results better than first glance

There is some very good news for this year and next hidden in the figures released today. The market has not yet realised this:

* $4M of cost savings to be achieved this year, plus another $6M in FY14 (I have assumed all remaining cost savings from the total of $10M occur by June 2014).

* $20M of payments received in the first week of October do not appear in the cash flow or balance sheet yet. Net debt will be rapidly reduced with only 25% dividend payout, and the receipt of this overdue cash.

* IMO, the negative impacts on EBIT for this half are all likely to be one-offs for this year, whereas the positive impacts are all recurring, due to efficiencies already implemented.

At the current market price and my predicted NPAT for FY13 of $19M, NFK is still very profitable on ROE of over 15% and has a FY13 P/E of around 5.6. It is currently at more than 10% discount on book price. Looking forward, and assuming a further $6M of savings in FY14, the ROE will be back above 20% and the forward FY14 P/E will be around 4.0 based on my assumed NPAT of $27M (as well as the further cost savings, the negative impacts of this first half should not occur again next year). If this doesn't make NFK a takeover target, I don't know what will.

Before you say this is a ramp up, I have today bought more NFK shares, and will not be selling until it gets taken over or until the price doubles.