General | Feb 04 2006
Last week Transpacific Industries (TPI) was sitting quietly on an FN Arena indicator of precisely 0.00. All five covering brokers could come up with no better than Hold. Then the company announced it had decided to merge with NZ’s Waste Management (WAM.NZ) and all hell broke loose.
Slumbering analysts suddenly increased target prices across the board – in the order of 30%. The market reacted accordingly, and some $2.00 was added to the TPI share price (last trade $8.62). And the FN Arena indicator? Well it now sits at minus 0.20.
Every broker is positive about TPI post-merger – growth potential, a better position in which to attempt to acquire Cleanaway, maybe more deals in the pipeline. The only problem is the market lapped it all up immediately and so it was a bit late to be upgrading to Buy.
Aspect Huntley in fact went the other way, suggesting the jump in share price was a good opportunity to take profits. (Pity if you didn’t have any shares). Thus the recommendation dropped to Reduce, and that’s why the indicator fell to minus 0.20.
So anecdotally, brokers are expecting good things from TPI, but from a valuation point of view, you just couldn’t buy it. A case of shutting the gate after the horse.
