In
my original TNT Express analytical piece, I observed that the express delivery/logistics company had a highly unusual share price chart followed a failed bid approach and tough trading observations.
Well, today's YTD chart for the company continues to look unusual...but note the continued improvement in the shares over the last 3 months. A story is building at TNT Express and that continued today post the publication of the Q3 trading numbers, with the share rising around 4%.
Of course the numbers still don't look flawless...far from it with YTD operating profit running at a loss hit by provisions and FX losses.
However, a sign of improved discipline is being shown by the cash flow statement where total changes in cash generated remain over Euro100m ahead of the same period last year. Extrapolate this and the company is generating a free cash flow yield of 6-7%...and it still holds cash on the balance sheet.
Of course, regional operation results are still dominated by Europe (c. half the revenues of the business) but looking beyond this area of macro difficulty, other improvements are coming in...and let's not forget that our old friend of foreign exchange losses has also weighed on numbers.
If you put
Deliver! gains with reduced Brazil losses and better Asia/Middle East/Africa results together then this could account for an annualised improvement in profitability of about Euro60m and that is enough to fully offset the 2013 downdraft in profits year-on-year in the Europe main business.
From a valuation perspective, TNT Express remains a play on not just a corporate turnaround but a rebound in the European economy - as is the nature of an express/logistics business. There remains considerable 'show me' elements still. Strong free cash flow though and cash on the balance sheet gives the management a fighting chance...and that's reflected in the share price chart bounce recently.
Despite the bounce, TNT Express remains a share to hold. Lots of self-help potential...and who knows about a bidder coming back in?!
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