Sharechat Logo

Daily ShareChat: Cavalier

By Jenny Ruth

Wednesday 15th September 2010

Text too small?
 Jenny Ruth

Carpet maker Cavalier Corp's earnings will benefit significantly from one-off gains associated with Canterbury's earthquake, says Craigs Investment Partners.

It has raised its 2011 net profit forecast by 18% to $21 million and its 2012 forecast by 16% to $22 million. That compares with the $17 million net profit Cavalier reported for the year ended June 1010.

Some 100,000 homes were damaged by the September 4 quake and more than 500 will have to be demolished. Bad weather and the after-shocks haven't helped salvage operations.

"In our impact analysis, we assume some 15% to 30% of the 100,000 damaged homes will require re-carpeting at some point and we assume Cavalier will hold onto its 38% market share," the broker says.

It assumes an average home requires 128 square metres of carpet. Based on these assumptions, this should boost Cavalier's sales revenue by between $20 million and $39 million.

"Taking the mid-point of $30 million and applying an EBITDA (earnings before interest, tax, depreciation and amortisation) margin of 30.5%, this equates to and EBITDA contribution of $9.02 million," Craigs says.

"Key downside risks include a delay in the start-up of repair work and the number of damaged homes requiring re-carpeting is lower than our estimate."

Craigs has raised its 12-month target for Cavalier shares by 12% to $3.41.

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:

Godfrey Hirst appeals High Court ruling on Cavalier warranties
Cavalier Corporation announces preliminary announcement of June 2013 full year results
Cavalier cuts FY earnings guidance, won't pay interim dividend
Cavalier names Paul Alston as chief financial officer
Cavalier turns to FY loss on cost to restructure unprofitable business
Cavalier ceases spinning at Onehunga with 70 job losses
Cavalier Corporation
Cavalier forecasts FY loss after charges, no dividend; shares tumble
Cavalier says first-half profit plunges 59%, will miss full-year guidance
Cavalier Corporation