By Jenny Ruth
Wednesday 23rd June 2010
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Australia-based Toll Holdings has lowered its guidance for its second-half EBIT (earnings before interest and tax) to about A$190 million (NZ$234.5 million) compared with $224 million in the first half, says James Cooper, an analyst at Aegis Equities Research.
"This is some way below guidance at the interim result presentation for second-half profit to be broadly in line with the first half," Cooper says.
"After seeing conditions improve in the first two months of 2010, Toll says they have again deteriorated. This echoes recent comments from other companies, particularly retailers," he says.
He has lowered his forecast for Toll's net profit in the year ending this month to A$280 million and slightly lowered his 2011 forecasts. His longer-term forecasts are unchanged.
"While falling economic activity could see earnings and the share price weaken further, at current price levels we believe Toll is undervalued," Cooper says.
Recent acquisitions have given Toll a foothold in Asia and earnings are likely to rise, providing the company can successfully integrate them into its existing operations.
"The continued growth of multi-national companies will make total supply chain solutions essential in order to be competitive, especially end-to-end logistics with the rise of China and India and their importance to world trade."
Recommendation: Buy (upgraded from add).
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