Tag: USA

Pullback Offers Attractive Entry Point

Posted by | Jul 20, 2006 | |

Attractive entry point on the back of market pullback. Although up 5% from the recent trough, TNT shares are down 9% since the beginning of May, in line with our European Logistics stock coverage universe average. We maintain our Outperform on the back of positive fundamentals and believe current share price weakness offers an attractive entry point with 24% upside potential to our price target.
Logistics disposal to serve as next likely key catalyst. Disposal of the Logistics division (ex freight forwarding) is expected before year-end at a price that at least matches book value of €1.2bn ($1.51bn) per TNT guidance. Successful disposal would (1) improve the group’s growth and returns profile and (2) trigger a sizeable share repurchase (estimated 9%-11%, dependent on takeout price).
Long-term focus on Express development. Ex Logistics, the Express division is set to play an even more pronounced role as the group’s growth driver. Besides the successful disposal of Logistics, emergence of accelerating top-line Express growth, in line with medium-term 10%-15% guidance (vs. ~10% guidance for 2006), could serve as a key fundamental catalyst in 2H:06.
Earnings ex logistics unchanged; updating ‘all-in’ estimates. Ex Logistics, we expect EPS of €1.89 ($2.38) and €2.13 ($2.68) in 2006/07 (no change) with our €35 ($42) target price implying a target P/E multiple of 13.8x (2007E) vs. current 11.1x. Due to an update of our Logistics valuation and treatment for discontinued depreciation, our ‘all-in’ estimates (inclusive of Logistics) are rising by 4% (down 4% underlying).
Risks to our bullish thesis. Key risks relate to (1) successful disposal of a large Logistics asset, (2) a major economic slowdown (to which Express would be highly geared), (3) Mail regulatory risk (4) a remaining, albeit small, gov equity stake overhang (10%) and (5) potential suitors interested in Express may choose other means of developing a greater presence in Europe.

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UTI Worldwide Inc Annual Report

Posted by | Jul 20, 2006 | |

No new news is good news

In-line F1Q:07 (April) quarter. UTIW reported $0.17, in-line with its prior pre-report range of $0.15-$0.17. Operating income was modestly higher than we projected benefiting from a penny less stock option expense offset by modestly lower than expected net rev. growth. Other income and share count modestly higher, tax rate modestly lower. Overall right in-line.
Modest positives from report and conf. call. Mgmt stated that it was comfortable with current F2Q and F07 Consensus EPS ests implying that downwardly adjusted EPS ests have likely bottomed. Ocean gross yields expanded 160bp y-o-y well above our expectations – we expect further acceleration in F2Q. New higher margin CL contracts were noted. Market acquisition is on-track. Corporate expenses were lower than expected.
Modest negatives… Receivables spiked but mgmt noted that the material part of that was related to timing for holidays in South Africa and thus far in F2Q working cap has reversed in UTIW’s favor. CL margins and profitability were weaker than expected. Airfreight net rev. grew only about 6% on an est. 13% volume growth. We expect acceleration in airfreight growth as recently hired employees from competitors begin to deliver.
Little new insight in our largest long term concern, contract logistics. UTIW continues to struggle with declining CL margins relating to some recent start-up costs and an unfavorable mix of faster U.S. growth. Large new CL contracts for IHD in S.A. and in China were noted. This is critical as these regions generally have materially better op margins and most recent large CL wins (WMT, HD, Fuji) have been based in the lower margin U.S. market.
Reiterate Outperform. While we don’t see material upside to near term estimates, we also don’t see downside. At current valuations we continue to favor the risk/reward to buy the stock now (aggressively under $30). Longer term this remains one of our favorite managements and models.

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L. Patrick Lupo Joins Board of Directors of Bunge Limited

Posted by | Jul 20, 2006 | |

Bunge Limited today announced that L. Patrick Lupo, former chairman and chief executive officer of DHL Worldwide Express (DHL), has joined its Board of Directors. The appointment of Mr. Lupo brings the membership of Bunge’s board to 11. Mr. Lupo is an independent director and will serve on the Board’s Compensation Committee and its Finance and Risk Policy Committee.

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Wonder Woman, Superman, Batman go postal

Posted by | Jul 19, 2006 | |

Faster than a speeding bullet, comic book superheroes are coming to a post office near you. Batman and Superman, Wonder Woman, Supergirl and a half dozen other superheroes will star on new postage stamps being released Thursday.

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As Postage Rates Rise, the Wise Will Find Hidden Value in Paper

Posted by | Jul 19, 2006 | |

The Postal Rate Commission announced in November 2005 the approval of a 5.4% postal rate increase. The increase took effect in early 2006, and for companies that mail high volumes of bills and statements the financial impact will be significant. Some may point to electronic bill presentment as a way to sidestep these increases, but the fact is that an overwhelming majority (between 85 to 90%) of utility customers still prefer to receive their statements in the mail and pay bills with a paper check. The reason? Customers have little incentive to change their habits and often find e-billing more confusing and time consuming than necessary.

In the face of the pending postal rate increase— coupled with slow adoption of electronic bill presentment and payment—utilities may feel that they are caught between a rock and a hard place; but there is hope. Smart utilities companies will find hidden value in their paper processes by looking more deeply at the value of printed statements and more closely at the reliability of the USPS. E-billing may someday provide significant cost advantages to billers, but until customer adoption is more fully developed it is wise to look at the many advantages of issuing statements and bills via P.O.P. – plain old paper.

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