It is the beginning of a new year. Here in New Zealand an annual tradition is the media reporting of brokers views of the top stocks for the coming year. Here is one of the lists. We were not invited to participate this year - maybe next year. We decided to put out our list of our most undervalued and most overvalued NZX stocks - based on valuations done on the Valuecruncher blog. Unlike the lists in the media - our list includes our assumptions.

Valuecruncher Five Most Undervalued (Cheap)

1. Air New Zealand - +34.78%

2. Michael Hill - +31.34%

3. Sky TV - +31.22%

4. Nuplex - +26.19%

5. Rakon - +24.00%

Valuecruncher Five Most Overvalued (Expensive)

1. Mainfreight - -8.84%

2. Auckland International Airport - -7.65%

3. Fletcher Building - -7.29%

4. F&P Healthcare - -6.45%

5. Steel & Tube - -5.56%

Our valuations have been completed since early October 2008. The percentage over or under valuation was based on the share price at the time the valuation was completed. The Valuecruncher interactive model allows you to play with our assumptions. If you disagree with our analysis - change our assumptions and tell us what you think.

Comparing our list with the traditional brokers. Four of the six brokers list Sky TV - which is one of our picks as most undervalued. But also three of the six list F&P Healthcare - while we have it as one of our most overvalued.

We will revisit these valuations as the year progresses.

Disclosure: None

Valuecruncher has previously looked at Nuplex ($NPX.NZ).  Subsequent to that post the company announced some very negative earnings guidance.  When Valuecruncher looked at $NPX.NZ in early-November the company was trading at NZ$5.30.  $NPX.NZ is currently trading at NZ$2.94 - 44.5% below NZ$5.30.  Valuecruncher decided to revisit the valuation of $NPX.NZ based on their updated earnings guidance.

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.

Valuecruncher valuation model of $NPX.NZ with interactive assumptions

Valuecruncher produces a valuation of NZ$3.71 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 26.2% above the current share price of NZ$2.94.

Assumptions

• Revenue: For our earlier analysis we used revenues of NZ$1.625 billion in 2009, NZ$1.725 billion in 2010 and NZ$1.775 billion in 2011.  We have amended those down to NZ$1.535 billion in 2009, NZ$1.575 billion in 2010 and NZ$1.650 billion in 2011.
• Profitability: We previous used a flat EBITDA margin of 7.5% to 2011.  We have amended that down to 6.5% in 2009 and 2010 rising to 7.0% in 2011.
• Capital Expenditure: We have assumed capital expenditures of NZ$30.0 million per annum moving forward.  This is the same as our previous valuation.
• 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%.  This is the same as our previous valuation.
• Terminal Growth Rate: 2.5%.  previously we used a 3.0% terminal growth rate.  The New Zealand economy has grown at an average rate of 2.6% over the last five-years.  We have moved $NPX.NZ’s terminal growth rate closer to this wider New Zealand economy growth rate.

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?

Disclosure: None

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 valuation model of $NPX.NZ with interactive assumptions

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.

Assumptions

• 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?

Disclosure: None