MaxiTRANS Gains Traction

This story features MAXIPARTS LIMITED. For more info SHARE ANALYSIS: MXI

-Rationalisation to stabilise earnings
-Suspension product returns to market
-And expected to lift FY16 earnings
 

By Eva Brocklehurst

Broader market conditions remain patchy for vehicle parts manufacturer MaxiTRANS ((MXI)) but the re-introduction of an important suspension product is expected to help FY16 earnings.

The company has provided guidance for profit of $4.8-5.8m in the first half, which Canaccord Genuity welcomes as a sign the business is recovering. The recovery has come largely through operational improvements and efficiencies. The broker expects FY16 profit of $10.4m, upgrading estimates by 12%.

Canaccord Genuity lifts underlying FY16 and FY17 earnings forecasts to 5.6c and 6.1c per share respectively. A Buy rating is retained and target is 77c.

The company has rationalised its plant, closing the Bundaberg facility and relocating production to other sites, which is expected to provide an annualised benefit of $1.75m. After product recalls adversely affected earnings in FY15, the CS suspension product has been returned to the market. This should underpin earnings, the broker believes.

Three underperforming Queensland retail operations will also be closed while a new warehouse in Victoria should reduce operating costs. Rationalisation is expected to help stabilise earnings within the parts business, which remains patchy, in Canaccord Genuity's observation.

In contrast the van market remains strong, with the company boasting an order book out to mid 2016. The broker notes, while demand for trailers and tippers is variable, there are some sizeable potential orders in the market.

The parts and services business is important to the company's long-term growth strategy but scale is also being sought in the MTC panel manufacturing operations in China.
 

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