ferrets stock to watch: coates hire limited

Ferrets Stock to Watch: COATES HIRE LIMITED
09:08, Thursday, May 03, 2007

A COMPANY THAT HAS A NUMBER OF SUITORS IN THE WINGS

Sydney - Thursday - May 3: (RWE Aust Business News)
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OVERVIEW
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Shareholders in Coates Hire Ltd (ASX:COA) seem to have a lot to
look forward to with a number of preliminary approaches from interested
parties reportedly hiding in the wings.

Yesterday the sharemarket decided there could be a lot more
value in the stock as directors decided to undertake a review of
strategic options.

Coates's shares yesterday jumped 48c to $5.98, closing in on the
all-time of $6.61.

Directors have announced they are considering all of the
company's options in a view to maximising value for all shareholders.

However, its going to take a few months to complete.

The review will consider both corporate and operational
strategies.

This follows receipt of a number of preliminary approaches from
interested parties including private equity firms.

The company has appointed Macquarie Bank and will appoint a
leading consulting firm to advise it on the strategic review.

Directors emphasise there is no assurance that this process will
result in any specific transaction.

Coates does not intend to disclose further developments
regarding the process until after the Board has completed its review,
and it will be business as usual during the review process.

In the February half-yearly result, the anticipated divergence
of economic activity between various states and sectors has seen Coates
respond in a flexible and efficient manner to some patchy market
conditions during the six-month period.

The organic growth achieved, despite a slowdown in certain
areas, has however demonstrated that the company's extension and
diversification strategy has put it in great shape to deal with these
challenges and continue moving forward.

Coates said it is also evidence that the quality of earnings
streams now is providing increasing protection against short-term
disruptions.

SHARE PRICE MOVEMENTS
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Shares of Coates yesterday jumped 48c to $5.98. Rolling year for
the year and all time-high is $6.61 while the low is $4.67. Dividend is
20c to yield 3.34 per cent. Earnings per share is 39.5c and p/e ratio
15.14. The company has 250.8 million shares on issue with a market cap
of $1.49 billion.

Operating NPAT, which excludes the one-off tax benefit booked in
the previous corresponding period, was up 8 per cent at $46.5 million
although Coates reported net profit showed a decline.

This continued growth in core profit is also reflected by the
Board's decision to increase the dividend for the first half to 10c per
share from 9c in the previous corresponding period.

In summary, the strength of the final quarter of calendar 2006
allowed the company to look forward to an improved second half of the
year, historically always a stronger period.

"We are confident of achieving clear progress on the first half
and accordingly we have provided investors with a full-year forecast at
our results announcement," directors said.

In Australia, the outlook for the remainder of the year in
various regions has improved and some of the flat spots seen earlier
in the year are now starting to abate.

Project activity is improving in NSW and Victoria and the
company is seeing continued growth in WA and in Queensland.

On the basis of these internal and external improvements, Coates
is confident of achieving clear progress in the second half in terms of
sales, margins, earnings and profit, and is targeting full-year
operating NPAT of between $106 million and $110 million, an
improvement of 13-17 per cent on the prior year.

This excludes any costs associated with the reorganisation
of the group.

Coates will continue to focus on the efficient deployment of its
fleet, leveraging prior investments, broadening our revenue streams and
maximising the beneficial impact of a strong external environment, with
the ultimate goal of leveraging top line growth to bottom-line
performance.

BACKGROUND
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Coates Hire Ltd is Australia's largest equipment hire company
with 120 years of experience, supplying to a wide variety of markets
including engineering civil construction, building construction and
maintenance, mining and resources, manufacturing, government, industrial
shutdowns and events.

With over 190 branch and satellite locations and its own
maintenance and transport capability, Coates is well positioned to
satisfy the equipment hire needs of its customer base.

Coates's overseas operations comprises Coates Offshore, based in
Aberdeen in the UK which provides specialised equipment to the offshore
oil and gas industry, and Coates Hire Indonesia with seven locations
supporting the mining resource and offshore sectors.

ENDS

Copyright © 2007 RWE Australian Business News. All rights reserved.