CMI Ltd
Recommendation
When we last looked at this mini-conglomerate, on 21 Nov 06 (Sell – $1.21), we commented on its convoluted buyback: ‘It looks like major shareholder Max Hofmeister is trying to take care of loyal dividend-seeking shareholders before reality bites and the dividend is cut.’ And so it unfolded, with the interim dividend in April cut in half and the final dividend axed altogether.
The company recently reported a net loss of $3.8m for the year to 30 June, although this was impacted by an $18.6m writedown on the value of the engineering division’s fixed and intangible assets. Even ignoring the writedown, underlying pre-tax profit was $13.4m, down 16% on the prior year. The engineering and finance divisions both showed poor results, influenced by a tough automotive market. The electrical division performed well, though.
We’ll continue to keep an eye on CMI, because it’s the sort of tough and somewhat convoluted business that might occasionally offer up a bargain. But we’re nowhere near interested at this moment and price. Preferring to save space for more attractive opportunities, we’re CEASING COVERAGE unless that situation changes.