Transpacific

Transpacific (TPI) has a retained Outperform recommendation and a share price target of $14.75 from Australian stockmarket analyst Macquarie Research Equities. Transpacific will report its FY07 profit on Wednesday 29 August 2007. The analyst expects this to be a strong result, up around 114% on last year, driven by acquisitions, including Waste Management NZ, Cleanaway to name a few. The analysts have put upgrades through to their EPS foreacsts: FY08 +3.5%; and FY09 +4.3%. The stock is currently trading at $13.50. They are forecasting a net result of $101.7m, up 114% on pcp. Transpacific’s strong FY07 result will somewhat be overshadowed however by the massive profit growth forecast for FY08 following the Cleanaway acquisition. Acquisitions will be the primary driver of profit growth in FY07, with Waste Management New Zealand, Baxter, Twigg Group and Cleanaway being major businesses acquired during the year. WNZ should contribute for the full 12 months and be the primary profit driver, while Baxter is in for around five months, Twigg four months and Cleanaway one month.They also expect underlying organic growth to be robust. This will be due to a combination of solid volume growth across the business units and Transpacific management improving the underlying performance of a number of completed acquisitions. The analysts are forecasting Transpacific to report EBITDA of $543m in FY08. Next year should see a full-year contribution from the Cleanaway business, which they forecast to contribute up to $160m in EBITDA, including around $50m in synergy benefits and business enhancements, while sound underlying organic growth in the liquid waste division should continue given its leading market position, strong pricing power, operating leverage and GDP+ volume growth. Full-year contributions from other major acquisitions made during FY07, such as Baxter and Twigg, as well as the other many bolt-on businesses acquired will also grow profits, while stronger contributions from the hydrogenation project are also forecast. Transpacific (TPI) management has built a market leading position in Australia and New Zealand waste management rapidly by completing a number of strategic acquisitions.