Long Term View: Nuplex Industries Ltd

In this series of posts I am going to be looking at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO. The calculation of returns includes dividends and tax credits.

Nuplex Industries Ltd [NPX.NZ] has been one of the worst performing stocks listed on the NZX in terms of returns to shareholders since its listing in Feb 1967 (we will start at an adjusted $2.50c per share from available 1995 data to make our comparison) $2.95c in net dividends (excluding the period 1967-1994. No data can be easily found for dividends) and 30% more in tax credits (see chart above) a 3:2 share split in 1993 and a 7:1 rights issue in April 2009 gives NPX a slightly more than minus 600% return (see chart below for the share price percentage gain against the average of all NZX indexes - does not include dividends, tax credits and the share split in its calculation) over the nearly 17 year listing of NPX (the period between 1967 and 1992 is excluded because no shareprice or dividend details are available so the return will be higher than stated here), an approximate annual net return just over minus 35%.

This is approximately a 300% worse return when compared to the average of all NZX indexes.





Long Term View Series

Auckland International Airport
Air New Zealand
AMP Ltd
Briscoe Group Ltd
Contact Energy Ltd
Delegats Group Ltd
EBOS Group Ltd
Fletcher Building Ltd
Fisher & Paykel Appliances
Fisher & Paykel Healthcare
Freightways Ltd
Goodman Fielder Ltd
Hallenstein Glasson Holdings Ltd
Hellaby Holdings Ltd
Mainfreight Ltd
Michael Hill International Ltd
Metlifecare Ltd
New Zealand Refining Ltd
New Zealand Stock Exchange Ltd
Port Of Tauranga Ltd
Postie Plus Group Ltd
Pumpkin Patch Ltd
Restaurant Brands Ltd
Ryman Healthcare Ltd
Sanford Ltd
Sky City Entertainment Group Ltd
Sky Network Television Ltd
Steel & Tube Ltd
Telecom NZ Ltd
Telstra Corp Ltd
Tourism Holdings Ltd
The Warehouse Group Ltd


Nuplex @ Share Investor

Reason to be cautious on Nuplex forecast
Nuplex rights decision a dilemna for shareholders

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Download NPX Company Reports


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c Share Investor 2010

Securities Commission needs a clean out

The resignation of Securities Commission director David Jackson over the non disclosure of the breaking of banking covenants by Nuplex Ltd [NPX.NZ] highlights what conflicts of interest other Securities Commission Directors might have.

I agree with Mark Weldon, NZX CEO, that directors on the commission need to be full time and independent. Currently they are neither. A bit rich coming from Mark though when his own NZX Ltd [NZX.NZ] has a number of conflicts of interest in the day to day running of the exchange.

The SEC commissioners (see below) hold a number of positions on NZX listed companies that put them in direct conflict with their positions on the commission.

Simon Botherway has a directorship on Fisher & Paykel Appliances [FPA.NZ]. Annabel Cotton has interests in listed funds manager Fisher Funds and Mark Verbiest is on the Freightways Ltd [FRE.NZ] board.

Unacceptable to the average investor like myself because as a person with a financial interest in a company you can hardly be expected to regulate without bias that company as a SEC director and also do the job of director at that company with a clear conscience should anything need your regulatory hand.

Both positions are therefore compromised.

I know it is a small pool of competent individuals from which we seem to choose and we expect people with experience in the field (and that means NZX listed company investors and directors) but I think any bias needs to be a criteria that has to be exceeded and weeded out at the interview process before an SEC director is employed and that means selling those shares and resigning those directorships.

It looks likely that the SEC is going to be disbanded soon to be replaced by another market watchdog and that gives politicians the perfect opportunity for a clean out of the dross at the SEC and the appointment of a watchdog that is squeaky clean, has more clout and is able to prosecute law breakers with quick, effective and meaningful punishment.

The alternative is more of the same insider stuff that pervades stockmarket investing in New Zealand, the continued compromise of investors and the stockmarket in general and a lack of confidence in a market by current investors and more importantly those new investors who would like to buy shares but see stockmarket investing as the wild west or old boys club.


The current Members of the Commission are

Jane Diplock AO BA (Hons), LL B, DipEd (Sydney), Dip Int Law (ANU), FIPAA, FNZIM
Chairman of the Commission since September 2001.
Professional: Barrister and Solicitor of the ACT Supreme Court and High Court of Australia, Barrister of the New South Wales Supreme Court; Fellow of the Institute of Public Administration of Australia;
Chevening Fellow at London School of Economics; Chairman of the Executive Committee of IOSCO;
Member of the Financial Crisis Advisory Group; Fellow of the New Zealand Institute of Management.

David Mayhew BA LLB Hons
Commissioner for Financial Advisers.
Professional: Professional: Barrister and Solicitor of High Court of NZ, Solicitor of Supreme Court England and Wales .

Simon Botherway CFA, B Comm
Professional investor.
Directorship: Fisher and Paykel Appliances Holdings Limited.

Shelley CaveLLB
Solicitor, Auckland
Professional: Partner of Simpson Grierson specialising in corporate and securities law.

Annabel M. Cotton BMS (Accounting and Finance), ACA, CSAP
Business Consultant, Hamilton.
Professional: Consultant to companies listed in New Zealand and overseas.
Directorships: Genesis Power Limited, Kingfish Limited, Barramundi Limited, Marlin Global Limited and a number of private companies.

Keitha Dunstan PhD (QLD), M Bus (QUT), Grad Dip Mgt (UCQ), B Com (QLD), CA, FCPA
Professor, Australia.
Professional: Head of School of Business, Bond University Australia.

Elizabeth Hickey M Com(Hons), FCA, MInstD
Professional: Chartered Accountant, Auckland.
Directorships: New Zealand Institute of Chartered Accountants.

John Holland B Com, LL B
Solicitor, Christchurch.
Professional: Partner of Chapman Tripp specialising in securities and competition law and mergers and acquisitions.
Directorships: Board member of Chapman Tripp.

Neville O. Todd B Com
Company Director, Wellington.
Directorships: Kinloch Funds Management Limited and its subsidiaries. Formerly a director of Milford Asset Management and Salomon, Smith Barney New Zealand Limited, and a member of the New Zealand Stock Exchange.

Mark Verbiest LLB
Company Director, Wellington.
Professional: Consultant Simpson Grierson
Directorships: AMP Haumi Management Limited (manager of AMP NZ Office Trust); Freightways Limited, Government Superannuation Fund Authority, Southern Cross Medical Care Society, Health Trust and related entities, Aptimize Limited (Chairman).

Related

Securities Commission

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c Share Investor 2010

Nuplex rights decision a dilemna for shareholders

I have been chatting to a customer about his Nuplex Industries Ltd [NPX.NZ] shares for around a year now.

A year ago he was very positive about the company and its prospects for the long term.

He was also in the money because his shares had risen, up to over 8 bucks.

Oh how times have changed.

Since then then the stock has crashed 90% to finish at 89c today (it hit a low of 51 c on Mar 23) it has announced a big drop in profit and also a rights issue to raise more capital because of high debt levels and therefore a lack of cashflow for the day to day running of the company.

The rights issue key points are:

- Entitlement Ratio: 7 new shares for every 1 existing share
- Issue Price: NZ$0.23 per new share
- Total New Shares: 577,643,738 million new shares to be issued
- Gross Proceeds: NZ$132.8 million to be raised (fully underwritten)

My customer asked my advice on whether he should in effect chase good money after bad by participating in the issue.

I wasn't about to give him advice because everyone has different financial circumstances but I did tell him what I would do given the same situation.

It went sort of as follows.

You would have to consider that given they are in their current situation after the beginning of an economic downturn, then when things get worse will they have the cap out again in another 12 months for more money?

If the answer is no and the company will recover and you may get a recovery in profitability and share price.

Then and only then if I was sure about the long term viability of Nuplex then I would participate in the rights issue.

If not then the only other thing to consider is when to cut and run before the share price is diluted, presumably down to 23c, the rights issue price.

I am not sure if I was helpful at all to my client but I think he is erring on the side of pluncking down some more money.

I hope his hunch is right.


Related Links

NPX- Rights Issue Offer Doc



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c Share Investor 2009