Daily ShareChat: Mainfreight

By Jenny Ruth

Friday 4th June 2010

Mainfreight's combination of rate increases and market share gains means it "offers a compelling proposition in the next six to 12 months," especially given recent share price weakness, says First NZ Capital analyst Kar Yue Yeo.

He says Mainfreight's fourth quarter earnings before interest, tax, depreciation and amortisation (EBITDA) of $18.8 million was ahead of his $18.2 million estimate, driven by better-than-expected 10.6% revenue growth.

Kar Yue has raised his 2011 to 2013 net profit forecasts by between 4% and 11% as a result.

"Apart from a recovery in the New Zealand economy, Mainfreight is also picking up market share from failed and existing competitors and benefiting from increases in service pricing," he says.

"Earnings in Australia and the US have more than halved and have the potential to double."

The company's new facilities next to the Wellington central railyard will significantly increase efficiency and reduce the cost of its freight handling process and savings, not yet in his forecasts, in 2012 and beyond could be in the millions of dollars.

Mainfreight's 'problem child,' it's US domestic operation, is now break-even to marginally profitable in recent weeks after a $1.1 million EBITDA loss in the fourth quarter.

Recommendation: outperform (upgraded from neutral)

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