This is the first time I am covering a stock that has a Netherlands listing. Usually I tend to look abroad to find nice opportunities, but this one I just cannot miss out on.
Hagemeyer N.V. is a Dutch B2B distribution services group that provides its products and services to electrical contractors and installers in the commercial and industrial market, as well as to industrial users.
The company has seen three years of severe financial misery, after serious operational disruption in USA, UK and Germany. But the recovery is there, with net losses having improved from Eur 318 mio in 2003 to Eur 141 mio in 2004 and Eur 58 mio in 2005. A simple extrapolation here wouldn't be far from the truth: Hagemeyer will be profitable again this year.
Based on the current share price of Eur 3.58, the forward P/E (2007) is at 10.5 about half of the sector average, whilst there is certainly room for some positive surprises in the coming year. EPS is expected to be at least 50% higher than this year's earnings, which means that we may expect a share price that reflects this strong growth.
It must be said that Hagemeyer's Q3 revenues were somewhat below expectations (9.1% vs the 11.5% consensus) and that the company is vulnerable to a weakening US Dollar, but the extent to which the share price has taken a hit since Spring this year is not at all justifiable. Especially if you consider that the company still plans to achieve revenues of Eur 6 bln this year (+7.2% over 2005), with 6% revenue growth expected for the coming years.
CEO Rudi de Becker certainly made a change since he joined the company in 2004 and in my opinion Hagemeyer still has a long way to go, but I certainly have regained confidence in the company's management. Based on its strong expected earnings growth combined with revenue growth, I see at least a price target of Eur 5.00 for 2007.
10 December 2006
Strong earnings growth may boost Hagemeyer
This is the first time I am covering a stock that has a Netherlands listing. Usually I tend to look abroad to find nice opportunities, but this one I just cannot miss out on.
Hagemeyer N.V. is a Dutch B2B distribution services group that provides its products and services to electrical contractors and installers in the commercial and industrial market, as well as to industrial users.
The company has seen three years of severe financial misery, after serious operational disruption in USA, UK and Germany. But the recovery is there, with net losses having improved from Eur 318 mio in 2003 to Eur 141 mio in 2004 and Eur 58 mio in 2005. A simple extrapolation here wouldn't be far from the truth: Hagemeyer will be profitable again this year.
Based on the current share price of Eur 3.58, the forward P/E (2007) is at 10.5 about half of the sector average, whilst there is certainly room for some positive surprises in the coming year. EPS is expected to be at least 50% higher than this year's earnings, which means that we may expect a share price that reflects this strong growth.
It must be said that Hagemeyer's Q3 revenues were somewhat below expectations (9.1% vs the 11.5% consensus) and that the company is vulnerable to a weakening US Dollar, but the extent to which the share price has taken a hit since Spring this year is not at all justifiable. Especially if you consider that the company still plans to achieve revenues of Eur 6 bln this year (+7.2% over 2005), with 6% revenue growth expected for the coming years.
CEO Rudi de Becker certainly made a change since he joined the company in 2004 and in my opinion Hagemeyer still has a long way to go, but I certainly have regained confidence in the company's management. Based on its strong expected earnings growth combined with revenue growth, I see at least a price target of Eur 5.00 for 2007.
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