Daily ShareChat: Nuplex

By Jenny Ruth

Wednesday 22nd September 2010 3 Comments

If Nuplex decides to change its corporate domicile from New Zealand to Australia but remains listed on NZX as a dual-listed company, it will be subject to a substantial re-weighting in the Top 50 Index, say Forsyth Barr analysts John Cairns and Matthew Leach.

That's because dual-listed companies are weighted by the proportion of revenue they generate in New Zealand. Currently ranked at number 15 in the Top 50, a change in domicile would see it drop to about number 46, Cairns and Leach say.

"While Nuplex is not at risk of dropping out of the NZ50 index, it does go into the category of companies (40 to 50 of the index) which are vulnerable to removal as new IPOs or larger companies come through."

Nuplex would also drop out of the Top 10 and Top 15 indicies because these are restricted to New Zealand domiciled companies.

"For a company with about 80% of its register held by New Zealand investors and a wide range of institutions, the drop in the NZ50 weighting would have a significant impact on its trading activity and potentially a negative share price impact as index-based investors look to sell down holdings," they say.

Nuplex is currently only a member of ASX's all ordinaries index with a 0.04% weighting. If it satisfied the liquidity rules, it would only be ranked 172 in the S&P/ASX200 index with a weighting of 0.05%, they say. However, based on current trading, Nuplex wouldn't satisfy ASX's liquidity requirements.

Recommendation: Accumulate.

For another view on Nuplex read what the NZ Shareholders Association has to say: Resin maker in a sticky situation - again

Comments from our readers

On 23 September 2010 at 7:46 am Richard Christensen said:

The comments made above do not appear to be too favourable with regard to future prospects. Why then is the resommendation to accumulate?

On 24 September 2010 at 8:20 am M said:

Richard, this commentary does not fundamentally affect Nuplex's underlying value.

On 24 September 2010 at 12:28 pm Roger said:

M, the fundamental value of Nuplex will always be underlying if the Board of Nuplex operates in the future as it has in the past. They have a new CEO, I would feel happier if they also got a new Chairman.