CSR Limited
Recommendation
CSR has reported a 4% decline in net profit before significant items to $241m for the year ended 31 March. The (relatively) good news is that due to the company buying back shares throughout the year, earnings per share were flat at 27.4 cents. A final dividend of 9 cents a share, fully franked, was declared (ex date 5 June), bringing the annual total to 15 cents a share.
The stock is trading on a relatively modest PER of about 13, but we aren’t excited. The outlook for the company’s operations, particularly its sugar division, looks grim for at least the next twelve months. And as we’ve pointed out on numerous occasions, most recently on 26 Sep 06 (Better Value Elsewhere – $2.84), the other main businesses – aluminium and building products – are hardly high quality.
Like many other poorly performing stocks at the moment, it appears that the only factor supporting the share price is the prospect of a private equity bid. We don’t think this a good reason for owning a stock, however, and have changed our recommendation to AVOID.
Brad Newcombe