By Jenny Ruth
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Thursday 17th June 2010 |
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With the recent decline in its share price, resins company Nuplex Industries' shares are looking inexpensive, says Forsyth Barr analyst John Cairns.
He values the stock at $3.63.
"Gobal resin demand is continuing to recover. However, with the exception of Asia, (it) is still tracking below 2008 levels," Cairns says.
"Raw material pricing is increasing and pass-through price increases are being implemented. Nuplex is refocusing its product mix on higher-margin specialist resins," he says.
He is forecasting Nuplex's earnings before interest, tax, depreciation and amortisation (EBITDA) for the year ending June 30 will be $131.4 million compared with the company's reiterated guidance of between $125 million and $135 million.
European demand is recovering but the impact of European fiscal austerity measures is far from clear, he says. Australasian demand is also continuing to recover, although volumes are still below prior year levels.
"Nuplex is continuing to move its product mix to higher specification resins, driven in part by regulations limiting toxicity and the ongoing commitment to develop new technologies in-house," Cairns says.
"The transition to new technologies and the reduction in low-margin resin sales is driving higher average margins."
Nuplex's extensive restructuring during the global financial crisis has resulted in a lower fixed cost base, he says.
Recommendation: Accumulate (raised from hold).
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