Capral on track to resume dividends for FY16

Capral (ASX: CAA) is an Australian based manufacturer and distributor of aluminium products for use in residential, commercial and industrial markets. They produce a range of products including window frames and street signs, where their domestic supply chain is a key advantage compared with the long lead times of importers. In October 2013 they acquired the OneSteel Aluminium business which has been successfully integrated, providing a number of synergies and increasing exposure to the buoyant residential construction sector. Capral’s competitive position has benefited from the weaker AUD as well as a government inquiry that resulted in favourable anti-dumping rulings. These factors have resulted in market share gains at the expense of some overseas competitors.
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The balance sheet remains strong, and the company won’t have to pay tax for many years, thanks to accumulated grossed-up tax losses of close to $290m. This, coupled with modest CapEx requirements, should result in strong cash generation. The company has paid no dividends since 2004, but appears on track to consider a final dividend at the FY16 result (December year-end). Assuming a conservative 50%
payout of FY16 free cash flow, the stock is yielding over 8% at a share price of 17.5c. 

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Perpetual Asset Management (Australia)

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