Daily ShareChat: Nuplex

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).

Comments from our readers

No comments yet

Add your comment:

Your name:
Your email:	Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Anti-spam verification:

Type the text you see in the image into the field below. You are asked to do this in order to verify that this enquiry is not being performed by an automated process.