MaxiTRANS Industries Limited crashes 10% on falling profits

Profits and dividends fell heavily in 2015, making MaxiTRANS Industries Limited (ASX:MXI) look risky at today's prices.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The last time I wrote about MaxiTRANS Industries Limited (ASX: MXI) was just after its first half results in April.

At the time I suggested investors avoid the stock, as management advised that dividends were expected to fall and that second-half profit would come in substantially worse than the 50% decline that was experienced in the first six months of 2015.

Unfortunately, that market update proved fairly indicative of what shareholders received when the company reported Friday afternoon:

The What:

  • Revenue fell 6.5%
  • Net Profit After Tax (excluding significant items) fell 63.1% to $6.3m
  • Net Profit After Tax (including significant items) fell 73.7% to $4.5m
  • Earnings per share were 2.43 cents, down from 9.16 cents in 2014
  • Maxitrans share of the trailer market improved
  • Strong revenue growth of 39% in New Zealand, albeit from a small base
  • $4.3m cash at bank
  • $47m in interest-bearing liabilities, with interest cover* of 4.2 times
  • 'Subdued' outlook for 2016

So What?

Falls in revenue and earnings reflect more aggressive discounting and pricing strategies as well as declining demand from certain sectors. It was no surprise to see a 53% decline in tipper sales compared to 2014, and while Maxi suggests their new VersaBOLT tipper product will cause sales to rise again in 2016 I don't see it having a major impact.

On other fronts the demand for refrigerated vans is a positive sign and shows that the company has alternatives to selling products purely for mining purposes. Similarly growth in New Zealand was a positive and I am left with the impression that Maxitrans is competing successfully on price with its competitors.

However, this is also a double-edged sword as the business appears to be trading on razor-thin levels of profitability, especially if the performance in the second half is the 'new normal' going forwards.

Debt rose meaningfully during the year and with negative free cash flow, it is likely to continue rising unless management is able to trim back capital expenditure – which might shoot the business in the foot by delaying new products and facilities.

Now What?

As I wrote back in April, I again suggest that shareholders steer clear of Maxitrans for the time being. Trading on a Price to Earnings (P/E) ratio of 16, it still does not appear cheap given the number of alternatives available for a similar valuation.

When you're investing for the future – which, really, is the definition of investing – it is better to play it safe than take risks with companies being punished by forces outside their control.

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »