STU: Profit Announcement

[bongo66]

Hey fellow investors, when is STUs half announced please:)?

TIA, B

[bongo66]

Anyone? cant find this on ASB or National Banks Share service...

[limegreen]

16 Feb according to aireview calendar

[Lawso]

Thursday 17th according to today's NZ Herald. PPL half also on Thursday. CEN to announce at agm tomorrow, WAM, NZX and MHI on Wednesday, TUA and NTH on Friday.

[Winston001]

I started thinking about STU today. It appears to have a PE of 16 which is below other market leaders and yet also has a very good track record. Surely it is undervalued on the current bull market. It will be interesting to see what happens on the 17th.

[stephen]

Winston, aren't STU's biggest customers in construction? Anyone who thinks that construction is peaking would be placing a lower valuation on STU.

Just a thought.

[Winston001]

I agree Stephen but even if house building is slowing, apparently there is plenty of commercial construction, and beyond that, council and government infrastructure work to soak up the steel. Mind you, I'm no expert. I simply read these ideas in another thread.

If the $US recovered, that may not help STU. My main focus is that the PE is out of sync with other stocks, many of which must also be affected by any slowdown. Eg FBU - but it keeps on going. Forsyth Barr now value it at $7.35

[Lawso]

Driving to the city today I counted eight tower cranes on the Auckland CBD skyline. And that was all I had time to count before the lights changed. This highly unscientific survey was enough to convince me there is heaps of commercial construction under way.

[rotsevni]

Can't fathom why STU is down today. The market seems inappropriately underwhelmed by the 50% earnings increase and bouyant forecast. The modest PE has actually gone down as a result (by about 8%) whereas the growth potential seems to have gone up.
So I bought a heap. Was I sucked in?

[KJ]

Is the PE modest?-Fbu PE around 10.

[rotsevni]

Maybe, but why why the PE go down on such good news?

[rotsevni]

Maybe, but why why the PE go down on such good news?

[KJ]

As you know the market is always looking and pricing ahead.

Results for the previous 6 mths (to 30/6) NPAT $16.6m-so $18.6m for the latest 6 mths was already priced in-then the market had run up from $4.83 over the last 2-3 wks to $5.43.
Perhaps the market was expecting a better result.

FBU and CEN leapt up and are now coming back.Market often overshoots on the high side and also on the low side.

[rotsevni]

quote:Originally posted by KJ

As you know the market is always looking and pricing ahead.

Results for the previous 6 mths (to 30/6) NPAT $16.6m-so $18.6m for the latest 6 mths was already priced in-then the market had run up from $4.83 over the last 2-3 wks to $5.43.
Perhaps the market was expecting a better result.

FBU and CEN leapt up and are now coming back.Market often overshoots on the high side and also on the low side.


Thanks KJ. Still puzzled though, since I took all of that into account.

Let's filter out the 55% growth figure for the year and just look at the half year growth and PE figures for the last 5 announcements:
Announcement [PE] Growth in 6 month NPAT
Dec 2004 [12.7] 12%
Jun 2004 [13.9] 38%
Dec 2003 [14.3] 13%
Jun 2003 [15.3] -4%


The outlook statement and the 6 month growth is identical to last year's. The 12 month growth is spectacular "55%" compared to last year's "9%" I would have thought the PE would be at least as good as a year ago?

[KJ]

You are ignoring the fact that the market works ahead and has already priced in the increase in profits.Have a look at the graph-the shareprice has moved up about 50% in the last 12 mths.

Now if the market decides that the PE should be the same as FBU (10) then the STU shareprice will be about $4.00.

[rotsevni]

quote:Originally posted by KJ

You are ignoring the fact that the market works ahead and has already priced in the increase in profits.Have a look at the graph-the shareprice has moved up about 50% in the last 12 mths.

Now if the market decides that the PE should be the same as FBU (10) then the STU shareprice will be about $4.00.


Um, no. With respect I don't think I'm ignoring that, but incase I'm mistaken, since I'm a novice at this, here are my figures:

FOR RESULTS SEPARATED BY 12 MONTHS, UPDATED 6 MONTHLY:
The price has moved from about $4.00 to $5.30 in 1 year, that's up 33%
The 6 months NPAT (to Dec) has improved from 12M to 18.6M, that's up 55%.
The 12 months NPAT (to Dec) has improved from 22.5M to 35.2M, that's up 56%.

FOR RESULTS SEPARATED BY 6 MONTHS, UPDATED 6 MONTHLY:
The price has moved from about $4.50 to $5.30 in 6 months, that's up 17.5%
The 6 months NPAT has improved from 16.55M to 18.6M, that's up 12.5%.
The 12 months NPAT has improved from 28.5M to 35.2M, that's up 23.5%.

Most ways you look at it, earnings growth has outstripped price growth, but I take your point that the exceptional June result makes even an excellent December result look less flash. I thought it would be best to compare year-on-year figures to avoid these seasonal or balance-date blips.

So let's look at comparative figures for FBU:

FOR RESULTS SEPARATED BY 12 MONTHS, UPDATED 6 MONTHLY:
The price has moved from about $4.00 to $7.00 in 1 year, that's up 75%
The 6 months NPAT (to Dec) has improved from 111M to 161M, that's up 45%.
The 12 months NPAT (to Dec) has improved from 196M to 290M, that's up 48%.

FOR RESULTS SEPARATED BY 6 MONTHS, UPDATED 6 MONTHLY:
The price has moved from about $5.25 to $7.00 in 6 months, that's up 33%
The 6 months NPAT has improved from 129M to 161M, that's up 25%.
The 12 months NPAT has improved from 240M to 290M, that's up 21%.

A lot depends on whether you average over 6 or 12 months.
I'll leave you to draw your own conclusions.

[KJ]

Rotsevni

IMO profits and share prices do not move in some synchronized fashion in 6mth or 12 mth zones.Sometimes one gets ahead of the other or other factors such as sentiment come into play.How does the market see things 1 or 2 yrs ahead? How does the market see the industry that they are in?

However if you look at STU over the last 2 yrs:
NPAT 30/6/03...$21.5m 30/6/05 say $36m...increase 70%
SP Feb 03...$3.20 Feb 05...$5.40.....increase 70%

Now FBU:
NPAT 30/6/03...$168m 30/6/05 say $325m...increase 100%
SP Feb...$3.50 Feb 05....$7.00....increase 100%

Looks like a jack-up!!Unusual for them to be the same but the point is that the longer the period the closer they will be together.

More importantly,how does the market see STU in 1 or 2 yrs time? If it thinks that the profit will flatten going forward then it is likely that the PE will decrease.Why would it deserve a higher PE than FBU? Why does FBU not have a higher PE? It is the future that determines the PE-not the past.For what it's worth.

[rotsevni]

Thanks KJ, I'm enjoying this discussion.
May I rib you by pointing out that any analysis based upon guesses 6 months ahead is by definition a jack up?
:)
But good on you for sticking you neck out. For what it's worth, I assuming the next STU result (NPAT) to be around 39M.

Your observation that "profits and share prices do not move in some synchronized fashion" seems less applicable to STU than FBU.
For the previous 6 reports (I have not looked back further yet)
STU P:E ratio has stayed steady (+/- 0.5) between 13 and 14
except on one period (15.3).
FBU P:E has varied more (+/- 2.2) between 8.5 and 10.7
except for one period ( -5 ). That suggests to me that FBU share price is more influenced by emotion than STU, and that the STU share price is presently a victim of that emotion.

[KJ]

Rotsevni-good discussion.
The profit figures for STU and FBU were arrived at by simply roughly doubling the first half.I do not hold STU and have not been following it closely.If we accept your $39m it will not make much difference-my point was, that,over the long term,it is normal for there to be a correlation between NPAT increase and SP increase.

I do hold FBU and to be honest do expect its NPAT to be ahead of the figure that I used.

You make some good points but I come back to the basic point that I have been trying to make and that is,that the market is looking at least 1 to 2 yrs ahead.

Given the basic premise that NPAT is the single most important driver of SP, then those with the greatest ability to make accurate assessments (not guesses)1 to 2 yrs ahead will do best in the sharemarket.

Why has FBU's PE increased from 8.5 to 10.7?-IMO it is because it has emerged from the Fletcher Challenge shambles where it was a poor performer,to a highly profitable top performing large coy with very high quality management who have demonstrated their skills and ability to improve the NZ business while acquiring and integrating new businesses.ROE around 25%.

The market recognises this outstanding performance and has re-rated it-although not high enough in my opinion-deserves a higher PE.
Probably held back-like STU-because of the cyclical nature of the building industry.

[rotsevni]

Thanks KJ.

Just one point, when say that "FBU's PE increased from 8.5 to 10.7"
(actually 10.5 by my reckoning)
you have chosen to ignore that it was at its highest in July 2002, the year before it was 8.5 and a year after it was at the disastrous -5.
In fact it goes up and down like a yo-yo.
This is the first time in 7 results that P:E is up twice in a row. A bit early to call that a trend. It's just as valid to say it will be overdue for a fall in P:E next time if past performance is what we are using as a yardstick.

[KJ]

Rotsevni
When I used the PE range "8.5 to 10.7" I am quoting you from your earlier post-I have not gone back to check it out as I do not think that it adds much.It's not material really.

I have not chosen to ignore anything-I simply do not have the nos available to work it out-I do not know the number of shares on issue then etc.In fact I do not know if your calc are correct,but am just accepting what you are saying.

You have told me that the PE has increased from 8.5 to 10.7-I accept this and have given my opinion why this is so.

What yr was it -5? I certainly think that the PE has been held back in the last yr or two by sentiment-experts have been predicting a collapse in the residential housing market for a couple of yrs.

[rotsevni]

quote:Originally posted by KJ

Rotsevni
What yr was it -5? I certainly think that the PE has been held back in the last yr or two by sentiment-experts have been predicting a collapse in the residential housing market for a couple of yrs.


KJ, sorry I confused you, it should all make sense with the numbers below:
P:E 12/01; 7/02; 12/02; 7/03; 12/03; 6/04; 12/04
STU 13.4; 13.2; 13.1; 15.3; 14.3; 13.9; 12.8
FBU -5; 10.7; 8.8; 9.7; 8.5; 9.4; 10.5

[rotsevni]

quote:Originally posted by KJ

Rotsevni
I certainly think that the (FBU)PE has been held back in the last yr or two by sentiment-experts have been predicting a collapse in the residential housing market for a couple of yrs.


This year they may be right. On the flipside:

from FBU report: "Despite a slowing in residential markets in Australia and imminently in NewZealand, non-residential building and infrastructure markets remain strong"

and STU report: "any softening in the residential construction sector to be offset by growth in commercial construction"

Since steel is much more intensively used in non-residential/commercial construction, would you not expect STU to have more exposure to the upside of commercial construction and less exposure to any downside in residential construction, compared with FBU??

[Phaedrus]

Re FBU/STU comparison.

The PE ratios may have been all over the place, but there is no doubt about the uptrends of these 2 stocks. Up and up and up for more than 4 years, so far.
It is amazing just how close their relative performance has been. Over 4 years, and they are within just a few percent of each other, at 300% growth.

What a pretty chart!

http://img.photobucket.com/albums/v418/789456/FBUstu001.gif

[rotsevni]

Thanks Phaedrus, care to add your trendlines for reference?

[Phaedrus]

http://sharetrader.co.nz/topic.asp?TOPIC_ID=19267&whichpage=1
http://sharetrader.co.nz/topic.asp?TOPIC_ID=20220&whichpage=1

[winner69]

investor spelt backwards ... or rotty for short

take those charts Phaedrus posted (links in previous post) ... print them off .... and using the left hand axis plot (use a scale that covers the range of the eps) the annual earnings per share on each (say as one column for each year ... take the month the financial year ends) ... and then a draw a line through the tops of the column ....

That line will look as impressive as the share price ... if the share price is heading up faster than the eps line than the PE is expanding ... and vice versa

A picture is better than a hundred words or in what you are trying to explian to KJ better than a lot of numbers

Do it and report back

[KJ]

Rotsevni-thanks for the PE numbers-I follow what you are saying.It will be interested to follow the PE's for both going forward.

[rotsevni]

quote:Originally posted by winner69


take those charts Phaedrus posted (links in previous post) ... print them off .... and using the left hand axis plot (use a scale that covers the range of the eps) the annual earnings per share on each (say as one column for each year ... take the month the financial year ends) ... and then a draw a line through the tops of the column ....

That line will look as impressive as the share price ... if the share price is heading up faster than the eps line than the PE is expanding ... and vice versa

A picture is better than a hundred words or in what you are trying to explian to KJ better than a lot of numbers

Do it and report back



Here ya go. The eps values are 12 month totals. They are direct from half years reports. Same for FBU but you have to add their half year figures together.
The first 2 FBU values are off the scale at -84 and -60

http://img.villagephotos.com/p/2005-2/949184/EPS.jpg

[rotsevni]

The left scale on my last post was rubbish.
Here is a more understandable chart.
http://img.villagephotos.com/p/2005-2/949184/EPS2.jpg

[Lawso]

What has been scarcely mentioned in the fascinating discussion on this thread - FBU vis-a-vis STU - is the yield. STU has always been a good yield stock and is currently returning 7.6% v. FBU 5.27%. This must surely have a bearing on their relative PE's.

Whatever, I'm nicely stocked up on FBU and today have bought a further 1k of STU @ 530 - 15c divvy due early March [:p]. Together these two closely related stocks make up only about 14% of my portfolio so an industry downturn wouldn't be a disaster for me.

[KJ]

I am not sure that this detail adds too much.I will stick with my posting of the 18/2/05 in that analysing short periods can easily mislead.It tends to cloud issues.

The chart indicates to me that FBU's PE is in an uptrend.

If you look at the PE's quoted (Dec 02- PE dropped to 8.8 and Dec 03 it dropped to 8.5)However if you look at SP you can see that 2 mths later (Feb 03)the SP was 20% higher and therefore the PE would have jumped.

If you look around Dec 03 SP was $4.40 in Nov-Dec $3.95-Jan 04 it was back to $4.30-so of course the PE changes constantly.

It is also interesting to note that at the time of these two low PE's FBU had issued new shares to buy businesses:

Sept 02-44m shares issued to buy Laminex
Aug 03-25m shares issued to buy Tasman

These transactions are sufficient to unsettle the share price in the short term while investors take a wait and see approach.