Latest from intersuisse? CSR is between a rock and a hard place....

Latest from intersuisse
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CSR is between a rock and a hard place. The rock is operations
associated with the Australian residential and commercial construction
sectors and the hard place a 70% interest in Gove Aluminium Finance
Limited (GAFL).
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Activity levels in the Australian residential segment are quite bleak with
approvals and starts falling with wet weather on the east coast
exacerbating the problem. The end of government stimulus in social
housing and Building the Education Revolution will affect FY12
comparisons.
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GAFL has a 36.05% stake in Tomago Aluminium Company (TAC), which
operates the Tomago aluminium smelter near Newcastle. The commodity
boom of the past five years bypassed the bauxite, alumina, aluminium
suite. CSR has exposure to the weakest bucket of the three and that is a
really hard place. It will be extremely difficult to generate book value for
the asset.

Impact
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We downgrade FY12 and FY13 estimates - FY12 NPAT from $83.5m to
$76.5m and FY13 from $108m to $96.0m. EPS reduces from 16.4¢ and
21.1¢ to 15.1¢ and 19.0¢ respectively. DPS also trims with a payout ratio
near the high end of the stated 60-80% range.
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We lower our long term growth forecasts resulting in reduction in fair value
from $2.74 to $2.10. Price triggers adjust accordingly.
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While the recommendation is Accumulate, CSR is not a must have stock.
Our clear preference in the building materials sector is James Hardie
Industries (JHX), with an ungeared balance sheet, solid growth potential.