By Jenny Ruth
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Friday 29th January 2010 |
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Resins company Nuplex's third profit upgrade in just over two months reflects management's increasing confidence in its operating performance, despite the difficulty in forecasting in the current environment, says Craigs Investment Partners analyst Dennis Lee.
Management said trading conditions were solid in November and December and raw materials costs have also been stable.
"Management said while it is difficult to gauge demand conditions in the second half at this stage, it is confident that current trends are unlikely to change materially in the near term to distort full-year earnings," Lee says.
Nuplex now expects earnings before interest, tax, depreciation and amortisation (EBITDA) between $120 million and $135 million for the year ending June, up from its previous guidance of between $110 million and $120 million, and confirmed it will resume paying dividends.
"We retain our positive view. We believe Nuplex's earnings are highly leveraged to the ongoing rebound in global economic activity," Lee says. Recent leading indicators support a continued global economic recovery, he says.
Lee has raised his target price 11% from $3.28 to $3.66 and has raised his forecast EBITDAfor 2010 by 9% to $125.8 million. He has raised his 2011 and 2012 forecasts by 4% each.
Recommendation: buy.
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