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Driving highway profits

Who said ‘super mining’ profits belong to the government? In an industry that’s supposedly a dying breed, it’s still possible for companies to lift some profit out of the ground in Western Australia, but perhaps not how you think.

Just ask CTI Logistics Limited (ASX: CLX) secretary David Mellor who announced in November that profit for the period ending 31 December was expected to exceed the previous corresponding period by 33-40%. Again in January, Mellor updated profit guidance to over 60%, citing resource related work as the catalyst for boosting profits.

Whilst net profit didn’t quite meet this guidance, it still gained a hefty 57.4%, with its share price reflecting its capacity to deliver solid results. Since October’s low of $1.32, the company is now enjoying a market value of $1.94 a share and a moderate price to earnings ratio of 15.67. A 46.96% increase in share value has been realised.

The company attributes much of its success to a recent move in resource related work and hopes to continue to maintain and develop its strong relationship with Chevron’s Gorgon Project in 2013. Despite this, the company has a diversified business model with profitable operations in supply chain logistics, transport services, security, property and plastic manufacturing.

Competitor Toll Holdings Limited (ASX: TOL) is also investing in the mining industry, spending $140 million on major infrastructure in Western Australia. Aurizon Holdings Limited (ASX: AZJ) (formally QR National) has also been increasing investments in the resources sector. On Monday, Aurizon agreed to acquire a majority interest in rail and port projects planned by Indian Conglomerate GVK and Hancock Prospecting Pty Ltd, owned by billionaire Gina Rinehart.

Foolish takeaway

Australia’s mineral-rich deserts and oceans create opportunities for investors big and small. Sometimes, we focus too much on the companies pulling things out of the ground and undermine the little guys offering essential support. It seems the market is realising this logistics company’s potential to drive their portfolio in the right direction.

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More reading

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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