Daily ShareChat: Hallenstein Glasson Holdings

Hallenstein Glasson Holdings' profits are likely to improve in the current year from maintaining tight operational management, store expansion and the benefits of the rising New Zealand dollar, despite continued difficult trading operations, says McDouall Stuart.

"Stability in economic conditions in the latter part of the latest year and market share gains in Australia (same-store sales growth of 12.3% in Australian dollar terms) has enabled the company to lift profitability in the second half," the broker says.

"The recently established Storm franchise is also performing strongly and expansion from its Auckland based has commenced.

McDouall Stuart is forecasting net profit will rise from the $12.8 million it reported for the year ended August 1 to $13 million in 2010 and to $14.7 million in 2011.

"Reflecting its conservatism, the company has an inefficient balance sheet with no debt and cash of $26 million. Cash levels are likely to diminish on the back of an expanding Glassons store rollout in Australia," the broker says.

It says while the company has been seeing expansion and acquisition opportunities, these have been modest. It has limited opportunities to roll out further stores in New Zealand although larger format stores are contemplated. It has 88 stores in New Zealand and 27 stores in Australia.

BROKER CALL:  McDouall Stuart rate Hallenstein Glasson Holdings as hold.

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