Yes I agree PE is above market average, so any indifferent news from CXP will affect the share price. Still believe in this stock which has entered into liquor and non-stationary segments in recent times to continue its strong growth. You have to be impressed with CXP considering the downturn in business activity over the past couple of years... A stock to watch when economic conditions improve for business. In a great position for acquistions to strengthen its revenue growth and core businesses.
mycall101
SHAW Analyst Comments: Corporate Express responds to market concerns 10-October-2002 Responds to market concerns
Corporate Express (CXP) has today issued a short comment in response to market concerns about the parent Buhrmann. The comment is in line with previous comments made to analysts, and CXP reiterates that the local operations are not directly affected by the activities of the rest of the Buhrmann group. CXP maintains its strong profit outlook (YE Dec 2002: NPAT +35%).
Background
Buhrmann is the largest shareholder of CXP, and is an international company with extensive office products (and other) activities throughout the Americas, Europe, Australia and other regions. Most operations are fully owned - but CXP in Australia is an investment of Buhrmann. Buhrmann on Monday 7 Oct noted lower than expected sales from several regions including the US. In response, the parent company has enacted global restructuring and cost reductions (but as CXP is an investment and performing very well, these would not apply to CXP). Buhrmann has also sold down some of its smaller investments, but expanded in Asia (ie, via CXP). Debt has also been restructured.
What could Buhrmann do impacting CXP?
Well, if loan covenants are breached Buhrmann could sell its investment in CXP (53%), but this is unlikely. Buhrmann has stated its loan covenants will not be breached on the current outlook. We do not expect the Buhrmann situation to impact CXP, and we expect CXP will continue to record growth based on its local and Asian opportunities.
Share price
The CXP share price has weakened on the concern that 53% could come onto the market - and with the PE well above the market average, any concerns will impact the share price. YE Dec 2002, 2003 PEs and Yields 19.6x, 15.9x and 1.6%, 1.9%.
CXP Price at posting:
0.0¢ Sentiment: None Disclosure: Held
