Nuplex ($NPX.NZ) is a New Zealand company (NZX and ASX listed) that manufactures and supplies a broad range of products to the building industry. As with other companies in the building industry they are facing concerns about a slowdown in demand. The current share price is trading toward the bottom of the 52-week range. How is this in relation to the intrinsic value of the company’s shares?
Valuecruncher produces a valuation of NZ$6.05 for $NPX.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 14.15% above the current share price of NZ$5.30.
- Revenue: Reuters aggregates six analysts covering $NPX.NZ and the mean estimates of 2009 and 2010 revenues are NZ$1.658 billion and NZ$1.777 billion respectively. For our analysis we have used NZ$1.625 billion in 2009, NZ$1.725 billion in 2010 and NZ$1.775 billion in 2011.
- Profitability: We have used a flat EBITDA margin of 7.5% to 2011. Reuters has $NPX.NZ‘s EBITD margin at 7.5% last year and an average of 7.8% over the last five-years.
- Capital Expenditure: We have assumed capital expenditures of NZ$30.0 million per annum moving forward.
- Discount Rate: 11.0%. The PwC New Zealand cost of capital report has $NPX.NZ at a WACC of 11.2% with the wider NZ market at 9.5%.
- Terminal Growth Rate: 3.0%.
Our analysis incorporates the cash and debt the $NPX.NZ balance sheet – Valuecruncher calculates a net debt number.
Play with our assumptions – what does your analysis say?