Takeovers Continue

19 February 2016

The oil price remains around US$30 a barrel and has fallen significantly in recent times, although the implications of this are not all negative. Lower oil prices benefit a number of businesses, and at the same time lower oil prices are stimulatory for the broader economy given it is a key cost for consumers and businesses. One company which benefits from a lower oil price is resins manufacturer Nuplex (NPX.NZ/NPX.AX) which has recently received a takeover offer which saw its share price jump 27% the other day. NPX shares corrected sharply in 2016 with the market selloff, which we believed created an opportunity to buy the stock. The market selloff combined with a low NZD & AUD have made Australasian companies an attractive investment for offshore buyers and we see this trend as set to continue. Sydney Airport (SYD.AX) also indirectly benefits from a lower oil price, and reported strong profit results yesterday which we discuss below.

Nuplex Takeover Offer
The start of 2016 had seen NPX.NZ (NPX.AX) shares retrace significantly and we took this opportunity to buy NPX shares on the 12th of Jan .Since then the shares are up 14.6% after receiving a takeover offer. NPX received an indicative, non-binding, conditional, all-cash proposal from Belgium company Allnex valuing the company’s shares at NZ$5.55 each. Allnex is backed by private equity firm Advent International Corporation which wants to create a leading, global independent coating resins producer. Nuplex’s board consider the offer attractive for shareholders, although there are several hurdles such as votes to be passed before the takeover can go ahead.

Sydney Airport Shines
Sydney Airport operating profit jumped 5.8% to $1 billion and revenue rose 5.6% to $1.23 billion. The airport operator is expected to pay a full year dividend of 30 cents a share (+17.6% from last year), which is materially higher than last year’s distribution given the standout performance. The improved performance is almost solely being driven by an ongoing rise in the number of high-spending Chinese tourists as Australia flourishes given the fall in the AUD. Chinese passenger numbers increased by 18% last year alone and we expect this trend to continue over the medium term.
Sydney Airport now has 7 mainland Chinese carriers serving the airport, more than any other long-haul outbound destination in the world. The airport is continuing to tailor its retail and food and beverage options to meet the passenger mix, including plans to add more Asian dining options given the influx in demand. Clearly high spending Chinese tourists are not feeling any of the effect from the Chinese economic slowdown. This is conducive for the Australian tourism and retail industries. A lower AUD and improved tourism and retail sectors are key thematics underpinning the portfolios. We continue to see economic benefits aiding the sectors over the long term. 

 

The oil price remains around US$30 a barrel and has fallen significantly in recent times, although the implications of this are not all negative. Lower oil prices benefit a number of businesses, and at the same time lower oil prices are stimulatory for th

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