Overview: Nuplex have backed up their decent half year result in February with an announcement of a “breakthrough technology for the coatings industry”. The global manufacturer of resins used in paints, coatings and structural materials, presented the technology to the European Coating Show this week. Clearly it resin-ated with the audience, as they were awarded the “Best Paper Award” for their efforts.
Pros: Nuplex will be looking to use the new technology to increase market share and improve margins. Margin improvement was a highlight of the Company’s half year result. EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) to sales margin was up to 7.9 percent, from 7.4 percent in the previous period. This is a key measure of the company’s ability to turn sales into earnings. Subsequently we saw the company report improved Net Profit from continuing operations of $25.6m.
Nuplex saw growth across most of their geographic segments, led by EMEA (Europe, Middle East & Africa), which saw local currency EBITDA rise 38.5 percent.
Cons: The exception to the growth trends was the poor performance of the Australia and New Zealand markets. Combined EBITDA in the area was down 67.5 percent from the first half of 2014, which was in turn lower than what Nuplex reported in the first half of 2013. A concerning trend. Nuplex did note improving margins in the area towards the end of the period.
The positive news flow from Nuplex recently comes against the backdrop of missed targets over the past few years. Nuplex have downgraded their EBITDA guidance in each of the last 4 years. Investors will be hoping that the Company can buck this tend and either meet or exceed their current EBITDA from continuing operations guidance of $NZ109m to $119m.
Price performance: Nuplex announced a share buy-back of up to 5% of outstanding shares in February. This has seen the Company buying back their shares on the market, helping to elevate the share price by 10% since their positive result.
Investment outlook: There is potential for a re-rating of the Company if/when the company finally starts to achieve consistent results. At the moment the Company trades at attractive earnings ratios in part due to the lack of trust afforded the Company by the market.
*A Broker's View is written by Grant Davies, Authorised Financial Advisor at Hamilton Hindin Greene Limited. This article represents general information provided by Hamilton Hindin Greene, who may hold an interest in the security. It does not constitute investment advice. Disclosure documents are available by request and free of charge