Daily ShareChat: Mainfreight

By Jenny Ruth

Tuesday 2nd June 2009

Mainfreight's near-term earnings growth has stalled but it is well positioned for substantial earnings growth as economic conditions recover, says Rob Mercer at Forsyth Barr.

"We are confident that Mainfreight will emerge from this down cycle in great shape and with substantial earnings growth prospects," Mercer says.

The company's New Zealand domestic and CaroTrans businesses performed strongly in the year ended March and cushioned the impact of the global economic downturn, he says.

Mainfreight reported a net profit before one-offs of $40 million for the year ended March, little changed from the previous year.

Mainfreight USA (exluding Target Logistics) and its Australian domestic operations are under-performing but the company has already made several changes which should lead to a step-up in earnings, despite the ongoing weak economic outlook, Mercer says.

"Mainfreight has responded to the decline in freight volumes through targeting market share and cutting back operating costs and capex," he says.

"The decision to defer staff bonus payments (which totaled $6.5 million) is further evidence that Mainfreight has the ability to manage its way through the economic recession and align interests between staff and shareholders."

Mercer is forecasting normalised net earnings will fall to $37 million in the current year but values Mainfreight shares at $5.77, well above Friday's close at $4.52.

BROKER CALL: Forsyth Barr rate Mainfreight (NZX: MFT ) as BUY.

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