Wednesday newspaper share tips: Polypipe, Antofagasta
By Alexander Bueso
Date: Wednesday 17 Aug 2016
(ShareCast News) - Polypipe should not be affected by the result of the EU referendum, as its trading performance during the first half of the year attests, according to the Financial Times' Lex.
Indeed, sales at the FTSE 250-listed manufacturer of plastic piping systems - of which environmental regulations were a key driver - grew 8% on an organic basis, sending the shares back to their pre-referendum level, after an initial 25% fall following the Brexit vote.
Those same regulations were a factor behind the acquisition of Naire, a provider of ventilation kit in August 2015 for about £145m, and promised synergies in sales. As well, it was that acquisition which was responsible for the company's net debt to earnings before interest, depreciation and amortisation (EBITDA) hitting 2.5 last year, but which was now down to 2.3 and predicted to fall back to 2.0 by December.
The company also generated more sales from its repair and maintenance division than new builds, Lex pointed out, and the former should not be affected by the Brexit fright, according to the tipster.
Nor would it be affected by the loss of the single market as the company builds to UK specifications, not EU.
Furthermore, Lex said the government was making "encouraging noises" about house building, more so that it did during the 2008 financial crisis.
According to Deutsche Bank, the company was trading at less than 13 times estimated earnings for 2016, which Lex believed was "not bad value for a growing business".
Antofagasta is well-placed to benefit from any recovery in the price of copper, if and when it materialises, but investors would be wrong to buy-in just yet, The Times's Tempus said.
Chinese demand for the stuff, which has a very wide variety of uses, will recover, eventually, but when is a whole different matter. Pundits have been calling for just that for several years now, with scant success.
Indeed, the rise in prices year-to-date has lagged that in other metals.
For his part, recently arrived Anto chief Ivan Arriagada expects the market to tip into deficit at some point in 2018, although over the next two years the surplus will continue to pile up.
Nevertheless, Chile, where the company has its biggest play in the space, the Los Pelambres mine, is a low-cost site. The company may also be set to beat its targets for cost reductions this year.
Production from Los Pelambres is due to ramp-up by the end of 2016, "nicely in time for any upturn", the tipster pointed out.
The miner's margins also have a built-in cushion at the moment to help the company withstand any weakness in prices.
So things are looking up for the Chile-focused outfit, yet given the shares' performance since the spring it still seems too early to 'buy', Tempus says.
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