Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
I was hoping to get your thoughts on LAU. The share price continues to slide, due to competition in transport. However, it pays a reasonable dividend, and is in a defensive industry - food, well food transport. Do you think the competition will ease, and if so, when or what would be a good entry point. Many thanks for all the great work, Mark
Hi Mark,
This ~$230mn transport/logistics business has indeed been slipping for more than 2-years with the 80c area changing from support to resistance. The issue is around margins with revenue climbing steadily from $435mn in 2021 to an estimated $1bn in FY26. However, earnings per share (EPS) has slipped from 12.1c to an estimated 8.7c in FY26 and the share price has followed accordingly. However, it wasn’t all bad news for LAU with strategic acquisitions and geographic expansion:
But the margin compression continued to weigh on the business with elevated input costs (fuel, labour, maintenance), excess capacity in transport/logistics market, weather/seasonality impacts (especially horticulture), corridor imbalances all weighed on results. Plus, recent acquisitions and infrastructure investment mean a heavier capital base, higher depreciation/interest charges, impacting short-term profitability.
Accompanying the FY25 results management emphasised the year as one of “strategic execution” — building the network, acquisitions, infrastructure, and transformation of operations. But they noted the operating environment remains challenging, especially in the transport/logistics division: “margin compression … elevated costs … competitive intensity.”
We believe the growth in revenue and expansion into new regions will be positives in the longer term, with the business building scale and diversification which should help with resilience. The short-term is likely to remain challenging, their commentary suggests that the transport/logistics market remains price-competitive, cost pressures ongoing, and the payoff from recent investments is yet to flow through.
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