Daily ShareChat: Nuplex Industries

Nuplex Industries' up to $156 million capital raising "should alleviate the financial risk of the company and allow management to pursue operational improvements in a difficult global economic environment," says McDouall Stuart.

While deteriorating global economic conditions have reduced demand for Nuplex's products following de-stocking by customers, there is some evidence that trend is reversing, it says. That provides the company "with confidence to provide EBITDA (earnings before interest, tax, depreciation and amortisation) of around $86 million for the current year," it says.

Nuplex has demonstrated international competitiveness through its technology and operational expertise in the resins business, which accounted for 81% of operating earnings last year. Its 2004 purchase of Akzo Nobel's coating resin business propelled Nuplex into a global player, it says.

McDouall Stuart is forecasting net profit for the year ending June will fall to $19 million from $53.4 million last year but will rise to $34 million in 2010 and to $40.6 million in 2011.

It is predicting the share price will rise after the capital raising if management delivers on its earnings guidance. The 23 cents a share seven-for-one rights issue compares with last week's 37 cents NZX price and McDouall Stuart values the shares at 67 cents.

Recommendation: Buy

BROKER CALL:

 

McDouall Stuart rates NPX as BUY.

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