Daily ShareChat: Cavalier Corporation

By Jenny Ruth

Tuesday 1st September 2009

Carpet maker Cavalier Corporation is a stock for patient investors because the housing industry in both Australia and New Zealand will recover in the medium term and the dividend yield appears attractive, says McDouall Stuart.

"While activity in the residential and commercial building industry sectors are likely to remain weak in the current year, there is some evidence of an upturn in consumer confidence, particularly in Australia," the broker says.

"If this trend continues, the refurbishment market, where Cavalier is most exposed, could see some recovery as the year progresses." However, the strengthening New Zealand dollar could dampen profitability.

Cavalier reported a 24% fall in normalised net profit to $13.7 million for the year ended June 30 although it was better than the company's November guidance of between $11 million to $13 million.

The company expects continued difficult trading conditions and its guidance for 2010 net profit is between $13.5 million and $15.5 million.

"The midpoint of $14.5 million is an improvement on the latest year and reflects the benefits of the cost reduction and efficiency programs in the carpet operations and the better industry dynamics in wool scouring," McDouall Stuart says. The wool scouring industry has been rationalised to reduce capacity to correspond with current demand.

BROKER CALL: McDouall Stuart rate Cavalier Corporation (NZX: CAV ) as hold.

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