projected earnings will probably dissapoint but Mainfreight have a fair cushion of mana they can expend.