Mainfreight (NZE: MFT) is a logistics and transport company headquartered and operating in New Zealand but with operation also in Australia, Europe, Asia and America. The company prides itself on service and quality, differentiators that are universally appreciated and valued.
Significant to note is the strength of their management team who have proven themselves to be responsible, consistent and personally invested in the success of the company. The company was founded by Bruce Plested (who remains on the board) in 1978. The CEO, Don Braid has been with the company for 22 years. Both are large shareholders and have demonstrated consistent growth over the long term, with a strong focus on service culture.
The company sits within a competitive industry which includes businesses like Toll Group and Linfox, however Mainfreight have been able to establish a market share of over 50% in New Zealand and we believe if they employ the same skills and management to their operations internationally they have the potential for strong growth in much larger markets. We estimate market share in Australia at around 5%, and much lower in the US.
Over the past ten years, the company has shown compound average EPS growth of 11%. The business requires moderate capital to grow (warehouses and branches), and the company has shown a return on capital employed of 19%.
We have chosen to invest in this company for the following reasons:
- Strong, consistent, aligned management team.
- Consistent track record of earnings of growth.
- The opportunity to boost market share internationally well into the medium term.
- The company has medium capital intensity, allowing them to grow without investing too heavily.
This stock is currently held by the Pengana Emerging Companies Fund
This report has been prepared by Pengana Capital Ltd (ABN 30 103 800 568, Australian Financial Services Licence No. 226566) (“Pengana”). This report does not contain any investment recommendation or investment advice and has been prepared without taking account of any person’s objectives, financial situation or needs. Therefore, before acting on the information in this report a person should consider the appropriateness of the information, having regard to their objectives, financial situation and needs. Pengana is the issuer of units in the Pengana Emerging Companies Fund (ARSN 111 894 540) (“the Fund”). A Product Disclosure Statement for the Fund (“PDS”) is available and can be obtained by contacting Pengana on (02) 8524 9900. A person who is considering investing in the Fund should obtain the relevant PDS and should consider the PDS carefully and consult with their financial adviser to determine whether the Fund is appropriate for them before deciding whether to invest in, or to continue to hold, units in the Fund. The value of investments can go up and down. Past performance is not a reliable indicator of past performance. While care has been taken in the preparation of this report, Pengana makes no representation or warranty as to the accuracy, currency or completeness of any statement, data or value. To the maximum extent permitted by law, Pengana expressly disclaims any liability which may arise out of the provision to, or use by, any person of this report.
