Nov 2006 Financial News

NML Releases Audited Year End Results

Nov 28, 2006

For the year ended September 30, 2006 Neal and Massy Holdings Limited (NML) reported Earnings Per Share (EPS) of $3.37, which represents an impressive increase of 20.36 per cent or $0.57 on the comparable EPS in 2005. This is in line with the Group’s target of a 15 per cent increase in EPS per annum over a five year period which commenced in 2004.

Neal & Massy continues to produce excellent top line growth with Group Third Party Revenue reaching a high of $4.20 billion, up by a notable 18.25 per cent or $648.36 million on the previous financial year. The Retail & Distribution Division of the Group continues to be the main Revenue driver, while the Automotive Division is second in line for highest contributor to the top line.

Operating Profit stood at $401.54 million, a significant increase of 18.64 per cent on the corresponding period in 2005, while Profit After Taxation amounted to $299.21 million up by an outstanding 20.19 per cent on the same period in 2005. The Group’s Operating Margin stood at 9.6 per cent for the period ended September 30, 2006 compared with 9.5 per cent in the previous year. The Effective Tax Rate for the period stood at 26.5 per cent while for the same period in 2005 the rate was 28.1 per cent.

NML maintains a strong balance sheet with $3.5 billion in Total Assets. Net Current Assets for the period under review amounted to $620.66 million, an increase of $3.96 million or 0.63 per cent on the corresponding period in 2005. While, the current ratio stood at 1.48 per cent as opposed to 1.73 per cent at the end of the financial year in 2005. This is mainly due to the fact that the Group leveraged the purchase of the most recent acquisitions with short term debt. It is the objective to convert some of this short term debt to medium term debt over the next financial year and as such there should be an improvement in the current ratio by the end of the financial year ended 2007.

Shareholder’s Equity stood at $1.58 billion for the period under review; this was up by 15.18 per cent on the year ended September 30, 2005.

The Board of Directors has declared a final dividend of 74 cents which brings the total dividend paid for the year to $1.05, an increase of 19.3 per cent on the previous year. The dividend will be paid on January 19, 2007 to Shareholders on the Register of Members at the close of business on January 9, 2007.

The shares of NML are currently priced at $37.02 per share and with a Net Asset Value of $17.11 per share; this share is trading at an attractive market to book ratio of 2.16. Additionally, given the excellent results of the Group and positive expectations of the Chairman, we are forecasting an EPS of $4.00 for the financial year ended 2007, which represents growth in EPS of 18.69 per cent on the year ended 2006. At the price of $37.02 and the forecasted EPS of $4.00, these shares are trading at an extremely attractive multiple of 9.26 times. We therefore maintain our recommendation of a BUY on this share.

Gia Singh
WISE Research Team

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