By Jenny Ruth
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Monday 6th July 2009 |
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Hellaby Holdings' debt reduction progress, predominantly through working capital improvements, "is impressive and considerably ahead of what the company had guided to at it's half year result" in February, says Jason Familton at First NZ Capital.
Last week, the company said it had cut core bank debts to $51 million at June 30. In February, it said it wanted to get core debt down to $70 million or less. Hellaby also said it had renegotiated its banking facilities with Westpac through to July 31, 2011.
"While at a level which is clearly more comfortable, we continue to view the remaining core bank debt of $51 million (especially when coupled with the $50 million capital notes) as leaving Hellaby too highly geared and we will look for further debt reduction in 2010," Familton says.
But the progress to date led him to increase his "sum-of-the-parts" valuation to $1.57 a share from $1.35 previously. The shares ended last week at $1.29.
Familton is forecasting Hellaby's operating profit for the year ended June will come in at $25.3 million, in line with the company's guidance. "We remain cautious around earnings as we head into 2010 while the New Zealand economy remains in recession, although we believe there is some prospect of recovery later on in calendar 2009."
BROKER CALL: First NZ Capital rate Hellaby Holdings as underperform.
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