Freightways - FRE

[Oiler]

I notice at least one broker upgraded recommendation to accumulate on the back of yesterdays result - mainly just on the basis that they seem to have passed the low in the cycle. However, I like my recovery stocks to be either very cheap or have a higher proportion of fixed costs that makes for more rapid upswing in margins.

By my measure, FRE is over-priced at $2.81 current - a fairer price would be somewhere below $2.20.

Appreciate your comments Lizard as FRE is one stock I was looking to jump into..... will wait for a lower price.

[macduffy]

I notice at least one broker upgraded recommendation to accumulate on the back of yesterdays result - mainly just on the basis that they seem to have passed the low in the cycle. However, I like my recovery stocks to be either very cheap or have a higher proportion of fixed costs that makes for more rapid upswing in margins.

By my measure, FRE is over-priced at $2.81 current - a fairer price would be somewhere below $2.20.

I always respect your judgement, Lizard.

Would you care to give a brief summary of your value?

[jmsnz]

I always respect your judgement, Lizard.

Would you care to give a brief summary of your value?

That would be very interesting, particularly alongside a valuation for MFT currently trading around 6.50. Which represents better value?

[Dr_Who]

I always respect your judgement, Lizard.

Would you care to give a brief summary of your value?

I too would like Lizards assessment.

I had a look at FRE a week before their announcement but didnt buy any shares. One would have thought a weak retail market may have an impact on FRE?

Could this company be a possible T/O target?

[Lizard]

Please don't take my comments as advice - I'm just an opinion; one voice in the bazaar! I'm sure all ShareTraders make their own decisions and choose stocks that fit their own investing style and timeframe.

Results season, I am processing results pretty quickly and just like to stick a quick view up - then hope others add their own points of view to the mix so the verdict can percolate. Probably best I come back to it for another look in a few weeks or months when I have a few hours spare to look through, as FRE is not a share I know in any depth.

[K1W1G0LD]

historic.jpgI would'nt hold your breath for $2.20 FRE has'nt hit anything south of $2.65 for quite a while.

[macduffy]

Please don't take my comments as advice - I'm just an opinion; one voice in the bazaar! I'm sure all ShareTraders make their own decisions and choose stocks that fit their own investing style and timeframe.

Yes, everything we post here is "just an opinion".

But when numbers are bandied about, I'd still like to know how they're arrived at.


Disc: I don't hold FRE.

[Lizard]

Okay. Well I guess I best stop posting numbers or I am going to be on here day and night typing up my analysis.

[Lizard]

Right, now that I've had a wee tanty, I've got a few minutes to give some numbers.

But firstly, I reckon that if you want an opinion that comes with a justification and analysis, you should go talk to your broker. This "open-source analysis" stuff can't be read in the same way and it's crazy to expect posters to either come up with a justification or else water down their opinions to something suitably vague.

Anyway, looking back at my calcs, the $2.20 is my assessment based on:
1. A DCF of my estimates of forward NPAT for the next 5+ years, based on a growth rate that might be sustainable after considering the variable vs fixed cost nature of the business. Using a 10% discount rate and 3% terminal growth. But, like any DCF, it will have an amplified GIGO factor.
2. EV/EBIT currently sits at 10.8, which I consider very high unless applied to a company which could almost double EBIT in the next year - I don't think this is the case for FRE. I think an EV/EBIT of 9.0 is the most I would want to stomach.
3. Yield of 5.0% is nice, but currently not exceptional.
4. Debt remains at the top end of a comfortable range in current market and near term growth does not sound exceptional, so I personally would not want to pay top dollar for it.

Just my views - others will have other opinions. I don't have the advantages of an analyst in being able to talk to management. Shares go up and down for other reasons besides value and value is just the framework that choose to use.

[Lizard]

That would be very interesting, particularly alongside a valuation for MFT currently trading around 6.50. Which represents better value?

I don't see a huge choice between FRE and MFT on value. I think both are good, well-run companies that would be fine to hold for the long-term. However, I think there is better value around at present, but then that is probably my weakness - always wanting to buy too cheap.

I've compared some numbers on both and would see MFT at $6.50 as been somewhat more expensive than FRE at $2.81, based on EV/EBIT, and yield. Also, I'd consider FRE to have a higher theoretical growth rate (at constant capital), based on current returns and model. So if I was buying for a long term portfolio and had to choose between them, I'd probably choose FRE at current prices. However, I'd consider FRE higher risk from balance sheet perspective, so would be watching closely for anything that might impact cashflow and debt.

If I was really interested in either of them for a long term portfolio, I'd probably be looking a lot closer for any specific changes that they might be exposed to in currencies, costs and markets before making a call. To me, the price is not attractive enough to justify the extra work at this point.