By Jenny Ruth
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Tuesday 9th June 2009 |
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The economic downturn is hitting amphibious boat manufacturer Sealegs hard but still has real long-term growth prospects, according to McDouall Stuart.
Sealegs reported a $5.8 million net loss for the year ended March compared with a $1.7 million net loss the previous year, although the latest loss included $4.2 million in non-cash one-off costs.
"Encouragingly, operating revenue of $11.5 million was up 21% on last year's $9.6 million, continuing the company's run of impressive revenue growth," the broker says.
The "underwhelming" net loss "masks a number of positive steps Sealegs took during the latter part of the year to adjust to the tougher trading environment."
Sealegs has cuts staff and manufacturing rates to keep inventories in check and reduce its cash burn. It is now manufacturing to order. "With $2.7 million of net cash in the bank, Sealegs should have sufficient liquidity to enable it to continue operating for at least two further years without needing additional funding, even at lower current production levels," McDouall Stuart says.
"However, the near-term sales growth potential remains strong." Sealegs made its first North American sale in the second half of the latest year and, although demand in the US is still depressed, "it remains the world's biggest and most lucrative small boat market, offering very substantial future sales potential."
BROKER CALL: McDouall Stuart rate Sealegs (NZX: SLG ) as a speculative buy.
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