Corporate Express Australia Limited - initial analysis

[Excerpt from company analysis of Corporate Express Australia Limited dated 16 Jan 2008.]

Corporate Express Australia Limited is a subsidiary of the Dutch company Corporate Express NV, which is also its majority shareholder. The company's main operations comprise of supplying furniture, office stationary and other consumable goods to businesses around Australia. The business fortes an established distribution system, buying power, an on-line ordering system (akin to an on-line shop) and integration of its e-commerce site with popular accounting systems.

Corporate Express is a well managed business that is profitable but faces risk from competition and business spending. It does not have excellent growth prospects but has been able to grow organically throughout the review period. While it is a low margin operation it has been able to maintain those margins in a tight band. Having established itself as a leading supplier of office products, it offers a barrier for competition from a simple marketing perspective.

On Wednesday, 16 January 2008 Corporate Express shares closed at $6.01 offering a moderate margin of safety to its valuation. For long-term competition risks and short-term spending risks associated with this business a higher margin of safety to fair value is required.