todays private client report from ssb

So close you can almost touch it
† The interim result beat expectations, with the mix of solid operating performances, cost cutting and zero tax resulting in EBIT and NPAT coming in ahead of forecasts by 16% and 61%, respectively.
† The delay in completing the divestment of the remaining non-core auto businesses is the only cause for disappointment. While there is a chance it drags on into FY06, the risk of further red ink is negligible (be it asset values or earnings), as the business is breaking even and the $40m write-down has effectively reduced the carrying value to working capital.

† That aside, the huge task of restructuring the company is largely complete. Nylex has been transformed from a heavily indebted rust-belt manufacturer with too many businesses to count, to a focused marketer & distributor of consumer-related products and a niche manufacturer of products with growing markets that have high barriers to entry.

† We have revised our forecasts to reflect the higher run-rate on operating profits at the half and expectations that earnings will be untaxed in both FY05E and FY06E. This has resulted in upgrades to EPS for FY05E-06E of 34%, 43% and 13%, respectively.

† While the drawn-out divestment program may weigh on investor sentiment until it is completed, waiting for final closure before buying the stock will probably prove too late, as the price will invariably gap-up. As such, we have upgraded our rating to Buy / High Risk (1H) and increased our target price to $0.54 (previously $0.44).