May 2006 Financial News

NML Releases Unaudited Half Year Results

May 16, 2006

Neal and Massy Holdings Limited (NML) in the unaudited results for the half-year ended March 31, 2006 have reported a growth in EPS of 11.48%, from $1.22 to $1.36. This growth was driven primarily by an increase in Third Party Revenue, which moved 12% from $1.7 billion to $1.96 billion, filtering down to the bottom line.

The Chairman placed this performance into context, highlighting that the results of corresponding period last year were impacted by a substantial capital gain from one of the Group’s Associated Companies, which if excluded would have resulted in an increase in Profit after Tax of 23%. Last year the Associated Companies of the Group increased their contribution by 53.85 percent year on year from $17.264 to $26.6 million. In the period under review, the contribution by the Associated Companies was $16.2 million. Despite the fall in this income stream, the Group attained an 11.25% growth in Profit before Taxation, which because of the effective tax rate being maintained translated to the same level of growth in Profit After Taxation, from $115.6 million to $128.6 million.

The current share price of NML is $39.50. Using this share price and the running EPS of $2.94, the shares are trading at a P/E multiple of 13.43 times. The second half of the year is traditionally the stronger period for the company and as such we expect that NML will meet its commitment of 15% growth at the year-end. Based on this projection, we anticipate an EPS in the range of $3.22-3.25. Given the changing investment climate in the local market, we expect that the combination of the consistent past performance and the prospects for the rest of the year, that investors would be attracted to this share, translating to upward push on the share price. We recommend a BUY on this share.

Jason Gokool
WISE Research Team