Forum Archive Index - October 2000

["Mike Hudson" <mikehudson@clear.net.nz>]

On a similar vein I hope that Francis Salveson from ABM AMRO doesn't mind me sharing the comments from his daily e-mail with you. I can only say that in the event that anybody makes a buying decision based on these comments that the order is placed through ABM AMRO

 

Carter Holt Harvey… CAH is expected to announce its 2Q01 result on 18 October, two weeks earlier than previously scheduled as a result of ongoing improvements to business and accounting systems. Future quarterly earnings announcements will be made within 3 weeks of each quarter end… We are forecasting 2Q01 NPAT of around $80m (up 86% yoy) but will be down on 1Q01 of $90m. The latter benefited quite significantly from the sale of standing timber. We are expecting 2Q01 sale volume of standing timber to be lower… Although prices in 2Q01 should still remain positive for some product grades, earnings are likely to feel the pressure of the Australasian construction sector slowdown, higher fuel costs, the mixed Asian linerboard market and the margin squeeze on tissue from higher pulp cost. Fundamentals of the company are still solidly based. The commodity market downturn affecting earnings is likely to be a short-term market "correction". On this basis, CAH is a compelling valuation story. The stock is trading at 0.6x price-to-book value compared to its Northern Hemisphere counterparts who are trading at 1.1-1.4x… $1.63… Buy (Source: Dennis Lee, Analyst, ABN AMRO NZ)

Fletcher Forests… FFS will take the form of a standalone company with Terry McFadgen as the new CEO… The company will be recapitalised through a pro-rata 2:1 rights issue at $0.25 (raising $427m), a placement of $90m (at ex-issue price of $0.40 per share) to Rubicon, and sale of $80m of assets to Rubicon… Ex-rights issue, the debt/capitalisation (look through) of FFS will decline from 45.1% to 25.7%. Rubicon will end up holding an 8.1% interest in FFS… There will be a massive share price dilution. Our theoretical estimate of the share price ex-rights issue (based on 2:1 and pre-announcement price of $0.56) is around $0.35. Our DCF valuation of FFS will decline from $0.94 to $0.40 per share ex-rights issue… at 43c the shares are a BUY. (Source: Dennis Lee, Analyst, ABN AMRO NZ)