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Daily ShareChat: Nuplex

By Jenny Ruth

Tuesday 12th October 2010

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 Jenny Ruth

Data from Nuplex Industries' end markets, with the exception of China, continue to be less expansionary but supportive of a slow-burn recovery, says Tristan Joll at Goldman Sachs JB Were.

"Given this, we remain happy with our below-consensus forecast and see further risks in 1/ the pace of European recovery and 2/ margin pressures from rising feedstock pricing," Joll says.

"While Europe was the standout contributor to second-half performance (the six months ended June), the sustainability of this appears tenuous," he says. Recent data suggest industry volumes are once again decreasing in absolute terms.

Joll is forecasting Nuplex's earnings before interest, tax, depreciation and amortisation (EBITDA) will be $128.3 million in the year ending June 2011 compared with the Bloomberg range excluding his forecast of between $140 million and $150 million. EBITDA in the year ended June this year was $139.4 million

"Despite its attractive cash yield, we believe Nuplex is fairly valued for the current environment and see few sources of outperformance in coming months," he says.

Joll doubts company guidance at the November 3 annual shareholders' meeting will be able to outstrip market expectations.

"Given this, ... we believe a trading range for the stock sits between $3.05 and $3.50 per share."

Recommendation: Hold.

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