Tnt Assessed As Europe's Top Carrier
Sun Herald
Saturday June 24, 1989
JUSTIN ARTER, Josephine Russo & Peter Hilton, ANZ McCaughan
BUY
TNT ($3.40): TNT offers one of the few avenues outside US stocks to invest in express freight and transport companies. The stock trades at a considerable PE (price/earnings) discount to US companies yet displays greater earnings potential in the medium term than those companies.
The express freight sector displays compound growth of 30 per cent per annum in Europe up until 1992 and TNT has been independently assessed as being the number one carrier in this region. TNT's strategic objective over the next three years will be to extract maximum growth from European assets.
Burns Philp ($3.32): The group's acquisition and rationalisation strategy over recent years, its concentration on niche growth markets-in particular in food/fermentation and hardware retail, and strong management assures long-term outperformance.
BTR Nylex ($4.98): BTR Nylex has a proven track record of very strong earnings growth through both acquisition and business development. it currently has a low net debt to equity level of around 25pc which will allow it to endure high interest rates better than most and to make an acquisition if and when appropriate.
The stock performed well in the 1985/86 high interest rate environment. BTR Nylex also sources some 40pc of its profits offshore which provides some hedge against a local downturn.
Pacific Dunlop ($4.60): This is a steady earnings growth company which has a high degree of defensiveness in its earnings. Its markets are largely replacement items in fairly inelastic products (basic clothing and footwear, car tyres, car batteries, and medical latex products) and it earns close to 40pc of profits offshore.
Pacific Dunlop performed well in the recession of 1981/82 and the high interest rate environment of 1985/86 reflecting this defensive value.
DAVID ARCHIBALD, ENERGY ANALYST, JARDEN MORGAN.
BUY
Woodside Petroleum ($2.38): The first shipment of Liquified Natural Gas(LNG) from the North West Shelf project is now only about two months away, nearly twenty years after the idea for the project was first considered.
The LNG, which is methane liquified at minus 161 degrees, will be shipped to power stations in Japan.
At its current share price, we consider Woodside to be better value than either Santos or Ampol Exploration as an investment in the oil sector. With BHP and Shell owning 82pc of the issued shares in Woodside, it is also a high quality investment.
We believe that Woodside won't be able to pay significant dividends until about 1995, but the dividend stream from then will be substantial.
At an oil price of US$20 per barrel, dividends of the order of 50 per share in 1989 dollar terms could be paid.
This makes Woodside ideal for those who wish to benefit from the rise in oil prices expected in the early 1990s and have a good dividend income from the mid-1990s.
GEOFF STANLEY, MINING ANALYST, JARDINE FLEMING AUSTRALIA
BUY
Industrial Equities Ltd ($2.10): We believe that the realisable value with the company on a breakup basis is in excess of $2.70. Considering the presence of Spalvins on the IEL register (circa 8pc), the chance of an improved offer over the current offer of $2.40 and one Goodman Fielder share for two IEL shares is good.
Paxus Corporation Ltd ($1.40): On the smaller company front, we believe that specialist software and computer services company Paxus Corporation offers good long-term value.
Despite its association with the high technology sector, the company has a solid track record.
Sales in Europe and New Zealand are particularly strong.
The company should earn in excess of $11.5 million in the year ending March 1990.
Pan Australian Mining ($4.25): The company has successfully commissioned its CIP plant at Mt Leyshon in Queensland and is achieving expected ore throughput and gold recoveries. It also recently announced some exceptional drill intersections, including 242m grading 4.2 grams of gold per tonne, from the Mt Leyshon deposit. As a result, further increases in reserves are expected to be announced.
Pan Ocean shareholders should accept the 80 offered by ADL.
© 1989 Sun Herald