Forum Archive Index - January 2001

["Peter Maiden" <pmaiden@xtra.co.nz>]

Currently NUF is trading at 390 wiith a PE of 8.4 (based on 2000 earnings) . If based on forecast earnings (as stated at their AGM) PE is about 7.3.

Back in  Dec 1998 NUF were trading at 600 with a PE close to 20.

Similar companies in Australia trade with a PE in the 14 to 17 range. Futuris (FCL) are at 14, Orica (ORI) at 14, ICT at 17 and SRP at 15.

The EPS graph in the NUF annual report looks impressive with a steady growth since 1996. EPS rose 15% from 29.9 cents in 1999 to 34.4 centsin 2000 (Australian cents).

Whereas other 'old' economy stocks such as AIA have fought back strongly since technology stocks started falling to realistic values in April last year NUF has been left behind.

Maybe the reason for being left behind is that they are now domiciled in Australia. Even though relatively high up on the NZSE 40 they are small fish in the big Australia pond and as such find it hard to get investor (both retail and institutional) interest.

If this is the reason then won't all NZ companies find it difficult on a merged ASX/NZSE - interesting thought.

 

Back to NUF -  their earnings growth does support a higher PE with the subsequent increase in price.

 

Fundamentally a companies share price should reflect levels of ongoing profitability. NUF history and future prospects does say that they should be priced near to a PE of 15, similar to what their counterparts in Australia are trading at.

If that is the case a fair value of NUF is 650 based on last years profitability and 750 based on forecasted 2001 earnings.

 

Interestingly that is where the price would be if NUF had maintained its 1998 price. The difference between the past and present shows us how much the market has discounted some 'old' economy and out of fashion stocks.

I hold some NUF bought at todays price some months ago. Even though not been the success I hoped I have put an order in to buy some more, even though I am not generally that keen on chemical companies.

Only time will tell whether this 'analyst' is right - but at least I have put my money where my mouth is..

Peter