FBU vs NPX

[metro]

I am interested in people's thoughts on both FBU (Fletcher Building Limited) and NPX (Nuplex Limited). Which of the two companies is the better performer and has better prospects? Which company has the more favourable share price? Would be good if anyone wants to give an opinion, perhaps posts charts of both companys or can provide a comprehensive DCF valauation? Any ratio analysis? Forecast P/E ratios?

i have looked at them from the point of view of strategy analysis, what I call trend analysis (looking at fundamentals over 5 to 10 years) and ratio analysis. I have also looked at each company's contingent liabilities, (which in the case of NPV is very interesting).

But I would be very keen on other peoples thoughts? comparisons between the two, any charts etc

Disc: Is part of a MBA university project

[metro]

I would have thought FBU was the better company, in every way, but i'm a long time FBU shareholder (and FCL before that) so my thoughts maybe biased.

[winner69]

I am interested in people's thoughts on both FBU (Fletcher Building Limited) and NPX (Nuplex Limited). Which of the two companies is the better performer and has better prospects?

Long term I assess company performance on return on invested capital ... which if to worry about doing any more research this needs to be more than the companies cost of capital. Also I assess longer term growth prospects and where they are in the current growth cycle and seeing whether growth is likely to be greater than overall market

Returns on capital and current valuations

NPX return on capital - have for a long time consistently achieved about 10% pa. Even wasn't too bad in their bad year a while ago and on recovery was about 12% last year. OK performance but NPX has not been that much of a value creator. Rudiimentary valuation on this basis would be that market cap should be slightluy more than equity value of $2.68 but if the 12% pa returnd can be maintained a valuation somewhere near $3.75-$4.00

FBU return on capital - did average 17% pa up to 2007 but the last few years this has fallen to 9% pa. Paying too much for Laminex and stuffed markets have not helped eh. On this basis a rudimentary valuation would be about $5.00 (book value). The current shareprice implies an additional $250m of annual profit coming through - so a fair bit of good stuff built in.

Where are both positioned today and future prospects

NPX - I see them fully valued at the moment in that the market is either assuming above average returns (compared to the past) or that significant growth is still to come. I still feel that NPX will continue to be valued as an old fashioned chemical company and as such PE expansion won't be much from the current number. Insofar as growth goes organic growth over time wont be that great and as such real growth will need to come from acquisitions. requiring more debt or equity. NPX has not leveraged previous acquisitions to any great degree (the flat returns on investment) - a trait shown ny many old fashioned chemical companies, esp those manufacturing soemthing that is essentially a commodity

FBU - been through a bad couple of years and the next couple won't be that great either. The current shareprice has a decent recovery built in already but in saying that it only takes returns back to historical levels. Suppose that implies that Laminex will start performing and markets will get a lot better - something that FBU can leverage more succesfully than NPX. Future acquisitions such as Crane are also great opportunities for FBU to leverage their assets.

So what?

You asked who has been the better performer. As a company I'd say FBU has been a better performer over time than NPX - based on its returns on capital. Without doing any great sumes (all the rights issues make this hard) I think FBU has also been the better long term investment for shareholders (my mate still moans at being under water with NPX even after fronting up with more dosh)

As to the future I believe that NPX will continue to consistent make returns that would be expected from an old fashioned chemical .. ie steady but not spectactular. The current shareprice is fuklly valued so future share holder returns will be in line with company performance.

FBU performace is OK at the bottom of the cycle and are well leveraged to benefit from better market conditions etc - there is considerable upside sometime in the future. The current shareprice has a lot if this recovery in it already but over time I feel better shareholder returns would be coming from FBU than from NPX

Thats my rave metro

[percy]

Forbar; Npx value $3.96 Buy.
FBU value $10.14 accumulate.
Craigs NPX target price $ 3.49 Neutral.
FBU target price $8.66 overweight.
percy. Both face headwinds,but have strong balance sheets.

[winner69]

Forbar; Npx value $3.96 Buy.
FBU value $10.14 accumulate.
Craigs NPX target price $ 3.49 Neutral.
FBU target price $8.66 overweight.
percy. Both face headwinds,but have strong balance sheets.

With due respect to the skills of the Forbar analyst FBU at $10.14 would give a market cap of $6.2 billion - long term PE has been 10 -11 which sort of implies NPAT after tax of $560m-$610m ..... 2010 was $310m ..... anotyher Tui moment?

[percy]

With due respect to the skills of the Forbar analyst FBU at $10.14 would give a market cap of $6.2 billion - long term PE has been 10 -11 which sort of implies NPAT after tax of $560m-$610m ..... 2010 was $310m ..... anotyher Tui moment?

I am pleased you give forbar analyst due respect.!! You may be on your own there.!!!! However I thought it would give Metro something to work from having two brokers' view to work from.

[metro]

Thank you all for the comments you made. I appreciate you taking the time to reply. I provided background inoformation on both companies and then compared the two companies by doing some strategy analysis, ratio analysis and then something that I called trend analysis. I also compared their contingent liabilities and looked at the chart of both companys and tried to make insightful comment (but im no TA!)

Thanks again!

[percy]

Thank you all for the comments you made. I appreciate you taking the time to reply. I provided background inoformation on both companies and then compared the two companies by doing some strategy analysis, ratio analysis and then something that I called trend analysis. I also compared their contingent liabilities and looked at the chart of both companys and tried to make insightful comment (but im no TA!)

Thanks again!

metro.you can let us know your conclusions.We will n't tell anyone.!!!

[Phaedrus]

The charts of these 2 stocks are very similar. Both were in steep uptrends, both triggered trendline-break Sell signals and both have tracked sideways ever since.

There are some small differences, though :-

FBU has triggered a recent Buy signal (green arrow). NPX hasn't.

FBU has broken above its previous Resistance level. NPX hasn't.

FBU's Buy signal was near the lower range of its trend channel (a good place to buy).

NPX is right at the top of its trend channel and just below established resistance. Not a good time or place to buy.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/FBUnpx116.gif

[percy]

phaedrus.Are you using NPX NZ or NPX Au for your chart,as NPX NZ chart on stocknessmonster looks different from yours?

[Phaedrus]

I checked, and have used NPX.NZ, Percy. I then looked at Stocknessmonster and their 1 year chart appears to match mine. Are you looking at the right time period? If you still have reservations, get back to me with the specifics and I'll check more closely.

[percy]

phaedrus.Thank you. On your chart the resistance line is at just over $3.50,yet the high at end on march appears to be $3.45 and the stock is currently trading over $3.50 It is the one year chart.

[percy]

phaedrus.Thank you. On your chart the resistance line is at just over $3.50,yet the high at end on march appears to be $3.45 and the stock is currently trading over $3.50 It is the one year chart.

think I have answered my own question.Google charts show march 29th $3.58 , nov 4th $3.55, dec 9th $3.53 ,dec 22nd $3.55 ,jan 6th $3.55.
So your resistance line is confirmed.sorry to waste your time.

[Phaedrus]

No problem Percy. Stocknessmonster charts are a bit "vertically compressed" which alters the appearance quite a lot.

[percy]

Love it.!!! FBU down 4cents ,NPX up 3cents today.

[percy]

It has now been 9 days since last post.It looks to me as though the NPX $3.58 resistance line on phaedrus's chart has now become the support line,with NPX finishing above this level for a number of days,and finished to-day at $3.65.Therefore the uptrend is confirmed.?

[Phaedrus]

That's right Percy. The uptrend is re-confirmed and theoretically, now that the $3.58 resistance has been broken, it ought to become Support, but we are yet to see a test of this.

[percy]

That's right Percy. The uptrend is re-confirmed and theoretically, now that the $3.58 resistance has been broken, it ought to become Support, but we are yet to see a test of this.

Thank you for the reply.The post was made a bit tongue in cheek. !!! I appreciate the OUGHT.

[whirly]

Looks to me like a bearish divergence sp/vol. Or is it just consolidation? Anyone like to confirm this for me?

[percy]

craigs have upgraded to BUY, target price $3.90 to reflect the recent sector re-rating.

[whirly]

Sorry Belgarion. NPX.

Thanks for your reply Percy.

W.

[percy]

whirly, percy ... given the thread is called "FBU vs NPX" it'd be nice to know which you're talking about

Will leave that difficult decision to a legend to decide.but posts 17, 18, 19, 20 all refered to NPX so I would expect post 21 would be a continuation of the trend.
I know some Brokers research is suspect, but to imply Craigs would have at target price of $3.90 for FBU begs the question "have you spent too long in the sun to-day.?"Been hot here too 36 .

[winner69]

I think craigs are the outfit who have FBU north of $10 ... some outfit does anyway

[percy]

I think craigs are the outfit who have FBU north of $10 ... some outfit does anyway

not craigs. read post 4 on this thread.

[winner69]

not craigs. read post 4 on this thread.

Ta ... so it possibly the forever bullish Rob then ... maybe not Rob but his offsider

Talking of Craigs have you ever seen the kid that fronts up on AMP Business on TV1 .... looks like he has just school but he has learnt the right words to say and verbalise a typical Craigs report .... it made me wonder if he knew what he was really talking about ...... but then I might just have a jaundiced view of the youth of today

Maybe he is an ex Sharetrader member .... some have advanced to that role

[percy]

Ta ... so it possibly the forever bullish Rob then ... maybe not Rob but his offsider

Talking of Craigs have you ever seen the kid that fronts up on AMP Business on TV1 .... looks like he has just school but he has learnt the right words to say and verbalise a typical Craigs report .... it made me wonder if he knew what he was really talking about ...... but then I might just have a jaundiced view of the youth of today

Maybe he is an ex Sharetrader member .... some have advanced to that role
No not seen the kid. I have dealt with craigs since 1981.In christchurch it was Lawrence,Milton,and Howarth.I dealt with Mr.Howarth,who was an old school gentleman.I am pleased to say I receive the same excellent service from his son Derek.