Forum Archive Index - March 2001

["SWLEE" <SWLEE@xtra.co.nz>]

For those who may be interested in CAH, IMHO, it is a classical value stock which has been overlooked by many until recently when its price has begun to take off.

I have been following this stock very closely and have been accumulating since the price started to pick up.

Price increases have been accompanied by increasing volume, typifying the stock being in the accumulation phase of a uptrend movement. Further price increase appears positive because currently it has excellent fundamentals, technical trend and business plan.

 

Fundamental.

CAH reported a record profit for the last financial year ending 3/2000 of $202M which included a major contribution from its Chilean business that was sold in the same year. What is more impressive is that for the current period, despite the absence of contribution from the Chilean business, in its quarterly report CAH has managed to report a 9 month profit of $218M which already surpassed 2000 annual profit of $202m. The profit represents a massive increase of 50% over the corresponding period. This was achieved by increased revenue of 21%.

 

The F/year profit will not be known until mid April when CAH would release a brief statement at the same time as its parent company International Paper publishes its annual report.  Whatever it was, it is certain that 2001 profit will be better than last year, (by 30-50% ?). Being able to report increased profit under current environment whereby not many NZ companies been able to do so, it is an indication of the company being well managed by a team who are very focused to add value to its shareholders.

 

IMHO, CAH should be able to sustain a price range of  $2.74-$3.27, based on conservative P/E of 12-14 on 2001 profit projection.

 

Technical Analysis

The current price chart Moving Average is pointing strongly upwards, representing a bullish trend. (Similar to that of SKY, AIA etc).

CAH share price has dropped today after a strong run, IMO, it is only a technical retracement after a strong run. It could be opportunity to catch on the train!!

 

Business model

CAH is cash rich after disposing of the Chilean business and sitting on a war chest that allows them to acquire existing and new businesses, putting the company in a very competitive and monopolistic position. Their recent initiatives include :

                1) Have just commissioned a new state of the art plant in Northland( biggest in Southern Hemisphere) to capture new                     market

                2) Bought the MDF (medium density fibre) board plant in Australia from CSR, end of last year

                3) As a JV partner in the management of the new forestry port in Northland that is currently being constructed, providing                     immense benefit to their large forestry inventories in this part of the country

                4) As a JV with its parent company IP in acquiring a distribution business in China, enhancing its distribution network for                     their products

                5)  Investment in venture capital on online E-cargo freight hub

 

All the above initiatives must in due course, enhance CAH bottom line performance for years to come.

 

Summarising:

CAH has a very dynamic business plan, not stagnating like some of the big companies in NZ (such as FFS, FLB ?)etc; and with the newly introduced innovative management structure, the future looks promising!

 

IMO, CAH is, not only a value stock but also a growth stock in the medium term.

With a current share price well below its NTA @$2.7, it is certainly a potential takover target for any discerning predator.

 

I would be interested to hear what other thinks about CAH