NZX says shares undervalued

NZX plans to buy back 2.9% of its stock by January 31 next year, saying its current share price undervalues the company and doesn’t take account of its growth prospects.

Shares of the stock exchange operator jumped 6.9% to $1.56 after the announcement, the highest since June 10. NZX will buy back as many as 3.57 million shares, it said in a statement.

The company will also start paying dividends twice yearly, instead of its current annual payments, which it says will better meet the needs of investors looking for regular income as well as capital appreciation. The payments will be each April and October.

NZX board and management “view this adjustment to the timing of dividend payments as an opportunity to reiterate to the market their confidence in future earnings growth,” it said.

“The current share price is significantly below fair value and doesn’t reflect a reasonable valuation of the company today, even without taking into account the growth prospects about which the board and management are confident,” NZX said.

Announcing its first-quarter results in May, the company said NZX expects to see earnings and margin “steadily improve over the remainder of 2010”.

NZX has pledged to raise its annual dividend payments by a minimum of 1 cent per share for the next four years. It paid 6.25 cents a share in 2009, when profit soared 280% to $38.71 million on one-time gains from the sale of the TZ1 Registry and NZX’s shares in Bond Exchange of South Africa. 

The shares are rated ‘outperform’ based on two recommendations compiled by Reuters. 

Businesswire.co.nz

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