Monday, August 24, 2009

Freightways Ltd: 2009 Full Year profit commentary

OK, I am back to the wilderness of New Zealand from being ensconced in a hotel room and the back of taxi cabs in Bangkok for two weeks and the NZ stockmarket is smack in the middle of reporting season.

One company's results caught my fancy and I thought I would give you my thoughts on those results.

The full year profit to June 30 2009 that came out last week from Freightways Ltd [FRE.NZ] was a case of steady as she goes, at least at first glance

Revenue was up by 5% to NZ $340 million and net profit after tax up by 7% to just over $34 million. If you exclude the one-off $4 million profit on the sale and leaseback of a property then profit is down by over 12%. Not bad considering economic conditions but considering that revenue is up slightly it is clear that management have let business costs get out of control.

Having said that a large amount of that cost has been attributed to capital expenditure to allow for future growth and management say that this expense will achieve results in the coming year -10s of millions have been spent on many acquisitions over the last few years, which have been purchased with borrowed money.

Financing costs for a sizable company debt have also been considerable but a capital raising from earlier this year has been used to pay down some bank debt so this cost should be lessened for full year 2010.

Interesting that in comments about capital management, nothing was said about the sizable dividend being paid when profit was down. The company is borrowing heavily to fund this dividend and it should have been cut by more than it has. Other companies have done this during 2009 and for Freightway's management not to address this is very poor to say the least.

The courier businesses have been hit the hardest, while the company's purchase of document management businesses over the last several years seems to be paying off as these are achieving growth even when other parts of the the company have slowed.

Naturally management are cagey about company prospects for the coming year given economic uncertainty but I would have to say even if business operations and therefore revenue remain stagnant, the fact that a multitude of costs have been ameliorated in the current year will mean next years full year profit after tax should be substantially better than full year 2009.

The only worry and out clause about that statement is that management have flagged looking at buying businesses this year more than a few times and unless any prospective business is the "bargain of the century" and a great business to boot then such purchases would be folly given the still high company debt and issues surrounding the health of the global economy.

Overall, the full year 2009 result has been unexciting if not a little boring and disappointing from a shareholders point of view because opportunities to pay down more debt have been lost and the hiding of the fact that ordinary profit was actually down a reasonable amount, rather than the headline of a profit up 7% was disappointing management let down.

6.5 out of ten.

Disclosure: I own FRE shares in the Share Investor Portfolio


Freightways @ Share Investor


Freightway's Capital Raising more of the same crap for small shareholders
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Why did you but that stock: Freightways Ltd
Freightway's delivers
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Discuss this company @ Share Investor Forum

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c Share Investor 2009

Monday, August 17, 2009

Sky City Entertainment 2009 FY Profit Preamble

With Sky City Entertainment Group [SKC.NZ] reporting its FY 2009 profit this coming Wednesday 19 August, investors are not going to get any surprises.

The dividend ratio has been cut, debt has been paid back and profit is well up on last year.

On July 21 the market was updated with a profit up roughly 15% to around the NZ$116 million mark and since then shares have climbed to as high as $3.45 from about $2.80 before the upgrade. This is in a market where all shares are basically up.

What we need to know is how Nigel Morrison is going to go managing the company in the following 12 months and beyond.

In a sneak preview of an interview coming out in late August early September with Nigel I indicate the importance of this in my preamble:


Sound capital management with a focus on customer service and unnecessary costs stripped out have been the key to Nigel's success so far.

But what of the next 12 months and longer?

How will the business go under his leadership and what new ideas does he have to take this company through the $1 billion revenue barrier and beyond?

Morrison has done well but a further test of his strong management so far will come as Sky City emerges over the next year or so.

Shareholders and the market must see how Nigel will accomplish this and he should indicate the key ways he will achieve this, without revealing competitive secrets of course.

I look forward to Wednesday.


Sky City Entertainment Group @ Share Investor


Discuss this stock @ Share Investor Forum

Related Links

Put some questions to Nigel Morrison for the Interview.

You can submit them at the Share Investor Forum here or email them to me here and I will submit the best ones to Nigel.


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c Share Investor 2009

Wednesday, August 12, 2009

Letters from Bangkok: Business is Still Hot

Greetings from Bangkok, I am back here in this very busy city to do a bit of personal stuff and look at the way Thais do business as well.

I have to say from what I have seen so far, the global economic slowdown has yet to dampen the Thai's natural entrepreneurial spirit. Having said that there is political debate over a very large so-called "stimulus" package - you would have thought the Thais would have learnt from the failure of every country's respective bailouts that have thus far pumped trillions of borrowed money into failing economies.

Everything is constantly pumping and everywhere one looks, even in areas of abject poverty, people are selling things; whether it be rice, tyres, cars, rags or tummy tucks.

Bangkok really is a paradise for a healthy capitalist like myself!

The Thai Stock Exchange Index closed at 644.2 this last Friday, according to the Bangkok Post , up more than 50% over the last 6 months alone, and one could expect, like other world indexes, including our own NZX, this kind of market over-exuberance is not a sustainable one given the fragile nature of any perceived global economic recovery.

I am going to visit the heart of bureaucracy tomorrow, Embassy row (the Kiwi Embassy and red tape machine on the 15th floor of a very flash downtown building) in downtown Bangkok and plan on taking a look at the operation of their stockmarket as well.


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Friday, August 7, 2009

Beware of "Black October"

A recent market update by Kingfish Ltd [KFL.NZ] the listed portfolio management vehicle, got me thinking.

In this document they wax lyrical about how well share prices for the companies they hold have done well over the last quarter and they are right, they have done well.

Ryman Healthcare [RYM.NZ] Freightways Ltd [FRE.NZ] Mainfrieght Ltd [MFT.NZ] Sky City Entertainment Group[SKC.NZ] and many others have stacked value on their share prices.

Sky City alone has gained over 40% since its recent $2.51 lows.

Kingfish have all these companies in their portfolio bar Sky City. I own them all in the Share Investor Portfolio.

But rather than reason to get excited if you are an investor with a shorter term horizon you are likely to get a bit of a shock in the back pocket, if stockmarket history is anything to go by.

The month of October is notoriously bad for global markets, the 1929 crash happened in October and so did the 1987 crash - the 2008 crash likewise. Even if you discount those three historical events October is just a bummer month for stocks, it is probably a psychological thing where historical events have self perpetuated into a down month.

Nevertheless it does happen and that month could be the time to start buying again. My wallet is firmly closed, for now.

Take care of yourselves, be careful when deciding to buy and make some money why don't ya.

See you soon.

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