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Paperlinx (PPX)

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" PPX's main activities are manufacturing and sale of communication and high performance packaging papers. PaperlinX's leading local brand is REFLEX. "

P/E 16.42
Yield 6.1%


Just bought a few myself @ $4.55, anybody else heard of them, or have been tempted at these prices?
 
Shares magazine just had a feature article on the whole paperindustry in Australia, and they where mentioned in that.
 

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From Fat Prophets

Dog of the week (April 2004)

Dog Of The Week

--------------------------------------------------------------------------------
Back Issues
Paperlinx - The Greyhound
Paperlinx (PPX) is a major player in the international paper merchanting and distributing industries, as well as being a leading manufacturer in Australia of printing and specialty papers and packaging papers. The company listed on the Australian Stock Exchange in April 2000, following a de-merger from Amcor. In recent times the global market for fine papers has been in oversupply and this has placed downward pressure on margins and profitability. Supply imbalances typically clear after a period of time, eventually restoring equilibrium to the market.

Paperlinx now believes the low point in the paper manufacturing cycle has passed, and that conditions will improve over the next few years. When the current supply imbalances are ultimately removed from the industry, we anticipate prices will begin to rise, boosting margins and profits for Paperlinx. While many analysts remain on the sidelines waiting for 'visible' signs of a recovery to emerge, we believe that it is important to be one step ahead of the market. Downside risk with Paperlinx is, in our opinion, mitigated by a robust dividend yield of close to 6 percent and a low prospective price earnings ratio of around 10 times for 2004/05. We expect this greyhound to come bounding out of the gates within the next few months.


Bit of an 'inside' FYI. Major IT & infrastructure spending as back on the table at PPX, which is a sure sign that cash flows and revenue forecasts look healthy.
 
Yield is unfranked so not as attractive as it first appears. As others have noted currency has hurt them and integration of recent acquistions is still a risk. The paper industry is always tough but their are signs that the market in Europe is improving, probably an 06 story, when forecats may see it on a PE of around 11 times. At the 05 forecast PE of 15 it is too high for the historical average.

Anyway my 2 cents.
 
Linda_Lovelace said:
Yield is unfranked so not as attractive as it first appears. As others have noted currency has hurt them and integration of recent acquistions is still a risk. The paper industry is always tough but their are signs that the market in Europe is improving, probably an 06 story, when forecats may see it on a PE of around 11 times. At the 05 forecast PE of 15 it is too high for the historical average.

Anyway my 2 cents.
Click to expand...
I would have thought a PE of 15 tending towards a PE of 11 in one year would mean a n increase in share value of at least 20% in the next year.
So on that basis, and the likelyhood of an A$ weakening in 2006 the stock would be a big BUY.
 
Frodo, you are assuming the market is not aware of the improvement in 06, they are it is in the analyst forecasts. Paper tends to be volatile in its earnings streams (like steel) and therefore the market applies a PE discount to these stocks (market average PE is around 15) so 10 to 12 is about right.

PPX has moved into paper merchandising in a big way to try and mitigate this problem but it will take time. Still if the market continues to be bullish it will probably perform well as the bargain hunters look for something that looks a bit cheap. Apart fromt the ACCC concerns AMC has simialr issues re curency, cross border operations, voliatile earnings etc.

At the moment it is very hard to find anything to buy on PE type valuations, it is more of a momentum driven market where quant and charting takes over.
 
FYI, signs of declining demand for paper in the US which may flow through to Europe. early days but as noted earlier, very tough market. One positive is a strike at a competitor in the US.
 
Cheers for the info Linda. Interesting read. Must be an avid follower of them? How do you see them (SP) performing?

Im in for the long term, i still beleive they are at the bottom of the cycle, and represent good value.

Any tips you have? ;)
 
Reports tommorrow morning, pre market open. Given the mood of the market they would not want to disapoint.
 
Reported today, pretty ordinary result but pretty much as expected. Stock only off 10 cents which is an accomplishement in this market.

Multiplex got absolutely r*ped today on problems with Wembley stadium. Construction companies look bad at the moment, massive rises in steel (iron ore price increases will be passed on) and the very real prospect of industrial action once the Fed Govt introduces its work place reform bill in July (0r earlier).

Looks like the bubble has burst in the market (for know anyway). Have a look at the CEY/AUO freindly take-over if you like a bit of risk.
 
morgoth said:
Reported today, pretty ordinary result but pretty much as expected. Stock only off 10 cents which is an accomplishement in this market.

Multiplex got absolutely r*ped today on problems with Wembley stadium. Construction companies look bad at the moment, massive rises in steel (iron ore price increases will be passed on) and the very real prospect of industrial action once the Fed Govt introduces its work place reform bill in July (0r earlier).

Looks like the bubble has burst in the market (for know anyway). Have a look at the CEY/AUO freindly take-over if you like a bit of risk.
Click to expand...
Agree that raw material prices will affect contracts without escalation clauses.
Industrial action should declline. It's hurting too much at present. The new laws will outlaw wildcat strikes, no ticket no start etc and put any union who breaks the law out of business. Hapened a few decades ago under Thatcher in UK when she had absolute control.
 

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Would not touch MXG, yeah they may bounce but Instos will want nothing to do with them and once a construction company gets into trouble it takes time to sort out.

I was refering to AUO as the way into CEY, but it has risks ie the deal falls through. As it is a straight script take-over, no CGT implications and if you get a higher bid, laughing! Only thing that could hurt is a collapse in commodity prices but that should not happen for a while. As a combined company CEY/AUO looks like a good marriage and the Port that AUO uses has excess capacity.
 
Not going well, curency and imports (in Oz) hurting them, $4.18 at the moment.
 
Been downgraded today, yeild forecasts are being cut due to capital works program.

Tough business paper, reason it trades on a discount to the market, will be good value at some stage, but not sure when.
 
morgoth said:
Multiplex got absolutely r*ped today on problems with Wembley stadium.
Click to expand...

The UK press has given them a big battering over their agressive entry in to the UK. Whether it's just nationalistic reporting and sour grapes remains to be seen but they wouldnt be the first Australian company to badly stuff up an overseas foray.
 

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medusala said:
The UK press has given them a big battering over their agressive entry in to the UK. Whether it's just nationalistic reporting and sour grapes remains to be seen but they wouldnt be the first Australian company to badly stuff up an overseas foray.
Click to expand...

AMP :(
 
Lidge said:
Bit of an 'inside' FYI. Major IT & infrastructure spending as back on the table at PPX, which is a sure sign that cash flows and revenue forecasts look healthy.
Click to expand...

Only because they choose a fairly rare industry solution of SAP.
 
Prices of paper falling in Europe, eroding margins further. Looking pretty sick.
 
Hope you did not buy anymore, remember what they say about bottom pickers.

The end up with smelly fingers.
 
Will get slaughtered today after issuing a profit warning last night after the market had closed. Company had said they were on track as little as 2 weeks ago, management credibility shot and will be punished.

The old saying never try and catch a slippery knife comes to mind.
 

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