Norfolk Group (NFK)

[Abracadabra]

Hi everyone, can someone help please? I have obviously missed something here, but can't work out what it is!
I bought into this on 7 September, it is in a long term uptrend, waited until it passed the 78c of previous highs and bought. Expected it to continue previous trend, but on Friday dropped way below trendline on high volume. Can't find any news that might explain it.
It is in the Industrial sector which is performing well. Cant see what I have done wrong, except of course not buying it months earlier!!
Any help would be much appreciated.

Thanks

[steve fleming]

Hi everyone, can someone help please? I have obviously missed something here, but can't work out what it is!
I bought into this on 7 September, it is in a long term uptrend, waited until it passed the 78c of previous highs and bought. Expected it to continue previous trend, but on Friday dropped way below trendline on high volume. Can't find any news that might explain it.
It is in the Industrial sector which is performing well. Cant see what I have done wrong, except of course not buying it months earlier!!
Any help would be much appreciated.

Thanks

Don't know why sorry.

But i've been watching NFK as it potentially may be a PE takeover play (again) here with Maui Capital - a newly formed NZ PE firm.

Maui Capital became a SSH in NFK in June and the MD of NFK is a director of Maui Capital....so could be a PE led Management buy out.

Maui Capital Directors are all ex the succesful Hauraki Private Equity fund which used to previuosly own NFK

http://www.mauicapital.co.nz/investments/

[drillfix]

Fundamentally, I dont know what this co does.

But it simply could be just a Knee Jerk reaction to the current market climate along with not being helped by its chart Technically Speaking.

Meaning, it appears to me that there is a Tombstone Doji right at the very top, followed by a couple of small Bearish Engulfing candles which happened in two sessions.

Adding to that, the MACD is in the middle of cross over which seen in the chart also caused by that or viceversa creating the sell off.

If it were me, I would place a stop around 68c and if that gets taken out put a buy order where the previous gap up was around 50c, or the upper next support around 60c (+ or - 1c). But dont know how long you may need to wait as it may just bounce back and continue to trade in its upper channel, or to the next channel. Seems to trade in a each channel for 2 weeks to a month or so.

Anyways, tot advice just purely observation, so good luck with that.

Chart for taking a peek.

http://i38.tinypic.com/zy60aq.gif

[lewinsky]

A number of shares in this sector have been clobbered and are taking a while to recover.

However it is on a PE of 22. A dividend yield of 2.72% and NTA of -12 cents.

Compare this with STS, pe 5.25,div yield 6.84% and NTA 82 cents.

On fundamentals STS looks a better story.

[Abracadabra]

Thanks for your replies. I am still holding this, had intended to sell today, but it dropped so low I went into a bit of a panic and couldn't bring myself to sell and have a 25% loss! It is up a bit from todays low, just hope it keeps climbing.
I know you are supposed to take emotion out of trading shares, but I am finding it very difficult to do after a day like today.

[drillfix]

Hey Abracadab,

If you would have set that Stop you could have bought them back lower and made your loss back after the bounce.

Ahh well, although dont live in hope mate, have a target in mind either where you want in or out or keep a trailing stop in place to exit you out.

For many this can be a hard practice or uneasy discipline, but thats what they are there for.

Anyways good luck to ya~!

[soulman]

I can post Huntleys comment on NFK for you holders.

NFK omitted details of its interest cover debt covenant when disclosing other covenants for the first time at its FY09 results presentation. We obtained this information later on and are concerned to see headroom is slim, with interest cover of 5.0x compared to the 4.5x covenant limit. This suggests a 10% fall in EBITDA will cause a breach. We think this is the real reason behind NFK’s “proactive” renegotiation of its July 2010 debt facility. The interest cover covenant seems pretty tough and in normal conditions it would be possible to negotiate a more lenient limit. Behaviour of the major banks suggests this will be difficult and expensive in the current environment. Successful renegotiation of the facility is key to reducing risk. Otherwise an equity raising may be necessary.

Shortly after NFK’s results were released, New Zealand private equity firm Maui Capital took a 5% stake in the company. Maui is the same private equity group that floated NFK in 2007 and has two directors on the Board – NFK Managing Director Glenn Wallace and Non-Executive Director Paul Chrystall, who is Managing Director of Maui. Despite these strong ties, NFK announced at the time that it was unaware who purchased the 5% stake. Corporate governance could be an issue. Maui has since increased its stake to 17% via a call and put option arrangement with another substantial shareholder. This may be a blocking manoeuvre to dissuade Monadelphous (MND), which owns 12.4%, from making a takeover bid. Alternatively, Maui may intend to re-privatise the company. The best interests of NFK shareholders and Maui Capital won’t necessarily be aligned, presenting a conflict of interest for Wallace and Chrystall.

Slim interest cover headroom is concerning but we draw comfort from obvious corporate interest in the company. NFK remains undervalued but is only suitable for risk tolerant investors. Hold.[/B]

I suggest maybe a discounted cap raising looming, so hold for the entitlement. The chart are still uptrending.

Disclosure: None

[Abracadabra]

Thanks Soulman, this would explain the sudden drop as I am sure subscribers to Huntleys after reading this would have been concerned. I feel very uneasy holding this, would rather invest in companies that management are open about what is going on!

I know Drillfix, I should have set a stop! It is so hard to be really disclipined! Next time!

[winner69]

Hey magic man -- looks like you getting pretty close back to square on this one going by todays action

Interesting looking company and if it wasn't for the NZ economy may be doing a lot better

[soulman]

That was 16 June 09 report by Huntley by the way so it's been known for a bit. NFK was just 52 cents at that time.

If your capital invested is negligible, you should hold on into it. MND buying a stake was a passive investment but you never know (they did bought them cheap at 25 odd cents). Also, the PE coy buying stakes of the coy, maybe thinking of taking it private is possible. Some upside to this coy still yet. It did floated at the $2 ends, didn't they?

Good luck.