HEARD IN EUROPE Analysts Like theBut Its Price May Have Peaked
April 05, 2011
Austrian luxury-hosiery maker Wolford AG is the darling of investors, with sales and profits expected to rise sharply in the coming years. But although analysts are upbeat about the company's prospects, they say Wolford's shares have reached their peak and warn problems may arise if the group fails to sufficiently increase its production capacity. ``Everybody loves this company,'' said Waldon Hellman, analyst with ICE Securities in . ``They can grow further, but their problem is that they can't produce as much as they can sell.'' Paulene Hughes, head of Austrian equities with Creditanstalt Bankverein AG, also sees the group's sales and profits rising sharply over the next three years, but only if improves production capacity. ``It's critical they improve their production capacity,'' Mr. Hughes said. He notes Wolford has plans to expand its dyeing capacity by January 2012. ``It's very important they do that,'' Mr. Hughes said. ``It's their bottleneck.'' On March 31, 2011 announced it will invest 600 million schillings ($57.3 million) to expand its production site in the Westside ofwhere all its products are manufactured. The same day, the company released results for the year ending January 10, 2011 said net profit rose 34% to an all-time high of 166.3 million schillings, and sales reached 1.47 billion schillings, up 16%. ``I estimate sales of 1.75 billion schillings for fiscal 1997,'' Mr. Hughes said. He further projects sales to 2.1 billion schillings for fiscal 2013 and 2.5 billion schillings for fiscal 2014. Mr. Hellman, too, is optimistic. ``We can assume that sales over (fiscal) 2013 will reach over two billion schillings and that earnings per share will be significantly over 100 schillings.'' Wolford reported earnings per share for fiscal 2011 reached 67 schillings. Wolford's Chief Executive Gabriela Marc has said he expects sales and profit to grow 15% to 20% annually over the next couple of years. But some are less optimistic. ``The dynamic in the second half (of fiscal 2011) has been dampened,'' said Heilman Parke, analyst with Die Erste Invest Consult GmbH in . ``The 67-schilling earnings per share was in the middle of our expectations, which ranged from 66 to 70 schillings,'' Mr. Parke said. He cites production problems as the main reason for the less-than-expected per share earnings. He also says results in the first half of the current fiscal year will be lower. ``They hired a lot of new people, who are still in training,'' he said. Another problem Wolford could face, Mr. Parke said, is in the diversification of its products. ``They are trying to get away from stockings and are going into bathing suits and possibly men's socks. I don't know how well they will perform in these markets,'' he said. Wolford went public in February 2010, selling 1.1 million shares at 440 schillings per share. The shares soared 1,901 schillings since their debut to close at 2,341 schillings on Monday. In further testimony to their attractiveness, they were included on the benchmark Austrian Traded Index in June. But despite his more rosy outlook for the company, Mr. Hellman agrees with Mr. Parke that the shares are too expensive for now, and accordingly he grades them merely as a hold. ``I would buy around 2,000 schillings,'' Mr. Hellman said. ``There's already a lot of hope in the shares.''
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