Daily ShareChat: Mainfreight

By Jenny Ruth

Wednesday 6th May 2009

Forsyth Barr analyst Rob Mercer has downgraded his forecasts for Mainfreight's earnings in 2010, reflecting the severity of the global economic slowdown, although he says the company is well positioned for substantial earnings growth as economic conditions improve.

"The impact from the contraction in economic activity is unavoidable in the short term but also provides substantial opportunities for Mainfreight and it is the latter point that we believe the market should focus on," he says.

Mercer is now forecasting Mainfreight's net profit before one-off items will be $36.3 million in the year ending March 31, 2010, down from his previous $43.9 million forecast. Mainfreight will report its 2009 results tomorrow and Mercer is expecting a $38 million net profit, down from his previous $39.8 million forecast.

"We believe Mainfreight will adopt a more aggressive pricing strategy to gain market share which is likely to place downward pressure on margins and flattens out its earnings outlook."

Mercer says a review of Mainfreight's margins since 1993 shows although margins have steadily improved over the past 16 years, through periods of lower activity margins tend to decline by about 1% which is the decline now factored into his 2010 forecast relative to the 2008 peak.

BROKER CALL: Forsyth Barr rates Mainfreight (MFT) as BUY

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