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Message subject : SHAREMARKET POINTERS

This message was posted by sj on November 13, 2000 :

SHAREMARKET POINTERS

Frucor Beverages has been one of the more successful floats this year. Its $1.20 shares joined the lists in June and went as high as $1.91 and are back to $1.45 now. However, in keeping with a year that has seen 92 of a record 143 floats (so far) lose money for investors Frucor also had its moments of doubt, trading as low as $1.15. The 40-year-old NZ-based company's growth in the past year has been as explosive as one of its famous energy drinks - "V", which is a guarana, caffeine and B Vitamin drink targeted at "on-the-go" 18 to 30-year-olds.

Frucor claims the launch of its so-called "New Age" drink "V" has been one of the most successful in cold beverages and in its fourth year is continuing to grow well and enjoy a market share of more than 60 per cent. "To appeal to its target market its advertising is funky, has attitude and is entertaining," the company says.

Frucor has other New Age drinks in its portfolio as well as fruit juices, flavoured milk drinks, bottled water and has moved into the carbonated soft drink market through the acquisition of Pepsi Cola Bottlers New Zealand. New Age drinks growth over the past three years ranges from 27 per cent to almost 1,200 per cent (although that's off a much smaller base, of course). The company is actively expanding internationally with initial moves into the UK and Ireland to be followed by Europe. International operations are only breaking even so far and the money is still being earnt in Australasia. However, the money appears to be pretty good. In the year to June 30 Frucor had a net profit of $9.6 million, three times the previous year's result of $3.2 million and nearly 10 per cent better than the $8.8 million forecast in the prospectus.

The adjusted net surplus for the year was $13.6 million (compared with $5 million in 1999). Sales in the three months to September, which is the winter quarter and a slow time for drinks, are tracking at 98 per cent of budget and 75 per cent ahead of the same period last year (when the company did not have Pepsi in its line-up). At this stage Frucor expects it will achieve its forecast full-year net profit of $20 million. That seems to indicate earnings per share of 16c, which means that at latest prices Frucor is on a prospective price/earnings
ratio of less than 10 times.

THERE'S A LOT OF TAKEOVER ACTIVITY IN TRANSPORT ... It may seem odd but Chalmers (ASX code: CHR) described its 85 per cent rise in bottom-line net profit from $414,000 to $766,000 in the year to June 30 as "disappointing". That's because operating profit was down, from $928,000 to $639,000. It was down because the bottom line was skewed by the $151,000 abnormal loss in 1999 and a tax bill of $363,000 that year, while in 2000 there were no abnormals and there was a tax credit of $127,000. Oh, and for the first time in the company's history the transport division lost money.

The market seems to be sharing the company's disappointment and is pricing the stock at $1.60, compared with a high/low range for the year of $2.50/$1.50. At this level yield is a handy 7.5 per cent from the fully franked 12c dividend and p/e is 11.9 times. The dividend cover is a tad slim with earnings per share at 13.4c. However, that should not be a problem. Chalmers has started the first quarter on a strong footing with revenue on budget and profits, compared with last year, being exceeded by a "significant margin". It describes the future promising. Chalmers has another attraction in that its net tangible asset backing at $2.50 a share exceeds share price by a big margin.

It could make the company a takeover prospect. After all, the transport business has traditionally been a hotbed of acquisition activity. In its review of operations for the past year the company revealed that the transport division sustained a negative return on revenue of 1 per cent; general handling and storage produced a small profit on reduced revenue; bulk handling and storage has shown steady growth; and containers in Melbourne started the year fairly slowly but became much busier in the second half and this has continued.



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