conspicuously week past few weeks, page-5

From Intersuisse today:

Alesco Corporation Limited ALS Monday 12 May 2008

Sticks to its guidance

Recommendation: Buy

Investment Rationale
Management has shown strong portfolio management skills, creating value
through acquiring growth businesses with key positions in niche markets,
improving productivity and selling underperforming businesses. Operating
margins are above 10%, from closer to 5% in FY01. Cyclicality remains in the
cash flows and the acquisition bent adds to risk through the potential for
overpayment and integration complications. Not capital intensive, this is a
reasonable generator of cash and dividends. Suitable for portfolios seeking
yield and some long term growth.
Event
�� CEO Justin Ryan gave updated comment on expected results for the year
ending 31 May 2008 and has retained FY08 EPS guidance set in January
for growth slightly higher than 12.2%.
�� The share price has dropped around 20% since mid-March mainly on
concerns over the worsening property and retail climate following recent
interest rate rises and Queensland floods. Buying interest has been
limited in a jittery market. Although the top line is being held back by
cyclical factors, ongoing business improvement is ensuring margin
expansion and profit growth.
�� Garage Doors & Openers restructuring including substantial staff cuts will
reduce the cost base by $2.5m but impose a pre-tax one-off cost of
$2.5m. NZ operations are also being restructured, causing a pre-tax
$5.5m one-off cost. The number of NZ facilities has been reduced from
five to two and the openers assembling operation transferred to Hong
Kong. The loss making specialty doors business will close by end May.
�� Building Products division's management structure has been simplified
and staff numbers reduced, creating cost savings of $1m pa with a pre-tax
one-off cost of $2.0m. Robinhood's Australian operations have been
integrated into Lincoln Sentry. Parbury decorative surfaces will be folded
into Lincoln Sentry from February.
�� The Total Eden McCracken's East Coast water business has
unsurprisingly been hampered by heavy rains but is returning to more
normal trading levels. West-coast out-performance has helped to offset.
�� Scientific & Medical (S&M) and Construction & Mining (C&M) divisions are
performing to expectations. S&M H2 results will be favoured by a strong
order book and seasonality factors. C&M benefits from ongoing strong
activity in resources and heavy construction markets.
Impact
�� Our NPAT estimates are reduced by 2.6% in FY08 and 4.2% in FY09. We
remain positive on prospects for ALS despite the slowing economy. This
is a well managed company and an attractive investment for long term
investors. The fully franked yield set to grow through 9% appeals. Full
year results are scheduled for 29 July.
Recommendation Impact
Continue to Buy for high franked yield and long-term growth..