DOREL INDUSTRIES $37.90 - Toronto symbol DII.B

DOREL INDUSTRIES $37.90 (Toronto symbol DII.B; TSINetwork Rating: Extra Risk) (514-731-0000; www.dorel.com; Shares outstanding: 32.3 million; Market cap: $1.3 billion; Dividend yield: 3.3%) makes a range of items, including ready-to-assemble home and office furniture; juvenile products, such as car seats, strollers, high chairs, toddler beds and cribs; and recreational goods, mainly bicycles.

In the three months ended March 31, 2014, Dorel’s sales rose 9.0%, to $647.7 million from $594.2 million a year earlier (all figures except share price and market cap in U.S. dollars). Sales rose 18.1% at the recreational segment and 2.0% at the home-furnishing division. Juvenile products sales gained 5.5%.

Earnings per share rose 11.4%, to $0.78 from $0.70. Sales of its high-profit Cannondale and Pacific Cycle premium bikes rebounded with an early spring in Europe. As well, Dorel’s 70% stake in Caloi, which it acquired last year, is now adding to its profits.

Established in 1898, Caloi is one of the world’s oldest bike makers. It is also Latin America’s topselling bicycle brand and the leader in the Brazilian market. This purchase fits nicely with Dorel’s plan to focus on international expansion, as it can now use Caloi’s facilities to sell more of its other bikes and gear in South America.

Dorel recently agreed to buy Hong Kong-based Lerado Group, a maker of baby strollers and infant car seats, for $120 million. China’s new infant-seat laws and growing middle class make it a great place for the company to expand.

The stock trades at 12.9 times Dorel’s forecast 2014 earnings of $3.05 a share.

Dorel Industries is still a buy.

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