Bid expected for CPU
Bid expected for poor, sick ComputershareJune 4 2002 ---------------------------------------------------------------------
--------------------------------------------------------------------- On track ... Toll has scored an upgrade, thanks to higher than expected earnings from its rail joint venture with Patrick Corp. --------------------------------------------------------------------- That's the rumour but some analysts wonder why anyone would be bothered. --------------------------------------------------------------------- Is anyone out there interested in making a bid for Computershare? After last week's briefing fiasco in which the company said very little that was new but still managed to upset the market, some of the more bullish observers have suggested at least one overseas entity must be interested. --------------------------------------------------------------------- Four companies have been mentioned. The first is Lloyds TSB of the UK, which took out its slide rule a few months ago when the local share registry company's share price was closer to $3. Yesterday the stock closed at $1.95, down 2c, with 14 million shares traded. --------------------------------------------------------------------- One significant argument against Lloyds making the bid is competition - by buying Computershare it would have mopped up just about the entire UK share registry market. The regulators might have a problem with that. --------------------------------------------------------------------- Other possibles are fellow UK company Capita IRG and two US-domiciled groups, Mellon Bank and DST. However, analysts were a little sceptical. --------------------------------------------------------------------- "Why go through all the hassle and cost of complex system transfers and integration for a company which makes less than $60 million a year?" said one. --------------------------------------------------------------------- Merrill Lynch has made some pretty hefty downgrades to its numbers following the replacement of a presentation to analysts with a select briefing to a couple of instos. --------------------------------------------------------------------- Merrill cut its share valuation from $2.30 to $1.80 and said it could not reconcile the group's earnings forecast of $56 million to $60 million without serious cost cuts in the second half. --------------------------------------------------------------------- Merrill Lynch has downgraded its earnings forecasts by 14.6 per cent to $44.6 million for the current year and by 25 per cent in 2003 and 27 per cent in 2004. --------------------------------------------------------------------- Toll gets an upgrade --------------------------------------------------------------------- JB Were's new transport analyst, Anthony Srom, has made major changes to the stockbroker's numbers for trucking and rail outfit Toll Holdings, driving through upgrades to both earnings and valuation. --------------------------------------------------------------------- Srom, formerly at Deutsche Bank, boosted JB Were's valuation by roughly $10 a share to $42.20, and added another 14 per cent and 9 per cent to Toll's forecast earnings for 2002-03 and 2003-04 respectively. --------------------------------------------------------------------- The basis for the upgrade is higher than expected earnings from Toll's Pacific National rail joint venture with Chris Corrigan's stevedore company, Patrick Corp. JB Were thinks Pacific National, valued at $2.1 billion, is worth about $10.17 a share to Toll. --------------------------------------------------------------------- By Srom's reckoning, the key areas for growth within Pacific National are the inter-modal and coal divisions, which he estimates will generate about 82 per cent of pre-tax earnings by 2005-06. Perhaps of most interest is JB Were's prediction that the rail business will ramp up margins to 20 per cent. --------------------------------------------------------------------- It's a high number but Srom believes it is achievable with the high barriers to entry in the railway game and the lower levels of competition than in other areas of the transport industry. --------------------------------------------------------------------- More broadly, JB Were believes Toll can expand its margins by branching more into port-related activities, embracing technology, setting up in Asia, and lowering costs in rail. --------------------------------------------------------------------- Toll shares rose 50c to $34.50. JB Were, obviously, rates the stock a "buy". --------------------------------------------------------------------- Metcash forgiven --------------------------------------------------------------------- Those jitters a few weeks back on Metcash's earnings now appear largely forgotten as the market invests more time in scrutinising the grocery and liquor wholesaler's strategy to expand in Asia. --------------------------------------------------------------------- Metcash has narrowed its choices down to two countries. One is strongly rumoured to be Malaysia. --------------------------------------------------------------------- The company is expected to buy, rather than build, its path into the Asian markets through an acquisition. After that, it would transplant the successful model it uses with Campbell's Cash & Carry in Australia. --------------------------------------------------------------------- Apparently it has decided to steer clear of a vertically integrated model, where it might also own a retail chain. --------------------------------------------------------------------- Those broad-brush plans are reasonably well known in the market. The overall reaction has left Metcash stock roughly steady, suggesting investors are giving cautious approval. --------------------------------------------------------------------- The stock rose 15c to $2.46 but analysts remain worried about its prospects for growth in Australia, where the Metcash-supplied IGA chain of supermarkets is bound to come under pressure from a more aggressive Woolworths and Coles Myer. --------------------------------------------------------------------- Good news from Coates --------------------------------------------------------------------- Last week's update by equipment hire company Coates Hire was what followers of the stock were waiting for. In a market where it seems nothing is certain, Coates reassured everyone that its program to integrate Wreckair was going to plan and should be done by the end of June. --------------------------------------------------------------------- The stock rose 2c to $2.20, suggesting it wasn't the most startling piece of news to hit the market this year. --------------------------------------------------------------------- Nevertheless, the announcement cheered stockbroking firm Burdett Buckeridge Young enough that it upgraded its forecasts for Coates' earnings and, consequently, its valuation on the stock. --------------------------------------------------------------------- BBY has a 12-month target for the shares of $3 and rates Coates a "strong buy". --------------------------------------------------------------------- Essentially, BBY likes the firmer pricing power and one-third market share that Wreckair gives Coates. ---------------------------------------------------------------------
CPU Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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