Nuplex rides overseas wave to bounce back

Photo / Kenny Rodger

An up day in the markets and positive analyst reports lifted Nuplex shares more than 28 per cent, regaining some of the ground lost on Friday.

The resins-maker rose by as much as 22c to 75c by early afternoon yesterday, but fell back slightly later to close up 15c on 68c.

The rise came after Friday's dismal performance which saw its shares plunge from $1.07 to 51c after the company announced plans for a $132.8 million seven-for-one rights issue at 23c per right.

ABN Amro head of research Mark Lister put the bounce-back down to "market exuberance" after a strong day overseas, as the fundamentals of the company had not changed.

Market commentator Arthur Lim said there was a follow-on from the United States, where the market had responded positively to news of a US$1 trillion write-off for toxic bank debt.

"There is a feeling that the banks are going to be more accommodating."

Lim said that had a spill-on effect to Nuplex as one of its banks was US firm Citibank, which many in the market knew had been dragging its feet on negotiations with Nuplex over its senior debt cover ratio.

"Any resolution on banks will push the markets up a bit as it makes it easier for companies that need funding."

Since the recapitalisation programme was released a number of analysts had also upgraded Nuplex, said Lim.

Jason Bloom, from UBS, changed his recommendation from neutral to buy and says Nuplex looks cheap based on the rights issue figures.

"We believe the current share price offers significant value, given the value of the 7:1 rights at 23c."

Bloom put a 12-month price target of $1.05 on the shares.

Lister said the higher the share price got the more attractive the rights issue price of 23c would appear to investors, but shareholders still faced a tough decision over the rights issue.

"On one hand the company is still in a challenging environment, which could be part of a reason not to own it, but if they don't take up the rights they are going to be pretty heavily diluted."

At the current share price the rights would be worth just 5.6c each with the post-issue price at 28.6c.

The rights trading on the NZX is expected to start on April 1.