STU - Steel & Tube Holdings

[winner69]

STU will come right one day

[winner69]

But if I was a share holder I’d be worried with this bit. Code for we don’t really know what we are doing

“As part of Project Strive the Board and Management are continuing to review the business operating model. This may result in further restructuring costs”

[Timesurfer]

That ridiculously low offer that the board turned down is looking pretty attractive about now.

[Scrunch]

But if I was a share holder I’d be worried with this bit. Code for we don’t really know what we are doing

“As part of Project Strive the Board and Management are continuing to review the business operating model. This may result in further restructuring costs”

I'd tend to interpret it the other way. We know the current results aren't acceptable and management are continuing to look at ways to do things better.

You are however correct in that if there is a better way, why aren't they already shifting to it rather pondering whether to do something while they continue to be paid and the now poorer shareholders don't get the returns that are potentially possible.

[SailorRob]

Hi Beagle,

Always value your opinion. I know shes a dog... but at .80 the market cap is less than working capital minus total liabilities. A Benjamin Graham net-net.

The balance sheet is pristine now, very little chance of solvency issues in the foreseeable future. Insider buying in reasonable volumes. Not much has happened to change the intrinsic value that was expressed in the offer just over a year ago at twice todays market cap.

I've been over 6 years of cash-flows 84 million has been paid out in dividends and there has always been positive cash flow from operations and generally been free cash flow. Yes the cycle is old and construction may be rolling over but also may not be. In the long term this country is young and popular and is going to need a lot of Steel.

Yes there are many problems and I've been through the thread back to 2018. But surely the price now reflects all of this and more and if investing for the medium/long term the upside potential is decent with protection on the downside from the balance sheet and lack of debt.

What am I missing apart from all the things already noted in this forum? This looks like a classic Walter Schloss/Ben Graham cigar butt situation.

Cheers, Rob.

[Waikaka]

Hi Beagle,

Always value your opinion. I know shes a dog... but at .80 the market cap is less than working capital minus total liabilities. A Benjamin Graham net-net.

The balance sheet is pristine now, very little chance of solvency issues in the foreseeable future. Insider buying in reasonable volumes. Not much has happened to change the intrinsic value that was expressed in the offer just over a year ago at twice todays market cap.

I've been over 6 years of cash-flows 84 million has been paid out in dividends and there has always been positive cash flow from operations and generally been free cash flow. Yes the cycle is old and construction may be rolling over but also may not be. In the long term this country is young and popular and is going to need a lot of Steel.

Yes there are many problems and I've been through the thread back to 2018. But surely the price now reflects all of this and more and if investing for the medium/long term the upside potential is decent with protection on the downside from the balance sheet and lack of debt.

What am I missing apart from all the things already noted in this forum? This looks like a classic Walter Schloss/Ben Graham cigar butt situation.

Cheers, Rob.


Ill wade in here.

STU net debt 15 million

STU on the asset side has:

$9 million in cash
$90 million in trade receivables (goods sent out but invoices not paid yet)
$113 million in inventory
$52 million in property and plant (not sure how much of this is property)


Hopefully most bills get paid, I am a bit ruthless in inventory/property and plant so maybe fire sale might be 50%, 75% receivables, intangibles are 0.

So assets = 9+67.5+56.5+26 take off $15 million in debt =$144 million

Market cap is $134 million.

If you liquidated the business now you would get 86c a share. Currently about 80c a share so a little margin of safety.

Been a while since I read the intelligent investor but I think Ben Graham then applied a discount?

Any way I am buying at these prices. About 1% of the portfolio so not high conviction but happy to accumulate around these prices.

[SailorRob]

Thanks Waikaka,

Looking at their annual report they seem to be conservative on the inventories and playables numbers already, but agreed more margin should be applied.

The Cigar Butts of Buffetts early days were often awful companies too, STU is not, just needs a few tweaks.
Thanks for your input, was wondering if I'd missed something big but doesn't look like it. The upside is huge and downside limited.

[macduffy]

You may well be on to something here, Rob. Technically, though, STU needs to break that weak trend to get me back in the register. Meanwhile, added to my watchlist.

Thanks.

:)

[GR8DAY]

Ill wade in here.

STU net debt 15 million

STU on the asset side has:

$9 million in cash
$90 million in trade receivables (goods sent out but invoices not paid yet)
$113 million in inventory
$52 million in property and plant (not sure how much of this is property)


Hopefully most bills get paid, I am a bit ruthless in inventory/property and plant so maybe fire sale might be 50%, 75% receivables, intangibles are 0.

So assets = 9+67.5+56.5+26 take off $15 million in debt =$144 million

Market cap is $134 million.

If you liquidated the business now you would get 86c a share. Currently about 80c a share so a little margin of safety.

Been a while since I read the intelligent investor but I think Ben Graham then applied a discount?

Any way I am buying at these prices. About 1% of the portfolio so not high conviction but happy to accumulate around these prices.



.....nice analysis Waikaka (and Rob), thanks for the effort in crunching those numbers. I've been accumulating small parcels of late whilst thinking the same........ie STU has largely been derisked to the point of the SP having settled around the 80/82c mark. Just need them to release some encouraging forecasts now to see it rebound to the $1 mark (for starters).....always the optimist.

[percy]

Their last announcement was certainly not where they said they would be.
I prefer people who do what they say they will do.

[Brain]

I prefer to invest in companies with growth potential. I think these guys would be running hard to stay in the same place.

[Waikaka]

I prefer to invest in companies with growth potential. I think these guys would be running hard to stay in the same place.

Luckily when some thing is this cheap I don't have to worry too much about them finding growth. All I need is for them to tread water and I should expect a reasonable return.

and like SailorRob mentioned consistent dividend payments and free cash flow for the last while:

2011 = $8 million
2012 = $15 million
2013 = $22 million
2014 = $-17 million
2015 = $7 million
2016 = $8 million
2017 = $3 million
2018 = $4 million
2019 = $25 million

Not a huge fan of the variability in FCF, but as the company has been listed since 1967 and been selling steel around for over 50 years suspect they might last another few years. Happy to own a little part of the business for now.

[Balance]

I prefer to invest in companies with growth potential. I think these guys would be running hard to stay in the same place.

Turnaround stories can be extremely rewarding but need deep pockets, patience, fortitude and even more patience to see the story through.

And there may not be a turnaround in the end!

Imo, STU is a worthwhile turnaround story.

[Timesurfer]

Then when Fletcher’s tried to buy them I became convinced it was a dog, as Fletchers seem to have a strict corporate policy of acquiring only dogs and overpaying for the privilege.
Good point.

[macduffy]

Then when Fletcher’s tried to buy them I became convinced it was a dog, as Fletchers seem to have a strict corporate policy of acquiring only dogs and overpaying for the privilege.

I'm not buying, yet, but it's worth noting that Fletchers have had management changes since then.

[Justin]

at current stage flectcher doing much better than bluescope:)

[trader_jackson]

FBU's steel unit EBIT down from $22m in 1H19 to just $1m in 1H20... makes STU look pretty good
No worries as, like STU, everything improving now.

[Balance]

FBU's steel unit EBIT down from $22m in 1H19 to just $1m in 1H20... makes STU look pretty good
No worries as, like STU, everything improving now.

Market seems to be 'buying' the FBU steel improving conditions in 2H.

Being the two principal players who have been at each other's throats for market share at the expense of margins, a turnaround could happen very quickly indeed if both sides declare ceasefire.

[BlackPeter]

Trendchart certainly does not look inspirational, but my question today is - did the analysts predict this slippery slope a year ago?

STU had in January 2019 a (peak) share price of $1.20 and analysts (consensus) forecast for January 2020 was $1.39, which means analysts predicted the SP to go up. They have been wrong - the STU shareprice in January 2020 actually peaked at $0.86, i.e. instead of the forecasted rise of 16% did punters get a 28% drop. Ouch.

Looking into the consensus buy recommendation - it was in January 2019 a "Underperform"(3.1/10) - i.e. analysts said that the share will underperform the NZX. This prediction was correct, while the NZX went up by 27% did STU drop by 28% (i.e. STU underperformed over the last 12 months the NZX50 by a woeful 55%.

Consensus prediction was clearly wrong, while recommendation was (while sort of inconsistent with the prediction) correct.

I am doing this exercise as well with other NZX listed stocks - the overview is here:
https://www.sharetrader.co.nz/showthread.php?11721-How-good-are-the-forecasts-of-stockmarket-analysts

10 stocks checked so far (checking for each consensus and buy recommendation);
Consensus shareprice forecasts correct: 1/10; analyst hitrate: 10%
Consensus recommendation vs NZX50 correct: 3/10; analyst hitrate: 30%

[Independent Observer AUNZ]

10 stocks checked so far (checking for each consensus and buy recommendation);
Consensus shareprice forecasts correct: 1/10; analyst hitrate: 10%
Consensus recommendation vs NZX50 correct: 3/10; analyst hitrate: 30%

Wow. So why does anyone believe in active management guided by analysts!!?

[Balance]

Wow. So why does anyone believe in active management guided by analysts!!?

Like all professionals you use, check out and use the ones you have confidence in - after you have assessed fully.

There was an analyst with one of the big broking firms in Auckland some of us used to follow very closely - very very closely.

Whenever he recommended 'Buy', we sold or stayed clear.

Whenever he recommended "Sell', we bought with or ears pinned back.

True story and it was such a sad day for us in the industry when he moved to the UK.

[Independent Observer AUNZ]

There was an analyst with one of the big broking firms in Auckland some of us used to follow very closely - very very closely.

Whenever he recommended 'Buy', we sold or stayed clear.

Whenever he recommended "Sell', we bought with or ears pinned back.

True story and it was such a sad day for us in the industry when he moved to the UK.

Haha wow, love it!

[airedale]

Was his family involved in the Antarctic whaling business in the 20th century?

[Cadalac123]

Beagle do you work as an analyst at an investing =firm

[winner69]

Beagle do you work as an analyst at an investing =firm

....maybe he works with t_j’s mates at Forsythe Barr

[Sideshow Bob]

Interim Results to 31 December 2019
24/2/2020, 8:33 amHALFYR Steel & Tube announces its interim financial results for the six months ended 31 December 2019.
For the six months to 31 December 2019, including NZ IFRS 16 adjustments, Steel & Tube has reported a result in line with January 2020 guidance, with sales revenue of $232.0m, EBIT (including non-trading adjustments) of $(33.4)m and a NPAT of $(37.0)m.
The result includes $39.1m in non-trading adjustments including $2m restructuring and relocation costs and a non-cash goodwill impairment of $37.1m as previously advised. Excluding non-trading adjustments, normalised EBIT was $5.7m.

As previously advised:

o Adverse market conditions continued to impact on sales revenue and volumes, with EBIT also impacted by $2m of Project Strive execution costs and $1.8m of doubtful debt provisioning and write-offs.
o Progress has been made in controllable areas, including operating cost reductions despite a higher cost environment, margin management and working capital discipline.

o Cash flow has remained robust despite the decrease in earnings, enabling a further reduction in net debt.

o Post balance date on 30 January 2020, Steel & Tube unconditionally agreed to sell a surplus Christchurch property for approximately $5.8m.

An improved second half (cf 1H20) is expected with benefits from cost efficiencies and overhead reductions, Project Strive initiatives and the commencement of significant new contracts.
The Board has declared a fully imputed interim dividend of 1.5 cents per share.

Further information is available in Steel & Tube’s 1H20 results presentation and Interim Financial Statements released to the market on 24 February 2020.
[See attached media release for summary results table.]
Steel & Tube Holdings Limited (NZX: STU) has today announced its results for the six months to 31 December 2019 (1H20). The result is in line with the guidance provided on 31 January 2020.
Including NZ IFRS 16 adjustments, the company has reported sales revenue of $232.0m, EBIT (including non-trading adjustments) of $(33.4)m and a NPAT of $(37.0)m. The result includes $39.1m in non-trading adjustments including $2m in Project Strive restructuring and relocation costs and a non-cash goodwill impairment of $37.1m , as previously advised. Excluding these non-trading adjustments, normalised EBIT was $5.7m.
Steel & Tube adopted NZ IFRS 16 Leases with effect from 1 July 2019. The impact of this new accounting standard was to increase reported EBIT by $2.6m and to reduce NPAT by $0.2m in 1H20. (For more information on the impact of NZ IFRS 16, see Steel & Tube’s 1H20 Investor Presentation and 1H20 Interim Financial Statements).
In line with Steel & Tube’s dividend policy, the Board has declared a fully imputed interim dividend of 1.5 cents per share.

As previously advised Steel & Tube has maintained market share and margins, however reduced vertical construction work and contraction in the stainless steel market have impacted on sales revenue and volumes in the first half, which were down 10% on the prior comparative period (1H20: $232.0m; 1H19: $258.2m).

1H20 EBIT was primarily impacted by lower sales activity, $2m Project Strive execution costs and $1.8m of doubtful debt provisions and write-offs (1H19: $1.0m write-back) mainly due to the unexpected liquidation of a major customer.
The business operating model continues to be reviewed to ensure it is fit for purpose, with a focus on ensuring it can fully meet customer needs, whilst reducing costs to serve. This work is ongoing, however, actions taken in the first half of the financial year are expected to deliver a further reduction in operating costs in the second half of the year.
Steel & Tube’s balance sheet remains strong, driven by better working capital management. The increase in debt write-offs and provisioning related to a small number of customers. Stewardship of debt collection has minimised credit exposures overall and improved underlying operating cash flow. Capital spending has remained in line with depreciation and amortisation and has been largely focussed on Steel & Tube’s digital ambitions, growth and safety initiatives.
Operating cash flow was robust at $10.5m (excluding the impact of NZ IFRS 16) (1H19: $11.1m), and helped achieve a further reduction in net debt during the period to $10.9m as at 31 December 2019, down from $15.0m as at 30 June 2019. On settlement, the proceeds from the sale of the Christchurch property will be used to further reduce debt.
Project Strive business transformation initiatives, including ongoing investment into digital technologies, continue to drive long term benefits for the company. Highlights in the first half include a further reduction in the property footprint from 35 to 31 locations, additional cost efficiencies, the launch of the first phase of digital initiatives and further development of Steel & Tube’s network strategy.
CEO of Steel & Tube, Mark Malpass, commented: “While the decline in industry activity is beyond Steel & Tube’s control, we have focussed on improving underlying operating costs, margins and working capital. Cash flow has remained robust and we reduced net debt.
“Our priority is on customer service and streamlining the business to deliver profitable growth. We are seeing signs of improving business confidence including the recent Government announcement to increase infrastructure investment, which should lead to increased market activity. An improved second half performance is expected as we benefit from Project Strive and commencement of significant new contracts.”

(1) As previously advised on 31 January 2020, the Board has reviewed the carrying value of goodwill as required by accounting standards, including consideration of the current difference between Steel & Tube’s market capitalisation (based on market share price) and the carrying value of its assets. Whilst the Board does not consider the adverse trading conditions experienced in 1H20 to be indicative of the medium to long term trading expectations, the reduced profitability in 1H20 has had an impact on the assessment of impairment. At this time and in accordance with accounting standards, the Board has concluded that the carrying value of goodwill is impaired. The impairment is non-cash in nature.
ENDS

[winner69]

All looking good reading through the mumbo jumbo eh Bob

[bull....]

All looking good reading through the mumbo jumbo eh Bob

lol they should have canned the dividend

[blackcap]

lol they should have canned the dividend

I was wondering the same thing. They post a huge loss (yeah yeah one off etc but they do that every year so its not really abnormal items is it) and then still pay a dividend. Might need to do a cap raise for the next dividend if this goes on...

[percy]

Their reputation as a serial under performer remains intact.

[trader_jackson]

I was wondering the same thing. They post a huge loss (yeah yeah one off etc but they do that every year so its not really abnormal items is it) and then still pay a dividend. Might need to do a cap raise for the next dividend if this goes on...

Strong cash flow they say... turnaround in progress they say...
Not sure to believe what they say as it certainly appears rocky.
Interesting how, unlike fletchers, they didn't seem to think 2H was going to be bigly... maybe STU are trying to do an HBL and understate, then outperform

[Sideshow Bob]

All looking good reading through the mumbo jumbo eh Bob

Indeed W69. Only thing I took from the first time I read it, was that it wasn't good.....

[winner69]

Things looking good at STU from that announcement

We all should encourage business leaders to be optimistic

Optimism encourages better company performance

Without optimism many a company gas gone broke

[Snow Leopard]

Seems like you should all read the accounts carefully and make a rational decision on whether it is good buying at the price.

Disc: tempted, but I am a sucker for this kind of thing.

[Timesurfer]

Lots of steel going into the Waimea irrigation pond - not sure if it is sourced through STU though. Must be helping prop up the industry.

[percy]

Perhaps you could find out who is supplying it, and let us know.

[Filthy]

starting to hear a few stories from
architects/project managers re: a couple of large construction projects struggling to get the cheap steel they ordered from China & having to turn to local NZ suppliers to complete. perhaps prices might start to rise a bit with oversea supply chain issues. if factories closed in China & issues with shipping it would seem logical that they can’t dump their stuff on our market anymore. just as long as demand stays reasonable here (gov spending) might actually work out....

[Waikaka]

Good to see STU have cancelled the interim dividend.

Much prefer them to hold onto that cash and hopefully avoid cap raising later.

153 million shares @ 1.5c a shares = ~$2.3million.

Picking up modest amounts at these prices but pretty cautious.

[SailorRob]

Good to see STU have cancelled the interim dividend.

Much prefer them to hold onto that cash and hopefully avoid cap raising later.

153 million shares @ 1.5c a shares = ~$2.3million.

Picking up modest amounts at these prices but pretty cautious.


Possibly the most undervalued company on the NZX at the moment - Was a NET-NET at 80c...

Any infrastructure plan will involve steel.

[winner69]

Possibly the most undervalued company on the NZX at the moment - Was a NET-NET at 80c...

Any infrastructure plan will involve steel.

But STU haven’t creamed it as steel use has reached record highs over the last few years.

[SailorRob]

Yep, nothing in this valuation assumes anything like great performance going forward. Just staying solvent and doing some business is all I need. One day the value of the assets will be exposed one way or another.

[Waikaka]

Yep, nothing in this valuation assumes anything like great performance going forward. Just staying solvent and doing some business is all I need. One day the value of the assets will be exposed one way or another.

STU is about 2% of my portfolio. Your prompt brought me back to have a relook.

I don't mind them consolidating sites but I hate it when they think it is such a good thing to sell off all their property. Really guts the underlying assets and margin of safety.

I like the cash flow and reasonable expectation that they will do well out of large infrastructure but could well be offset by residential and property related declines.
Sounds like they have a few big jobs coming up (CRL, Napier Port, Metro Sports in chch and Mangere bridge patch up). Suspect these will happen even in a post covid world, even if some delays in timing.

Been picking up small amounts but pretty modest.

[nztx]

STU is about 2% of my portfolio. Your prompt brought me back to have a relook.

I don't mind them consolidating sites but I hate it when they think it is such a good thing to sell off all their property. Really guts the underlying assets and margin of safety.

I like the cash flow and reasonable expectation that they will do well out of large infrastructure but could well be offset by residential and property related declines.
Sounds like they have a few big jobs coming up (CRL, Napier Port, Metro Sports in chch and Mangere bridge patch up). Suspect these will happen even in a post covid world, even if some delays in timing.

Been picking up small amounts but pretty modest.

I find it hard to see the same optimism on STU & so have recently adopted
the stance that more favourable opportunities appear to be elsewhere..

[SailorRob]

I find it hard to see the same optimism on STU & so have recently adopted
the stance that more favourable opportunities appear to be elsewhere..


The optimism is purely based on the price. It's one of most undervalued companies in the world based on current assets minus all liabilities vs market cap.

I ran a screen on the whole US market and 26 companies were cheaper on a Benjamin Graham NET NET basis.

Waikaka part of me agrees on the property sale theory but another part of me asks what business does any business have owning commercial property unless that's their business? What a lot of capital to have tied up doing nothing. As far as margin of safety goes though I agree but the proceeds could go to developing a margin of safety in other ways.

My NET NET analysis attributes zero to the value of all property plant and equipment anyway.

[winner69]

Sad as it is STU dispensing with 200 staff

Sign of the times

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/352208/321421.pdf


govt says construction going to be busy as...Stu don’t think so?

[winner69]

No doubt debt levels will rise again

[Blue Horseshoe]

Like the last paragraph.

“Steel & Tube is well positioned for the anticipated Government infrastructure projects. We continue to lead industry standards, and have secured further customer wins during the lock-down, including a significant Government roofing contract and other large projects are being finalised.”

[winner69]

Like the last paragraph.

“Steel & Tube is well positioned for the anticipated Government infrastructure projects. We continue to lead industry standards, and have secured further customer wins during the lock-down, including a significant Government roofing contract and other large projects are being finalised.”

All hunky dory then ...no worries

[winner69]

Wonder how many times you can emerge as a ‘stronger and more resilient company’

I think this is going to be the sixth time in recent years

[artemis]

Rounds of redundancies and layoffs have for decades been an effective way of easing out low performers and closing down locations with current or future issues. Those location issues might be financial, geographical, skill availability.

[Balance]

Rounds of redundancies and layoffs have for decades been an effective way of easing out low performers and closing down locations with current or future issues. Those location issues might be financial, geographical, skill availability.

Yup - saw it happened a plenty during the GFC. Get rid of the poor performers, the too highly paid (when a younger executive can do the job on lower pay) and unfortunately, those not politically (office) aligned to those in charge.

[percy]

Yup - saw it happened a plenty during the GFC. Get rid of the poor performers, the too highly paid (when a younger executive can do the job on lower pay) and unfortunately, those not politically (office) aligned to those in charge.

Sounds as though Winner69's great diversity manual is being thrown out the window.?.!

[winner69]

Sounds as though Winner69's great diversity manual is being thrown out the window.?.!

No PERCY ...they using the manual ......replacing old past it white guys with young people of mixed genders, races etc is good.

[Balance]

No PERCY ...they using the manual ......replacing old past it white guys with young people of mixed genders, races etc is good.

Haha - you are too fast with your answer!

[percy]

No PERCY ...they using the manual ......replacing old past it white guys with young people of mixed genders, races etc is good.

And that sums up why turn- arounds and restructures take longer and cost more.
All the old past it guys had all the knowledge and experience of the business.

[winner69]

Whatever happens to STU over the next year it’s almost a give they won’t be ‘more stronger and resilient’ and will go through the whole process again.

[Chinesekiwi]

And that sums up why turn- arounds and restructures take longer and cost more.
All the old past it guys had all the knowledge and experience of the business.


A la Fletchers.

[steveb]

well talking of Fletchers didn't the board come out and say they were worth more than the $1.90 FBU offered?

Remind me again what is the shareprice today and are all the board still in jobs

[dodgy]

And that sums up why turn- arounds and restructures take longer and cost more.
All the old past it guys had all the knowledge and experience of the business.

Agree Percy,
Change for the sake of diversity etc etc is a modern nonsense. Basic common sense dictates that the best person for the job always should get the job - period.
-dodgy

[nztx]

All hunky dory then ...no worries


Some outfits however still manage to orchestrate the honky dory turning to major crap fairly well

STU in recent years appears to be among that little bundle on repeat occasions

How much shareholder value have they managed to fairly well destroy in the past 4 or 5 years ?

Close to FBU yet or still a little way off ?

[artemis]

NZ Steel Waiuku plant closing. Assume rationalising locations, as STU is also doing. Tough for workers but good business decisions.

[winner69]

NZ Steel Waiuku plant closing. Assume rationalising locations, as STU is also doing. Tough for workers but good business decisions.

Making steel pipes doesn’t make money ...can’t compete with imports

Government says we should buy local ....might do something for them :D

[Balance]

NZ Steel Waiuku plant closing. Assume rationalising locations, as STU is also doing. Tough for workers but good business decisions.

Can you point us to the announcement?

I have only read about a proposal to close.

[artemis]

Can you point us to the announcement?

I have only read about a proposal to close.

Still a proposal I suppose, but not really.
https://www.scoop.co.nz/stories/BU2005/S00031/nz-steel-plant-closure-a-blow-for-the-waiuku-community.htm

[Balance]

Still a proposal I suppose, but not really.
https://www.scoop.co.nz/stories/BU2005/S00031/nz-steel-plant-closure-a-blow-for-the-waiuku-community.htm

Suspect it is negotiating tactics.

Big huge decision to shut the plant down.

[winner69]

Suspect it is negotiating tactics.

Big huge decision to shut the plant down.

It’s only (small) part of the operation they are talking about ...Pipes and Hollows

[winner69]

NZ Steel has a big Defined Benefit Super Scheme that’ll cause problems one day

Paying hundreds of pensioners

[nztx]

NZ Steel has a big Defined Benefit Super Scheme that’ll cause problems one day

Paying hundreds of pensioners

You mean to say there are more, over & above the 200 potentially about to walk ?

STU seems to give the impression from the nature of what has been seen from them over past 5 years in places, that it may be a haven for them .. probably for something approaching Liftime employment .. ;)

[Balance]

You mean to say there are more, over & above the 200 potentially about to walk ?

STU seems to give the impression from the nature of what has been seen from them over past 5 years in places, that it may be a haven for them .. probably for something approaching Liftime employment .. ;)

NZ Steel has the ongoing pension liability - not STU.

Remember that NZ Steel was a government entity (one of Muldoon’s Sink Big projects) which was bought by Equiticorp, then BHP Steel etc etc.

[nztx]

NZ Steel has the ongoing pension liability - not STU.

Remember that NZ Steel was a government entity (one of Muldoon’s Sink Big projects) which was bought by Equiticorp, then BHP Steel etc etc.

Mybad .. yes, I remember the NZ Steel chapters well from the 1990's

[mfd]

BlueScope Steel are reviewing their New Zealand operations, sounds like they may be closing the Glenbrook mill at some point. They also hold a blocking stake in Steel and Tube which they bought to stick a spanner in the Fletcher's takeover offer. I wonder if they'll be looking to sell their stake sometime soon...

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12348851

[winner69]

Pretty positive announcement that should make shareholders feel happy

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/357660/328005.pdf

On a pre-NZ IFRS 162 basis, FY20 normalised EBIT is expected to be a loss of approximately $5m to $7m.....but will still report a significant loss.

One day they won’t need to ‘normalise’ things and there will be steady profits ...yes?

[trader_jackson]

Pretty positive announcement that should make shareholders feel happy

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/357660/328005.pdf

On a pre-NZ IFRS 162 basis, FY20 normalised EBIT is expected to be a loss of approximately $5m to $7m.....but will still report a significant loss.

One day they won’t need to ‘normalise’ things and there will be steady profits ...yes?

Okay news is great news for STU really... especially in this climate, maybe the turnaround really is underway?

[winner69]

Okay news is great news for STU really... especially in this climate, maybe the turnaround really is underway?

I would say STU will never ‘turn around’ to any great degree

If they ever achieve a modest profit that’ll be a good year for them

[bottomfeeder]

Couldnt work out if it is a good result or not, I would say neutral. Dont hold too many. But looking forward to a steady future.

[percy]

Plan for the worst,hope for the best.
Still a long way to go,before we can judge whether they had achieved their turn around goals.!
I still distrust the sector.

[Snow Leopard]

For unknown reasons I still own some of these things and must be down over 50% and they are the holders of the wooden spoon in my NZX investment portfolio.

Ignoring the writing off of goodwill is not real money bit it is a less disappointing outcome than expected.
I am assuming there will no dividend.

[SailorRob]

For unknown reasons I still own some of these things and must be down over 50% and they are the holders of the wooden spoon in my NZX investment portfolio.

Ignoring the writing off of goodwill is not real money bit it is a less disappointing outcome than expected.
I am assuming there will no dividend.


It's not 'real money' in this accounting period.

It was very real money. Just ask anyone who's been a shareholder over the last couple of years.

[Snow Leopard]

It's not 'real money' in this accounting period.

It was very real money. Just ask anyone who's been a shareholder over the last couple of years.

Snow Leopards are renowned for their dry humour & sarcasm.

[nztx]

How much more 'Intangibles' do they have for writing off ?

Or do these get written back up in a rare good year, to be written down again in the next two not so good ? ;)

For some strange reason the small holding here got shot out the door fast as the SP descended below the buck
and dividend tap started drying up ..

Hopefully a rescuer such as FBU will take a renewed interest (or some other unfortunate potential buyer who has the foresight to have seen some well hidden benefit lurking in the stew) and relieve the long suffering from further rounds of nothing much, mysterious stock & other writedowns popping out of the stew, disappearing dividends etc.. but obviously at a fairly good price to compensate for all the suffering.. ;)

Hopefully the ticket for parting with patient holder's pieces of Stew will also include reimbursing them for the last Cap Raise required to hoist STU out of the large hole in the STEW they dug themselves into 2-3 years ago as well..

I'm a little perplexed as why the current Board still havent been able to add a little excitement factor in 2-3 years .. How difficult is it to stir the Stew a little faster ? - Even JLG (The Water, Alarms & other add-ons Outfit) manages to capture some heightened interest which barring FBU looking in at STU's version of stew, always seems to miss the hapless dull & boring stew @ STU ..

[artemis]

I am hopeful the company will recover in time, because the scrutiny they have been undertaking looks sensible, rather boring and hard. Streamlining processes, customer interfaces, inventory, assets. A lot of taxpayer money is going to be tipped into infrastructure and some of that should come STU's way. If not, a lot of questions are going to be asked.

[Getty]

Is this co a Steel, or is it going down the Tubes?
$58.1M more write downs.

[Filthy]

Is this co a Steel, or is it going down the Tubes?
$58.1M more write downs.

I was struggling to find very many positives with the latest announcement https://www.nzx.com/announcements/358836 - happy to be indulged though if anyone can see something I cant?
I still wonder what they were smoking when they thought $1.95 was too 'cheap' https://www.nzx.com/announcements/324803
disc: hold small sum (hoping the turnaround story is real....and an increase in gov infrastructure spending flows through.....)

[Getty]

Many a s/holder will rue the passing of the $1.95 offer.

I love the way they trumpet about going digital.
As if thats the panacea for all their ills
Mind you, there cant be much left to take the surgical scalpel to.
I thought the old abacus was reliable low capex item, and always worked in a power cut.

[winner69]

Hey t_j - a $60m loss not that good eh

[Getty]

Maybe the name of the co was a giveaway.
They are still in the IRON AGE.

[winner69]

Touting the strong Operating Cash flow of $39M

Back out change in working capital it was only $8m odd

Can't keep reducing stock etc forever .... might need more working capital during F21 but tha'ts another story

[Getty]

They are seriously looking like scrap metal at this stage!

I've just been to see some undertaker friends, to see if they can organise a decent burial.

Dr JPG.

I bury my mistakes.

[trader_jackson]

Hey t_j - a $60m loss not that good eh

Not so good, but not so bad - at least debt going to be gone soon.
Business still not that great - but at least things probably can't get worse.
Should have taken that $1.95 for sure

[nztx]

Touting the strong Operating Cash flow of $39M

Back out change in working capital it was only $8m odd

Can't keep reducing stock etc forever .... might need more working capital during F21 but tha'ts another story


that was the same story a year or so back with a Cap/Raise to bail them out of the sh*t back then wasn't it ?

[Getty]

Well, after that day of heart stopping news, the SP held to 58c, and some traded at 60c.
Maybe STU is not short for stupid afterall.

[SailorRob]

Ok some positive news for you all.

While I understand the frustrations of long term holders...

If Steel and Tube continue to perform just as they have done in the past, including continuing their many mistakes, then what you are looking at is a phenomenal company and investment opportunity.

What have I been smoking, how can I think that? Because of the most important number of all. The price you pay for it. Let's take a look at some numbers.

In the 13 financial years to 2019 (including the full GFC) after subtracting the 80 million which was taken back in the equity raising, STU has paid out in dividends fully covered, $116 million. Or an average of $9 million a year for 13 years. Against current market cap this is close to a sustained 10% yield for 13 years.

Cash flow from Operations was $283 Million or an average of $22 Million. Using 2020 numbers would actually increase this average. Of this $283 million, $135 million has gone back into the business in one form or another. That's 47% of all Cash from operations. Yes a lot of that money has been destroyed.

This leaves $148 million of true free cash flow, in the most conservatively measured sense. This is an average of $11.4 Million over a fully 13 year cycle including the worst crisis since the great depression.

That's a 12% free cash flow yield averaged over 13 years... Remember the free cash flow as measured conventionally would be much higher than this. If capital allocation improves in the future then this number will only be better.

Cash flow continues to be incredible even through first half 2020. Someone commented that a lot of it has been generated from change in working capital. I agree but this isn't a bad thing, they had too much inventory and it's value had a question mark over it. Now it's been turned into cash that value has been realised. As pointed out, they can't keep selling down inventory, that's why we look at 13 years of performance.

17.5 million cash on the balance sheet against 10 million long term debt.

Net working capital minus all debt is 124 million against a market cap of 96 million.

This investment case only requires that they continue to mess up everything they touch in order for it to be a great investment. The possibilities with any improvements from here and very different again.

Show me a better company on the NZX which is a good investment at current price even if it has no future growth and the board continues to be hopeless.

[winner69]

Hey Rob

You could write the same about Metro Glass (different numbers of course) ......and come to same conclusion

Cool eh

[forest]

I like your post SailorRob

Some time ago there was talk of possible class action for incorrect documentation or maybe substandard quality of products. I have not followed the process of this dispute, has this issue been resolved? Anybody knows?

[SailorRob]

Hey Rob

You could write the same about Metro Glass (different numbers of course) ......and come to same conclusion

Cool eh

Not familiar with the company but a quick look at the balance sheet alone tells me it's not the same.

There are only a small handful of companies in the world that would compare to Steel and Tube. I screened over 9000 companies in America in April and I can't remember what STU market cap was at the time but similar to now and on a Net working capital basis there were 26 companies out of the 9000 that screened cheaper.

There would be many similar on the free cash flow basis but I bet the number that have the same margin of safety in terms of Net working capital and the history of free cash generation would be single digits.

I'll run the numbers and check it out. I get your point but I just can't imagine that it's the same cash flow generating machine that STU has been for the last 13 years and probably a lot longer.

Have they really paid out 1.25 times the entire current market cap to shareholders in cash in the last 13 years? If so then I'm buying.

[winner69]

Rob ...you will only get 5 years of stuff on Metro but pretty IPO is a available but clouded by private equity carry on clouds the underlying performance.

[SailorRob]

Thanks Winner will take a look now.

Also forgot to add that STU has an average return on Equity for the 13 years of 9.2. If they can even do close to that going forward then buying at a fraction of book value should be a great investment.

Would love some constructive criticism.

[winner69]

Not familiar with the company but a quick look at the balance sheet alone tells me it's not the same.

There are only a small handful of companies in the world that would compare to Steel and Tube. I screened over 9000 companies in America in April and I can't remember what STU market cap was at the time but similar to now and on a Net working capital basis there were 26 companies out of the 9000 that screened cheaper.

There would be many similar on the free cash flow basis but I bet the number that have the same margin of safety in terms of Net working capital and the history of free cash generation would be single digits.

I'll run the numbers and check it out. I get your point but I just can't imagine that it's the same cash flow generating machine that STU has been for the last 13 years and probably a lot longer.

Have they really paid out 1.25 times the entire current market cap to shareholders in cash in the last 13 years? If so then I'm buying.

Your comments have piqued my interest and there is obviously a lot more to your methodology than what you’ve outlined

SKT has paid over $1 billion in dividends last 8 years and its current market cap is $239m. That’s payout of over 4 times market cap. It’s working capital to market cap looks good as well.

[SailorRob]

Yeah it's where the dividends have come from, are they covered by free cash flow as well as all capital expenditure plus any acquisitions being covered (or have the acquisitions produced additional cash flow that provide a decent ROIC) and have they been clawed back by equity raising. Has there been a material change in the business which will affect the free cash flow generation going forward.

Usually the case is the market cap has fallen off the planet due to inability to produce that cash going forward which makes comparing it VS historical cash flow generation irrelevant. Of course you're well aware of all this, just commenting for anyone else following.

With Metro, they have paid out a lot in dividends over the 5 years, 48 million roughly the current market cap, however they have only cleared 23 million in free cash flow as measured in the STU analysis and have taken on net 28.5 million in debt during that time.

The numbers don't look bad at a quick glance but it's not the same as a 13 year track record covering the GFC.

Ultimately Metro are spending more than what they're bringing in and funding the difference with debt, whether the debt is paying the dividend or the acquisitions, I'd argue it makes no difference. Now I know you're thinking that's exactly what STU were doing, yes but they clawed back 80 odd million in the equity raise which I have adjusted for.

You're not going to hear me argue that STU is a great company, but it's a journeyman and way oversold. What attracts me is that nothing needs to change to make a compelling case at these prices. They have proved they can't grow nor allocate capital, they are aware of their mistakes and all I need is for them to continue being hopeless but not get too much worse and I'll be very happy. Now if there is any improvement...

[liam]

[QUOTE=SailorRob;840440]Yeah it's where the dividends have come from, are they covered by free cash flow as well as all capital expenditure plus any acquisitions being covered (or have the acquisitions produced additional cash flow that provide a decent ROIC) and have they been clawed back by equity raising. Has there been a material change in the business which will affect the free cash flow generation going forward.

First time posting here, but STU is honestly the only NZX company I'm really interested in at these prices. I believe, after making an excel spreadsheet with financial info going back until 2005, that their biggest downfall was paying TOO much of a dividend. Their policy was to "pay half of net profits" but in the end, cash is king and profits can only pay what cash can back up, and they had to take on debt to fund the rest. From 2005-2010 they had zero cash and borrowings of around 40 mil. By 2017 their borrowings had ballooned to 133 mil and the dividend they paid was 10 times the free cash flow. It was stupid. It wasn't their cash flows that was the problem, it was their return of it to the shareholders which winded up bringing them down a debt and leveraged rabbit hole.

Bit of a young tangent there, but basically, I'm also pretty bloody bullish on it based on a) if they just keep as they are, I'd say there'd comfortably be FCF returns of over 10% per year (adjusting for them currently selling off surplus inventory) and b) the cash flows they have made in the past were without their current cost cutting measures, though I have zero clue about how good these actually are a company's word is never to be trusted, but theoretically if previous years' performances are adjusted for the reduced capital etc might be looking good?

Unfortunately Steel distribution and processing is pretty far from my circle of competence (basically tech) so really just wanting to know about the industry landscape, overseas competition, price war with Fletcher Steel (??) and anything else that may drive them away from ever returning to early performance. Pretty new to investing, but those are my thoughts. Cheers

[Scrunch]

This investment case only requires that they continue to mess up everything they touch in order for it to be a great investment. The possibilities with any improvements from here and very different again.

Show me a better company on the NZX which is a good investment at current price even if it has no future growth and the board continues to be hopeless.
The problem with long-term historical modelling like this is that the market can permanently change meaning historical profitability never returns. For instance a chain of VHS video stores could have looked great through a similar calculation, but...

If a long-term horizon like 13 years is used, companies like CAV are also likely screen very well on your criteria. Across 2007 to 2011 CAV was paying a dividend of circa $12m/yr. Its current market cap is $23m. In the case of CAV their market cap/balance sheet had debt of $60-$80m appearing sensible. Then the market changed, profitability collapsed and this debt was a huge issue. CAV went down the no-capital raise, no dividends route so there is no $80m of new capital as per STU. Its taken years and years but good progress has been made on reducing debt. Progress on returning to good levels of profitability has been terrible. If however they successfully execute their new strategy, CAV could be a great investment.

[RTM]

Infrastructure will be to the fore when the country tries to recover economically. I think that will use quite a bit of steel and concrete and so there should be some down wind sailing for SailorRob and STU, perhaps FBU as well. Surely they can’t screw it up again.

[nztx]

The problem with long-term historical modelling like this is that the market can permanently change meaning historical profitability never returns. For instance a chain of VHS video stores could have looked great through a similar calculation, but...

If a long-term horizon like 13 years is used, companies like CAV are also likely screen very well on your criteria. Across 2007 to 2011 CAV was paying a dividend of circa $12m/yr. Its current market cap is $23m. In the case of CAV their market cap/balance sheet had debt of $60-$80m appearing sensible. Then the market changed, profitability collapsed and this debt was a huge issue. CAV went down the no-capital raise, no dividends route so there is no $80m of new capital as per STU. Its taken years and years but good progress has been made on reducing debt. Progress on returning to good levels of profitability has been terrible. If however they successfully execute their new strategy, CAV could be a great investment.



Here is the last Cap Raise by STU to get them out of the Cactus repaying Wholesale Debt at the time:

https://www.nzx.com/announcements/322841


27/8/2018, 9:25 am GENERAL

Steel & Tube Reminder to Shareholders about Rights Offer

Steel & Tube Holdings Limited has today reminded shareholders about the closing date of the $60.1 million, pro rata, 1 for 1.9 rights offer, which closes at 5.00pm on Monday 3 September 2018.


That done, the favourite beancounter's new creative exercise on 'Right to Use' Assets & liabilities
went a significant way to going back towards the original position before the CR ,stuffing relevant ratios
with meaningless inflating gumpf in process & RTU Term Liability of near the same amount as repaid created ;)


Give or take $5 mil, the Cap Raise in the 2019 First Half (6m to 31.12.18)appears to have been all but completely obliterated
within just the next three reporting periods, looking at closing SHF's totals

[nztx]

Not much left in Intangibles / Goodwill to write off / impair @ FY 2020

That cant be a bad thing & seems to have starred in Writedowns in 2018 FY as well ;)

All up in recent 3 FY Reports - a mere $78 m expensed in Impairment & Restructuring charges

In itself, that may limit S&T's future focus to fine tuning Inventory, Plant & Equipment instead

It looks like half the Real Estate remaining was hocked off in 2020 Year as well (at what appears to
be write down on values after previous revaluation upwards)

Just so long as they dont impair the Legs on the Boardroom Table - then there may be
hope when storm clouds start clearing ..

Cashflow, Debtors & Closing balances appear consistant with 20-25% T/o downturn
2H - nevertheless continuing the recent roughly period on period T/o deterioration pattern.
Let's face it subsidised with effectively part Employee costs, some may have expected
slightly better cash retention than $17 mil closing FY on a $73m FY Employee Bill,
but it could have been worse, with the S&T scalpels being so active during the year.

Obviously the Scalpel bearing Teams are well paid, as for the sizey decrease in heads on Payroll,
a mere $5 million was shaved off the bill for Employees and benefits over 2019.

Barring the obvious NTA sticking out from the S&T burrow like a periscope searching for
the next storm, there must be some good bones buried somewhere, it's just difficult to see where
they lurk or who may be attracted to them .. IMO

With the Storm blamed for the Vast Carnage and seeing much mention - C-19, many may be
left wondering what things may have looked like without the brief distraction of C-19 in roughly
just the last quarter.

The good news presumably is that the Capitains of the S&T Fleet made it through the choppy
straights with Red Flags still somewhat aloft & intact, and get to sail a few more voyages.
Alas the missions didn't bring home much of a payload for more months when waters were calmer.

Of course, if STU were to talk FBU into coming back with $1.75 + some more, then hopefully
Bluescope decide to play ball nicely as well .. there may be lots of smiles all round .. and the
troubled S&T fleet may no longer have to sail the choppy straits all on their own .. ;)

[macduffy]

If only STU were a fleet of ships instead of being a poorly performing listed company!

;)

[GR8DAY]

If only STU were a fleet of ships instead of being a poorly performing listed company!

;)

.....let's hope the operative word is WERE macD. Remaining hopeful on this one, surely they will get this reset right this time.

[SailorRob]

The problem with long-term historical modelling like this is that the market can permanently change meaning historical profitability never returns. For instance a chain of VHS video stores could have looked great through a similar calculation, but...

If a long-term horizon like 13 years is used, companies like CAV are also likely screen very well on your criteria. Across 2007 to 2011 CAV was paying a dividend of circa $12m/yr. Its current market cap is $23m. In the case of CAV their market cap/balance sheet had debt of $60-$80m appearing sensible. Then the market changed, profitability collapsed and this debt was a huge issue. CAV went down the no-capital raise, no dividends route so there is no $80m of new capital as per STU. Its taken years and years but good progress has been made on reducing debt. Progress on returning to good levels of profitability has been terrible. If however they successfully execute their new strategy, CAV could be a great investment.

Correct Scrunch, as I posted above;

'Usually the case is the market cap has fallen off the planet due to inability to produce that cash going forward which makes comparing it VS historical cash flow generation irrelevant'.

A chain of VHS stores faced with technological disruption is very different from a Steel manufacturing distributing and retailing company that has a duopoly market in a young sparsely developed country lacking in infrastructure with a massive population runway and a pack of rabid money printing socialists at the helm who think they can allocate capital into infrastructure better than the private sector.

With STU it's not a matter of screening on criteria, the only screen I have done is a Net working capital screen for comparative value across the world, not on STU itself.

It's a matter of reading the annual reports over 13 years, starting on the last page not the first, studying the capital allocation decisions and following exactly what happened to ever cent of retained earnings, seeing the sustained cash flow generation and then making a call on whether anything has happened that will change things for the worse going forward.

All I need is for them to improve nothing at all. They can even make things worse and it will be a great investment. Just not too much worse.

Again all this requires a purchase at 55c. At $1 all bets are off.

This company was a market darling when it was expensive and they were making all the mistakes, now it's cheap nobody wants to know.

[SailorRob]

.....let's hope the operative word is WERE macD. Remaining hopeful on this one, surely they will get this reset right this time.

They don't need to get anything right.

Carrying on with all the same mistakes will be great.

Just keep repeating the last 13 years and I will be a very happy investor.

[SailorRob]

Here is the last Cap Raise by STU to get them out of the Cactus repaying Wholesale Debt at the time:

https://www.nzx.com/announcements/322841


27/8/2018, 9:25 am GENERAL

Steel & Tube Reminder to Shareholders about Rights Offer

Steel & Tube Holdings Limited has today reminded shareholders about the closing date of the $60.1 million, pro rata, 1 for 1.9 rights offer, which closes at 5.00pm on Monday 3 September 2018.


That done, the favourite beancounter's new creative exercise on 'Right to Use' Assets & liabilities
went a significant way to going back towards the original position before the CR ,stuffing relevant ratios
with meaningless inflating gumpf in process & RTU Term Liability of near the same amount as repaid created ;)


Give or take $5 mil, the Cap Raise in the 2019 First Half (6m to 31.12.18)appears to have been all but completely obliterated
within just the next three reporting periods, looking at closing SHF's totals

All just accounting nonsense, asset created to match liability. Nothing changes with this.

Net working capital covers the entire market cap and then some, rest of company for free.

[peat]

yeh Jenny Ruth wrote a good piece about Stu this morning in BusinessDesk. entitled Green shoots for Steel & Tube despite its $60m annual loss

(Paywalled)

https://businessdesk.co.nz/article/infrastructure/jenny-ruth-green-shoots-for-steel-tube-despite-its-60m-annual-loss

[RTM]

yeh Jenny Ruth wrote a good piece about Stu this morning in BusinessDesk. entitled Green shoots for Steel & Tube despite its $60m annual loss

(Paywalled)

https://businessdesk.co.nz/article/infrastructure/jenny-ruth-green-shoots-for-steel-tube-despite-its-60m-annual-loss

Thanks for posting that Peat.

[RRR]

[QUOTE=SailorRob;840420]

Net working capital minus all debt is 124 million against a market cap of 96 million.

-------------------------------------------------------------
Agree with you SailorRob - the above sentence summarizes the investment rationale. Ben Graham would have loved this stock..

Headline NPAT is misleading- cashflow and balance sheet is where we need to focus in these covid times. STU is not going broke, that is for sure. Management have delivered on their promise (was it "strive"). But, management don't own many shares which is always a concern

Cashflow - 39 million (increasing), Cash 17 million(increasing), debt 10 million (decreasing)
Receivables days - reducing (good)
Payables days - increasing (good)
Inventories - decreasing (capital heavy business, so they will have to carry significant inventory)
Staff numbers are reducing too and there is nothing much to write off I hope:eek2:
Market cap and liquidity too low for institutions, but that is favourable for retail investors:)

Discl - Invested from 0.64, bought more in the last week

[SailorRob]

[QUOTE=SailorRob;840420]

Net working capital minus all debt is 124 million against a market cap of 96 million.

-------------------------------------------------------------
Agree with you SailorRob - the above sentence summarizes the investment rationale. Ben Graham would have loved this stock..

Headline NPAT is misleading- cashflow and balance sheet is where we need to focus in these covid times. STU is not going broke, that is for sure. Management have delivered on their promise (was it "strive"). But, management don't own many shares which is always a concern

Cashflow - 39 million (increasing), Cash 17 million(increasing), debt 10 million (decreasing)
Receivables days - reducing (good)
Payables days - increasing (good)
Inventories - decreasing (capital heavy business, so they will have to carry significant inventory)
Staff numbers are reducing too and there is nothing much to write off I hope:eek2:
Market cap and liquidity too low for institutions, but that is favourable for retail investors:)

Discl - Invested from 0.64, bought more in the last week


Yes, Ben Graham, Warren Buffett (in his early days) and Walter Schloss would all have been all over it. Cash flow was around 26 million, the 39 was due to an accounting change so need to subtract the new 'financing cash flow' number in order to compare to prior cash flows. But still incredible.

[winner69]

Don’t blame Greg for not relocating to Auckland ....worse than going to purgatory

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/360128/331181.pdf

[Balance]

Don’t blame Greg for not relocating to Auckland ....worse than going to purgatory

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/360128/331181.pdf

Another Wellington based corporate moving to the big smoke.

Guess Wellington Property prices & job opportunities are more favourable than Auckland for CFO from an out of favour Company?

[RRR]

Watched the ASM video. Net debt as of 31 August is 0 - so they paid off 10 million debt in 2 months

Dividends will certainly resume from this year - any guess how many cents it will be??

https://vimeo.com/463707485

[artemis]

Q from the floor at the ASM - does the Board regret not accepting Fletchers offer.

Good answer from the Chair clarifying that the company advised Fletchers the independent valuation was being commissioned. Fletchers withdrew the offer.

[Southern Lad]

Watched the ASM video. Net debt as of 31 August is 0 - so they paid off 10 million debt in 2 months

At 30 June 2020 STU reported cash on hand of $17.4m and borrowings of $10m. At the AGM they reported that they had repaid the debt. They pointed out they had since balance date received $1.4m from the sale of a property in Gisborne. They also commented that cash on hand had continued to increase since balance date, so either they have had at least $8.6m of other net cashflow over the last three months or they haven’t really factored in the debt repayment (i.e. they were referring to net cash increasing rather than gross cash).

Anyway, assuming they continue to generate cash, they need to have a useful manner to invest it or all things being equal maybe shareholders may see a dividend. However, as STU had no imputation credits on hand and had tax losses to carry forward of $31.6m at 30 June 2020, dividend payments will not be tax efficient in shareholders hands for some years.

[biker]

FBU going to take another look I wonder?

[nztx]

FBU going to take another look I wonder?


Hopefully $2.25 this time or better, seeing as FBU seem to have stacked a pile of readies
from the most recent reported period's activities .. ;)

[Marilyn Munroe]

FBU going to take another look I wonder?

I'm sure Fletchers would like nothing better than take out the competition so they could hang New Zealand merchant steel buyers upside down and empty their pockets.

The Commerce Commission may cause such a plan to turn to rust.

Boop boop de do
Marilyn

[nztx]

Are NZ Steel's owners closing up shop in NZ ?

I seem to recollect something hitting the news a while back

Do they still have their blocking stake in STU - and what is the possibility of them looking for
a new home & owner for their parcel in the future ?

As a popular past Neil Young number says .. 'Rust never Sleeps.. ' ;)

[Lion_graf]

I'm sure Fletchers would like nothing better than take out the competition so they could hang New Zealand merchant steel buyers upside down and empty their pockets.

The Commerce Commission may cause such a plan to turn to rust.

Boop boop de do
Marilyn

I don't think it would be a smart move. I'm working in construction post lockdown building sheds and every bit of steel has come from australian companies. It's cheaper, easier to buy. Whereas New Zealand you have to go all round the country searching. May be able to get a bit here and there then get what your given.

[Greekwatchdog]

Think they Bought Milfords stake (15%).

[Filthy]

might be due for a trading update this week. was the 18th Nov last year...

[SailorRob]

might be due for a trading update this week. was the 18th Nov last year...

Dear shareholders,

We are printing cash and it's piling up and we have no idea what to do with it.

Against our market cap it's stunning but nobody cares.

Hell we might even buy shares back from a market that has forgotten we exist.

[Nigel]

One of the few decent stocks to still be well south of where it was in February and significantly under NTA (STU was around 80c in Feb, now 68c; NTA $1.03).
APL is another (was around 60c, now 33c; NTA 56c).

[SailorRob]

One of the few decent stocks to still be well south of where it was in February and significantly under NTA (STU was around 80c in Feb, now 68c; NTA $1.03).
APL is another (was around 60c, now 33c; NTA 56c).


On the NZX yep.

Not just under NTA but also under Net Working Capital. Rest of business free.

Very large free cash flow yield too.

[nztx]

On the NZX yep.

Not just under NTA but also under Net Working Capital. Rest of business free.

Very large free cash flow yield too.


Don't whisper too loud -- a now profitable FBU might be attracted in for another
swipe at a large pot of discounted STU, leaving without any spitting pips out .. ;)

[GR8DAY]

.........someone give this a good nudge over 70c please, crazy cheap and we need a good run through to 75 at least just to get a bit of respectability back into STU. Has to be benefiting now from the new found building confidence gaining a foothold.??

[Balance]

Don't whisper too loud -- a now profitable FBU might be attracted in for another
swipe at a large pot of discounted STU, leaving without any spitting pips out .. ;)

Not going to happen as there’s a 20% blocking stake.

Dis. Holder and confident we will see $1 on sp in 2021.

[Filthy]

both STU and MPG on a tear this week!

[bottomfeeder]

both STU and MPG on a tear this week!

Both being eyed up by FBU

[BlackPeter]

Both being eyed up by FBU

Would this be a good reason to short FBU?

Discl: hold none of MPG, STU or FBU, but sure - they might fit into a dog of the NZX strategy.

[Snow Leopard]

STU is the 'least successful' share I still own. :eek2:

My initial buying was around $1.20+.
But I doubled my holding last week, a decision I am reviewing, having spotted an error in my analysis.

It is difficult to see current fair value much over 70c.

With my optimistic hat on I am hoping that they will re-introduce dividends so that yield chasers buy it up.

[Balance]

both STU and MPG on a tear this week!

Talk to developers and they will tell you that resources are getting very stretched out there in the building, construction and infrastructure sectors - a huge change from 6 months ago when they were being inaudated by subies & tradesmen looking for work.

Result : Prices are going up for both manpower & materials.

[SailorRob]

If a company (STU) can average a return on its equity capital of 9.24% over the 13 years between 2007 and 2020, even though it made a lot of mistakes, and then the value of this equity capital is written down, and then you can buy that capital for give or take 50c on the dollar.

Then what would your returns as an owner of this capital be over the next few years providing they can continue stumbling blindly along in the hopeless fashion they have been?

[percy]

https://www.scoop.co.nz/stories/BU2012/S00056/traditional-steel-company-accelerates-digital-uptake-to-ensure-game-on-post-covid.htm

[nztx]

Is STU's bottom line gonna accelerate away any time soon on back of such positive vibes .. or still too hard ? ;)

Let's face it with all work & construction under way currently - if it didn't bounce it's way through to vastly
enhanced profitability then most may have to conclude that STU was incapable of doing things well ..
even in very favorable times ;)

[Balance]

https://www.scoop.co.nz/stories/BU2012/S00056/traditional-steel-company-accelerates-digital-uptake-to-ensure-game-on-post-covid.htm

“And I am happy to say, Steel & Tube, hit the mark, and reinforced their position as a digital leader in the steel industry,” says Reg. “I feel confident that following a massive year of IT change - Steel & Tube are now positioned for the future and can take their clients and employees with them!”

Been well positioned for quite a while but yet to deliver?

Like Fletchers though, may surprise market on the upside next trading update.

[GR8DAY]

`....I have it on good authority that the colour steel division of STU is going through the roof...........so to speak. The current building boom gaining momentum is turning into a bonanza for STU according to my inside contact. (tubing division not doing so well though) Disc: holder but still deeply in the red.

[SailorRob]

All they need to do is plod along making the same mistakes they always have and it will be a phenomenal investment (for someone buying here).

Any improvements and of course it will be even better.

Cash flows through the roof against market cap.

This is the definition of deep value investing.

[winner69]

Dwelling consents at 46 year highs ...no wonder they busy

Amazing how consents have tracked last 10 years

[GR8DAY]

....last time I checked every house needs a roof and at least half of them will be colour steel supplied by STU.....go figure!

[Getty]

Colour steel is the other mob, & they have multi distrbutors/resellers

[GR8DAY]

Colour steel is the other mob, & they have multi distrbutors/resellers

soz......STU ROOFING division I MEANT (generally) going gang busters according to source within the industry.

STU graph now in a clear uptrend and making modest gains each day.........just the way we like it.

[Balance]

soz......STU ROOFING division I MEANT (generally) going gang busters according to source within the industry.

STU graph now in a clear uptrend and making modest gains each day.........just the way we like it.

Gives those who missed out on the great run on FBU & MPG a chance to get in?

[GR8DAY]

Gives those who missed out on the great run on FBU & MPG a chance to get in?

......indeed Balance. All 3 companies linked one way or another so STU just playing catch-up at the mo with these modest but steady gains. Would be nice to at least see a $1 in front of SP for xmas.....what you think??

[JSwan]

How about a takeover offer of $1.60 from FBU?

[clearasmud]

How about a takeover offer of $1.60 from FBU?

Nice nice nice

[Greekwatchdog]

No chance in hell. Board already rejected $1.95. Commerce Commission will also have a say..

[SailorRob]

Liam,

Somehow missed this reply in August but you are bang on my friend. If you're new to investing and you're thinking like this you will go far. Like you this is the only NZX company I'm interested in as well.

As we have both realised, all they need to do is carry on making a complete balls up of everything they touch for this to be a great investment particularly from August prices. Any improvements will be a bonus.

The following sums up how the issues you have identified occur all to frequently.

The management of every company has two basic roles: to run the company and to allocate the capital that it earns. The first task is obvious, but the second one is frequently overlooked by both investors and managements. Managements generally tend to be better at managing companies than allocating capital. These are two completely distinct functions and require different skill sets. A large part of top corporate managers reached their lofty positions by working their way up from lower positions or by specialising in specific fields. Therefore, these people tend to be experts in the fields within which the company does business rather than in capital allocation. It is very typical, therefore, to see managements that run companies well but allocate capital poorly.

Speaking of capital allocation STU should be buying back stock like fiends at these prices, best shareholder return they could ever hope to achieve. An infinitely better use of capital than reinstating dividends or funding another stupid acquisition.

GreekWD it's my understanding they didn't reject any offer, the offer was withdrawn.

[clearasmud]

No chance in hell. Board already rejected $1.95. Commerce Commission will also have a say..
Never say never.
Our board canceled a dividend after the shares had gone ex dividend!

[Greekwatchdog]

Yeah I know, common sense really. Be stink to give shareholders a div then lay off xxx amount of staff.

[SailorRob]

[QUOTE=SailorRob;840440]Yeah it's where the dividends have come from, are they covered by free cash flow as well as all capital expenditure plus any acquisitions being covered (or have the acquisitions produced additional cash flow that provide a decent ROIC) and have they been clawed back by equity raising. Has there been a material change in the business which will affect the free cash flow generation going forward.

First time posting here, but STU is honestly the only NZX company I'm really interested in at these prices. I believe, after making an excel spreadsheet with financial info going back until 2005, that their biggest downfall was paying TOO much of a dividend. Their policy was to "pay half of net profits" but in the end, cash is king and profits can only pay what cash can back up, and they had to take on debt to fund the rest. From 2005-2010 they had zero cash and borrowings of around 40 mil. By 2017 their borrowings had ballooned to 133 mil and the dividend they paid was 10 times the free cash flow. It was stupid. It wasn't their cash flows that was the problem, it was their return of it to the shareholders which winded up bringing them down a debt and leveraged rabbit hole.

Bit of a young tangent there, but basically, I'm also pretty bloody bullish on it based on a) if they just keep as they are, I'd say there'd comfortably be FCF returns of over 10% per year (adjusting for them currently selling off surplus inventory) and b) the cash flows they have made in the past were without their current cost cutting measures, though I have zero clue about how good these actually are a company's word is never to be trusted, but theoretically if previous years' performances are adjusted for the reduced capital etc might be looking good?

Unfortunately Steel distribution and processing is pretty far from my circle of competence (basically tech) so really just wanting to know about the industry landscape, overseas competition, price war with Fletcher Steel (??) and anything else that may drive them away from ever returning to early performance. Pretty new to investing, but those are my thoughts. Cheers

Liam,

Somehow missed this reply in August but you are bang on my friend. If you're new to investing and you're thinking like this you will go far. Like you this is the only NZX company I'm interested in as well.

As we have both realised, all they need to do is carry on making a complete balls up of everything they touch for this to be a great investment particularly from August prices. Any improvements will be a bonus.

The following sums up how the issues you have identified occur all to frequently.

The management of every company has two basic roles: to run the company and to allocate the capital that it earns. The first task is obvious, but the second one is frequently overlooked by both investors and managements. Managements generally tend to be better at managing companies than allocating capital. These are two completely distinct functions and require different skill sets. A large part of top corporate managers reached their lofty positions by working their way up from lower positions or by specialising in specific fields. Therefore, these people tend to be experts in the fields within which the company does business rather than in capital allocation. It is very typical, therefore, to see managements that run companies well but allocate capital poorly.

Speaking of capital allocation STU should be buying back stock like fiends at these prices, best shareholder return they could ever hope to achieve. An infinitely better use of capital than reinstating dividends or funding another stupid acquisition.

GreekWD it's my understanding they didn't reject any offer, the offer was withdrawn.

[Greekwatchdog]

Board said no to earlier off then FBU increased then withdrew...

[SailorRob]

Board said no to earlier off then FBU increased then withdrew...

Yes sorry they did reject it at $1.70.

[Greekwatchdog]

All good mate. Just hope FBU stay away and hope for shareholders sake the board can walk the talk.

[Balance]

https://www.nzx.com/announcements/364832

Bloody waste of space to appoint another director just because she is female imo.

This company desperately needs real industry & commercial experienced directors.

No happy.

[GR8DAY]

.......she sure has some solid credentials behind her Balance. Maybe she's got bigger #alls too (when it comes to deal making) than some of the male directors so lets give her a chance. If and when the takeover remerges (will be sooner than later at these low SPs IMHO) then her commercial experience could come in very handed to negotiate a deal??

[Balance]

.......she sure has some solid credentials behind her Balance. Maybe she's got bigger #alls too (when it comes to deal making) than some of the male directors so lets give her a chance. If and when the takeover remerges (will be sooner than later at these low SPs IMHO) then her commercial experience could come in very handed to negotiate a deal??

No snowball chance in hell of a takeover now that the Aussie has a 20% blocking stake.

I am happy to invest and still hold STU as a recovery play - just not happy with the PC bull-dust these days of gender neutrality at board and management level.

The current chairwoman has not done a good job, that's for sure.

[GR8DAY]

......but she might be good looking too? (oops)

[winner69]

https://www.nzx.com/announcements/364832

Bloody waste of space to appoint another director just because she is female imo.

This company desperately needs real industry & commercial experienced directors.

No happy.

Should ‘dilute’ the Fletcher thinking on the Board ...too many ex Fletcher people to be healthy

[winner69]

That new director ...and she has a good name as well

About
An experienced Board Chair, Director and Audit Committee Chair with expertise in corporate governance, business leadership, risk management, Health & Safety and business assurance. An experienced Programme/Project Board Executive. Having a portfolio of governance experience underpinned by an executive career in FTSE Top 20 businesses, yielding complex delivery expertise, strong commercial skills and proven leadership competence. Drawing on a successful track record in high value national infrastructure construction and commercial operations; procurement and delivery of Defence equipment (air, sea and land forces capital equipment and support). Combining strategic thinking, OD experience with business leadership, stakeholder and relationship management qualities . A team player, trusted and respected for sound decision-making and personal integrity, with a "can do" mentality. A professional facilitator, practised in facilitating corporate boards through to operational teams and volunteer groups.

[BlackPeter]

...

The current chairwoman has not done a good job, that's for sure.

True, but I can give you for any chairwoman who did a bad job ten chairmen who underperformed much worse. Based on this statistics - why are their still people around who think that appointing men to board positions might be a good idea? Terrible performers.

Same in many other jobs. Given that the most disgusting and filthy US president of all times is male - how could anybody ever think about picking a male for a politician? Given that Trump is a male, they all must be disgusting crooks and liars, aren't they?

I hope you realize that your argument is non sensical but very sexist.

Sure, in any job there are some people who do a very good job, some people people who do a very bad job and a lot of people who do a mediocre job. No matter whether the job entails emptying rubbish bins, sitting around board tables or running a company or a country. The sex of these people has nothing to do with the quality of the job they are doing ... so maybe just give her the benefit of the doubt, as you would give as well anybody with a member between their legs ...

And yes - the STU board underperformed for some time now. Oops - aren't they mainly men?

[GR8DAY]

True, but I can give you for any chairwoman who did a bad job ten chairmen who underperformed much worse. Based on this statistics - why are their still people around who think that appointing men to board positions might be a good idea? Terrible performers.

Same in many other jobs. Given that the most disgusting and filthy US president of all times is male - how could anybody ever think about picking a male for a politician? Given that Trump is a male, they all must be disgusting crooks and liars, aren't they?

I hope you realize that your argument is non sensical but very sexist.

Sure, in any job there are some people who do a very good job, some people people who do a very bad job and a lot of people who do a mediocre job. No matter whether the job entails emptying rubbish bins, sitting around board tables or running a company or a country. The sex of these people has nothing to do with the quality of the job they are doing ... so maybe just give her the benefit of the doubt, as you would give as well anybody with a member between their legs ...

And yes - the STU board underperformed for some time now. Oops - aren't they mainly men?

.......well put BP and couldnt agree more (esp the CHUMP referencing)!!

[Balance]

.......well put BP and couldnt agree more (esp the CHUMP referencing)!!

What a load of PC claptrap.

Which part of this is sexist :

"This company desperately needs real industry & commercial experienced directors."

I would have written the same comment if they appointed a male accountant or lawyer as director.

[mfd]

What a load of PC claptrap.

Which part of this is sexist :

"This company desperately needs real industry & commercial experienced directors."

I would have written the same comment if they appointed a male accountant or lawyer as director.

It may be the other part of your post that is the issue:

"Bloody waste of space to appoint another director just because she is female imo"

The underlying sexism is the assumption that a woman rising to board level does so because of her sex rather than her abilities. White men face no such assumptions.

[Balance]

It may be the other part of your post that is the issue:

"Bloody waste of space to appoint another director just because she is female imo"

The underlying sexism is the assumption that a woman rising to board level does so because of her sex rather than her abilities. White men face no such assumptions.

Fair enough but I think it is fairly obvious that this gender diversity PC mumbo jumbo is why the new director is a 'she' rather than a director with real industry & commercial experience?

We know females do not (at this stage) have much presence in the building & construction industry, just as males (at this stage) do not have much presence in the child care industry.

Horses for courses and all that jazz.

[mfd]

Fair enough but I think it is fairly obvious that this gender diversity PC mumbo jumbo is why the new director is a 'she' rather than a director with real industry & commercial experience?

We know females do not (at this stage) have much presence in the building & construction industry, just as males (at this stage) do not have much presence in the child care industry.

Horses for courses and all that jazz.

You may think so, yet remarkably the board of EVO is entirely male. The issue is clearly a little more complicated, but it's safe to say that posts like your original one do not help things. I'm sure our new board member will perform at least as well as the existing (mostly male) members have done, although this is not a big ask.

https://www.evolveeducation.co.nz/investor-relations/board-members/

[Balance]

You may think so, yet remarkably the board of EVO is entirely male. The issue is clearly a little more complicated, but it's safe to say that posts like your original one do not help things. I'm sure our new board member will perform at least as well as the existing (mostly male) members have done, although this is not a big ask.

https://www.evolveeducation.co.nz/investor-relations/board-members/

EVO is going through a massive restructuring & repositioning exercise - the board reflects that fact. I am very very sure you will see the gender balance shifts once this critical (investment banking driven) phase of EVO’s progression is out of the way.

[Balance]

Anyway, sp is well above 80c and looks like heading higher to catch up with FBU & MPG.

Trading conditions look good for a profit upgrade in early 2021?

Steel production in NZ has powered ahead since the sharp decline due to the covid lockdown in March & April this year - indicating that steel consumption is heading higher and higher.

https://tradingeconomics.com/new-zealand/steel-production

[winner69]

Anyway, sp is well above 80c and looks like heading higher to catch up with FBU & MPG.

Trading conditions look good for a profit upgrade in early 2021?

Steel production in NZ has powered ahead since the sharp decline due to the covid lockdown in March & April this year - indicating that steel consumption is heading higher and higher.

https://tradingeconomics.com/new-zealand/steel-production

Ahead of schedule mate

All good news now - bad times are behind us

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/365189/337607.pdf

[Balance]

Ahead of schedule mate

All good news now - bad times are behind us

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/365189/337607.pdf

15% to 31% upgrade - a good start to restoring the credibility of the company.

Resumption of dividends in 2021 a certainty imo.

[GR8DAY]

.....anything under $1 SP will now "probably" stack up as a very clever purchase as this recovery continues. May even turn into a 6% divi return (once re-instated) plus any capital gain. My own holding (sub 50k) owes me about 91c.....may hit break even today after this latest good news announcement. Some great numbers buried in there.

[nztx]

.....anything under $1 SP will now "probably" stack up as a very clever purchase as this recovery continues. May even turn into a 6% divi return (once re-instated) plus any capital gain. My own holding (sub 50k) owes me about 91c.....may even hit break today after this latest good news announcement. Some great numbers buried in there.


Agree with you there - gr8day

[Balance]

.....anything under $1 SP will now "probably" stack up as a very clever purchase as this recovery continues. May even turn into a 6% divi return (once re-instated) plus any capital gain. My own holding (sub 50k) owes me about 91c.....may hit break even today after this latest good news announcement. Some great numbers buried in there.

Buying a few more.

When downgrades turn to upgrades, the sp will rise somewhat on the first upgrade but rockets on the second upgrade.

[macduffy]

Buying a few more.

When downgrades turn to upgrades, the sp will rise somewhat on the first upgrade but rockets on the second upgrade.

Me too - in expectation of a return to the days of good profits and generous dividends!

:cool:

[nztx]

Me too - in expectation of a return to the days of good profits and generous dividends!

:cool:


and buying more earlier here too ;)

[clearasmud]

[QUOTE=nztx;863027]and buying more earlier here too ;)[/QUOTE
Need 2 dollars to break even.
Bring on the divis!

[nztx]

Need 2 dollars to break even.
Bring on the divis!


A good time to consider buying more to average your per share cost downwards
& maybe benefit from a further SP swing upwards ? ;)

I did this with an expensive parcel of BGR bought pre Covid & now it's well in the money ..
after many middle year months in notional deficit territory ..

[SailorRob]

15% to 31% upgrade - a good start to restoring the credibility of the company.

Resumption of dividends in 2021 a certainty imo.

They should be buying back stock hand over fist here. Dividends will be a massive destroyer of Shareholder returns.

[Balance]

They should be buying back stock hand over fist here. Dividends will be a massive destroyer of Shareholder returns.

STU could do both - cash position is very strong and getting better by the month.

SP powering ahead past 90c, now at 92c.

Market waking up to just how good yesterday's update really is :

"The improved earnings coupled with ongoing working capital discipline has enabled Steel & Tube to deliver robust operating cashflows. At the end of November 2020, the Group held cash of approximately $24m (up from $7m net cash at 30 June 2020) with zero debt. Some working capital impact is expected in December to support seasonal inventory holdings, however the Group expects to report a strong cash position for the half year ending 31 December 2020."

[Snow Leopard]

STU Outperforming my expectations. I like it when I am this sort of wrong. :mellow:

Mr Market expecting great things in the future. Hopefully they will deliver.

[Balance]

STU Outperforming my expectations. I like it when I am this sort of wrong. :mellow:

Mr Market expecting great things in the future. Hopefully they will deliver.

Logic says that STU should follow the sp performances of MPG & FBU - and it is starting to and still some way to go imo.

[winner69]

At this rate they’ll just have to resurrect those presentations about achieving $35m-$40m EBIT .....save them coming up with new ones

[Entrep]

Cost out driven earnings lift. No signs of rational industry margins: STU provided a trading update showing earnings improvement over the first five months of FY21 and provided 1H21 normalised EBIT guidance of $6.5-7.5m, up 23% at the mid-point relative to the pcp. This was largely driven by cost out (FY21 c$10m guided due to staff redundancies) and sub-leasing property. Revenue for the first five months of FY21 is tracking slightly lower relative to the pcp (albeit November in line with pcp), below expectations given a soft 1H20 and elevated NZ building activity. No guidance has been provided for FY21 as STU remain cautious on the outlook for 2H21. STU had been aggressive on pricing to start FY21 and we are yet to see any signs of the industry becoming more rational on margins. As a result, it is difficult to see value. Due to limited downside to current share price, we retain our neutral recommendation.

Cost containment ahead of expectations. CIP FY21 EBIT +48%: We lift our FY21 EBIT forecast by $5m to $16m. Assuming STU achieves the mid-point of guided $6.5-7.5m 1H EBIT range, our forecast implies a $2m improvement in 2H due to the labour cost reduction being weighted to the 2H. While STU has materially improved its near-term EBIT, revenue fell with cost containment the key driver. The indicated revenue decline was contrary to our expectations given FBU's recent positive trading update.

Zero debt on balance sheet. Potential for earnings payout lift: STU’s net cash position improved over the past five months from $7m as at June 2020 to $24m currently. In the final month of the half some working capital impact is expected to support seasonal inventory holdings and STU is negotiating the sale of its remaining property as part of its property divestment programme. The current dividend policy is to payout 60-80% of normalised net earnings. With zero debt on the balance sheet there is potential for a lift or top end earnings payout. We have a FY21 NPAT expectation of $7m, this translates to a FY21 dividend of 3.5cps (top of range payout), a yield of 4.1%. STU is on a PE of 18X (1BF), not cheap rel. to peers.

Target price increased, Neutral rating retained: Our DCF derived 12-month TP (WACC 7.8% and TGR of 1.5%) is $0.80 (from $0.67). Key risks included domestic competition, volatility in steel prices and change programme execution From Craigs

[nztx]

At this rate they’ll just have to resurrect those presentations about achieving $35m-$40m EBIT .....save them coming up with new ones


And the best part of the lot - barring any Inventory impairment - there's stuff all major other bits on the balance sheet
remaining for further impairment provisioning .. ;)

[artemis]

I have followed STU for a while, including following it down :>( , and even turned up to some of the annual shareholder meetings. Despite recent results my overall impression is of a hardworking team now managing a thought-through strategy and an intelligent turnaround. Slow to start maybe but they have not pasted on a positive spin as some companies (and governments) do but have been upfront about problems and issues.

The company will benefit from the upcoming focus on infrastructure.

[macduffy]

The company will benefit from the upcoming focus on infrastructure.

Let's hope so! But remember we thought that FBU was going to make big bucks after the Christchurch earthquake.

Disc: Recently back in after a lengthy absence from the register!

[nztx]

Let's hope so! But remember we thought that FBU was going to make big bucks after the Christchurch earthquake.

Disc: Recently back in after a lengthy absence from the register!

similar here - dived back into STU after a while too..

[CraftyBeer]

Good to see this one heading in the right direction finally. Bought into STU nearly 20 years ago and it plodded along quite happily as yield stock until it all went pear shaped. Threw some money at the above $1 rights issues just to see it go further south. Doubled down once it went below 60c - hopefully management have now plugged all the holes and it can pop above the dollar mark again in the new year. I'd expect the housing crisis and related residential building to help push them along, though not sure what their revenue split is residential vs commercial?<br>

[Balance]

STU is a classic case of a good business being run into the ground by bad management

but

Because it has excellent underlying fundamentals (being in an oligopolistically structured industry with entry barriers), it can survive the bad management and return back to profitability with new management.

As Buffett famously said : ‘Buy into a good business which can be run by a fool because one day, a fool will run it!’

[SailorRob]

STU is a classic case of a good business being run into the ground by bad management

but

Because it has excellent underlying fundamentals (being in an oligopolistically structured industry with entry barriers), it can survive the bad management and return back to profitability with new management.

As Buffett famously said : ‘Buy into a good business which can be run by a fool because one day, a fool will run it!’

Average ROE of 9.2% since pre GFC (so includes GFC)

[nztx]

https://www.nzx.com/announcements/365469

22/12/2020, 9:02 am MKTUPDTE

'Steel & Tube Holdings Limited (NZX: STU) has signed an unconditional agreement to sell its property at 26 – 32 Hautonga St, Petone, Lower Hutt for $7 million on a sale and lease back basis.

The sale is expected to be completed on 22 March 2021.

Steel & Tube will continue to lease the property for a term of 2 years with two further rights of renewal of one year each.

The transaction has no material impact on the normalised earnings guidance provided by the Company on 17 December 2020.'

How much does this add to NTA ? ;)

No Material Impact ? Really ?

Add a Lease Liability & Costs where there were Owner's own costs before

$7m paying down liabilities or not ?

Reduced financing costs if proceeds applied against loans - surely not ?

No Material Impact ?

What was STU's most recent bottom line Surplus (Loss) again ? ;)

[BlackPeter]

https://www.nzx.com/announcements/365469

22/12/2020, 9:02 am MKTUPDTE

'Steel & Tube Holdings Limited (NZX: STU) has signed an unconditional agreement to sell its property at 26 – 32 Hautonga St, Petone, Lower Hutt for $7 million on a sale and lease back basis.

The sale is expected to be completed on 22 March 2021.

Steel & Tube will continue to lease the property for a term of 2 years with two further rights of renewal of one year each.

The transaction has no material impact on the normalised earnings guidance provided by the Company on 17 December 2020.'

How much does this add to NTA ? ;)

If they had it for market value in their balance sheet, then it should make no difference at all ...

[Norwest]

I did a detailed look into their assets a couple of months ago when they were around 62-63cents as it was well priced. I would have felt more inclined to invest if they had owned their decent buildings/land, but they don't own many of their properties.

Historically lease prices and also buildings/land value only goes up. Although looking at this property sale the 2/1/1 lease setup looks like they will exit this property in the mid-term.

[Jaa]

I did a detailed look into their assets a couple of months ago when they were around 62-63cents as it was well priced. I would have felt more inclined to invest if they had owned their decent buildings/land, but they don't own many of their properties.

Historically lease prices and also buildings/land value only goes up. Although looking at this property sale the 2/1/1 lease setup looks like they will exit this property in the mid-term.

Commercial rental yields must be close to historic lows though right? Lets say 5%. If they can beat that by investing the $7m in their business it's a good move.

Two years is a short lease so maybe they are thinking they can right size in time. Regardless they now have more flexibility depending on steel and property market conditions. Always nice to have.

[Jaa]

https://www.nzx.com/announcements/365469

22/12/2020, 9:02 am MKTUPDTE

'Steel & Tube Holdings Limited (NZX: STU) has signed an unconditional agreement to sell its property at 26 – 32 Hautonga St, Petone, Lower Hutt for $7 million on a sale and lease back basis.

The sale is expected to be completed on 22 March 2021.

Steel & Tube will continue to lease the property for a term of 2 years with two further rights of renewal of one year each.

The transaction has no material impact on the normalised earnings guidance provided by the Company on 17 December 2020.'

How much does this add to NTA ? ;)

No Material Impact ? Really ?

Add a Lease Liability & Costs where there were Owner's own costs before

$7m paying down liabilities or not ?

Reduced financing costs if proceeds applied against loans - surely not ?

No Material Impact ?

What was STU's most recent bottom line Surplus (Loss) again ? ;)

"no material impact on the normalised earnings guidance " - Could be a one off gain on sale.

Digging into this the property had a capital value of $6.6m so a small $400k gain.

https://www.stuff.co.nz/business/115736123/steel--tube-still-cashing-up-surplus-properties-offering-a-big-christchurch-industrial-for-sale

"The property has been home to Steel & Tube's reinforcing division for 13 years but is "surplus to requirements" and is being sold with vacant possession and by deadline treaty which is closing on September 25."

[RTM]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/365562/338081.pdf

A bit hard to believe ! 1069 Shares !

[Balance]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/365562/338081.pdf

A bit hard to believe ! 1069 Shares !

Tokenism - better she buys none!

[SailorRob]

I did a detailed look into their assets a couple of months ago when they were around 62-63cents as it was well priced. I would have felt more inclined to invest if they had owned their decent buildings/land, but they don't own many of their properties.

Historically lease prices and also buildings/land value only goes up. Although looking at this property sale the 2/1/1 lease setup looks like they will exit this property in the mid-term.


This is the last thing we want them to own. It's not a property company.

If it was good capital allocation to own their properties then would also be good to buy more properties and lease them to other businesses.

The best use of capital BY FAR earlier in the year would have been repurchasing their own stock.

Investing capital based on historical price performance is not necessarily wise. Using the same argument it would be a great idea for them to spend all their cash on Bitcoin.

[Scrunch]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/365562/338081.pdf

A bit hard to believe ! 1069 Shares !

The clue is the dollars spent. Exactly $1000. I'd bet that a sharesies account has been opened and the purchases included STU, among possibly others.

[nztx]

The clue is the dollars spent. Exactly $1000. I'd bet that a sharesies account has been opened and the purchases included STU, among possibly others.

if that was the case Sharesies Nominee would have to be declared in filing as holder on her behalf - wouldn't it ? ;)

[Snow Leopard]

She is probably just waiting for the inevitable retracement before buying a decent parcel :)

[SailorRob]

She is probably just waiting for the inevitable retracement before buying a decent parcel :)

She can borrow mine then and sell them short

[waikare]

The clue is the dollars spent. Exactly $1000. I'd bet that a sharesies account has been opened and the purchases included STU, among possibly others.

Perhaps she spent her Christmas bonus on these shares.

[nztx]

Did someone say a March Divie from STU ? ;)

[Balance]

Did someone say a March Divie from STU ? ;)

A certainty I would think.

[SailorRob]

A certainty I would think.

Let's hope they're not that stupid.

For long term holders buying back a chunk of the company at these prices will ensure far greater long term returns.

I'll instantly lose either 33 or 39% on any dividend but would gain around 70% on every dollar of buyback.

[Balance]

Let's hope they're not that stupid.

For long term holders buying back a chunk of the company at these prices will ensure far greater long term returns.

I'll instantly lose either 33 or 39% on any dividend but would gain around 70% on every dollar of buyback.

Sp appreciation is the key and the biggest source of funds (yet to enter the market) will be the desperate yield chasers in 2021.

[nztx]

Let's hope they're not that stupid.

For long term holders buying back a chunk of the company at these prices will ensure far greater long term returns.

I'll instantly lose either 33 or 39% on any dividend but would gain around 70% on every dollar of buyback.

I can see where you're coming from there & agree

However it's also important that STU be seen to be returning to the Div paying quotient of the market
to at least show some sign that Board have got things stabilised & are doing things right .. ;)

[GR8DAY]

........first official talk of divi re-instatement will send SP through the $1.20 mark IMHO

So bring it on directors please.

[Balance]

........first official talk of divi re-instatement will send SP through the $1.20 mark IMHO

So bring it on directors please.

Agreed.

Plenty of dividend & yield hounds out there waiting for the signal.

[SailorRob]

And here I was thinking all that matters is earnings per share and that those earnings are invested at the highest rate of return available to the capital allocators.

Agreed reinstated dividend will bump the price up a little. I'm looking for the maximum return on my investment in the medium term however.

If they can use their cash earnings to repurchase stock and it does not move the price and they continue to do it then I will soon enough own the entire company!

The math is really simple and I guarantee this action would provide the absolute highest return for the owners of the company.

For those looking for a quick cheap thrill though dividend might be best.

[SailorRob]

If I owned a decent company with a friend and we were earning cash from it and had cash in the bank, and we could each take some cash out of the business or I could use that cash to buy out my friend at a ridiculous price... I would forego taking a taxable cash payment and instead buy him out so I then own the entire future earnings of the company.

[Jantar]

If I owned a decent company with a friend and we were earning cash from it and had cash in the bank, and we could each take some cash out of the business or I could use that cash to buy out my friend at a ridiculous price... I would forego taking a taxable cash payment and instead buy him out so I then own the entire future earnings of the company.
That only works if the NTA/share in the compare is higher than the price that another party is willing to sell their share for. This is currently the case with STU as the shares are currently selling for less than NTA.

I would prefer to see a mix: Some dividend and some buy back.

[SailorRob]

That only works if the NTA/share in the compare is higher than the price that another party is willing to sell their share for. This is currently the case with STU as the shares are currently selling for less than NTA.

I would prefer to see a mix: Some dividend and some buy back.

If the intrinsic value is higher yes.

The NTA are irrelevant as the company could in fact be worth much less than NTA. New Zealand Refining company perfect example.

It's just math, every $ of dividend here will destroy value vs buy backs and when you factor in tax it's far far worse.

[SailorRob]

Below in Blue from Buffett, Berkshire letter to shareholders 1984.

It's crazy to even contemplate that using capital to pay out a dividend rather than buy back shares here (or preferably before now) is a better idea. Look at the destruction in shareholder value that has occured over the last 13 years due to bad capital allocation decisions, most of the dividends paid out were then taken back in a capital raising. And now they have the oppertunity to make a killing for shareholders and they will squander it. Even worse than that though is that some owners will be happy for them to.

The companies in which we have our largest investments have all engaged insignificant stock repurchases at times when wide discrepancies existed betweenprice and value. As shareholders, we find this encouraging and rewarding fortwo important reasons—one that is obvious, and one that is subtle and notalways understood.

The obvious point involves basic arithmetic: major repurchases at prices well below per-share intrinsic business value immediatelyincrease, in a highly significant way, that value. When companies purchase theirown stock, they often find it easy to get $2 of present value for $1. Corporateacquisition programs almost never do as well and, in a discouragingly largenumber of cases, fail to get anything close to $1 of value for each $1 expended.

The other benefit of repurchases is less subject to precise measurement but canbe fully as important over time. By making repurchases when a company’smarket value is well below its business value, management clearly demonstratesthat it is given to actions that enhance the wealth of shareholders, rather than toactions that expand management’s domain but that do nothing for (or even harm)shareholders. Seeing this, shareholders and potential shareholders increase theirestimates of future returns from the business. This upward revision, in turn,produces market prices more in line with intrinsic business value. These pricesare entirely rational. Investors should pay more for a business that is lodged inthe hands of a manager with demonstrated pro-shareholder leanings than for onein the hands of a self-interested manager marching to a different drummer. (Tomake the point extreme, how much would you pay to be a minority shareholderof a company controlled by Robert Wesco?)The key word is “demonstrated”. A manager who consistently turns his back onrepurchases, when these clearly are in the interests of owners, reveals more thanhe knows of his motivations. No matter how often or how eloquently he mouthssome public relations-inspired phrase such as “maximizing shareholder wealth”(this season’s favorite), the market correctly discounts assets lodged with him.His heart is not listening to his mouth—and, after a while, neither will themarket.

[SailorRob]

Another way to think about it is if they paid out dividends and then you used the dividend to buy more shares. This would not be very clever.

Berkshire letter to shareholders 1990

When Coca-Cola uses retained earnings to repurchase its shares, the companyincreases our percentage ownership in what I regard to be the most valuablefranchise in the world. (Coke also, of course, uses retained earnings in manyother value-enhancing ways.) Instead of repurchasing stock, Coca-Cola couldpay those funds to us in dividends, which we could then use to purchase moreCoke shares. That would be a less efficient scenario: Because of taxes we wouldpay on dividend income, we would not be able to increase our proportionateownership to the degree that Coke can, acting for us. If this less efficientprocedure were followed, however, Berkshire would report far greater“earnings.”

[nztx]

So how is a Share Buyback going make STU trade better / more effectively / perfect
the fine art of making plenty of profit & with fewer excuses in their neck of the woods ? ;)

Or likely to be distraction for Team STU trying to perfect the fine art of selling their bits & pieces
yet again (following the past trail of failing to pull off the notion profitably up to expectations) ? ;)

Money tossed at shareholders in form of a dividend would appear to far simpler for a busy
challenged Team STU trying to claw themselves back to where they previously were at ? ;)

A dividend as in cash landing in stakeholders hands is also likely to see fastest responses
in growing stakeholder's perception of the outfit rather than complex formulae of 'your slice
of the action divided by 5% fewer than the previous number of shares means you have
grown your notional share of the action' even if it's difficult to see this landing in stakeholder laps,
that is if it ever did .. ;)

Stakeholders in receipt of distributions are likely to vote accordingly & may therefore deliberate
that the ship is worth more than it's previous rating & SP, thus enhancing 'Stakeholder Value' they
see in STU, in the same way as has been seen with other listed companies eg HLG, BGR etc

If not mistaken didn't STU double it's issued Capital a few years back by Cap Raise only to completely
basically destroy all/most of the extra equity raised within 18 months with write downs & losses ? ;-)

STU would appear to have some way to go to restore it's credibility in eyes of stakeholders, keeping to
perfecting the knitting & not resorting to any smart tricks on the long trail doing so .. surely ;)

Stakeholders may well be expecting STU to return to dividend paying status in short to medium term .. ;)

This is the same outfit that was once suggested to be worth $1.75 a share in eyes of a suitor, just a few years back

We all know what happened then , and then subsequently more recently .. ;)

[nztx]

The Market may well be expecting a Good Result from STU in face of strong economic tail winds prevailing currently

The Real Test will be of STU's performance in lighter or less favourable winds and what Team STU manage to deliver
in those conditions .. ;)

At last year end 2020 STU reported $31.6 m in tax losses up from $16.1 m a year earlier, to offset
against future taxable profits

Imputation credit balance at last year end 2020 was $5K down from $0.7 m a year earlier

Clearly, unless further tax is paid to attach to dividends, any future distributions will attract full 33% DWT
deduction to Govt's Tax Collectors

Who knows, STU's Board may consider recovering & offsetting past Tax Losses completely, before making
further distributions to stakeholders .. ;)

In that way 100% of value enhancement is retained into strengthening the ship further..
possibly in turn making STU a potential takeover target once again ? ;)

[SailorRob]

I think I'll stick to Warrens sentiments and Maths here.

So how is a Share Buyback going make STU trade better / more effectively / perfect
the fine art of making plenty of profit & with fewer excuses in their neck of the woods ? ;)

It isn’t going to change the way they trade or make profit. It will leave them with fewer excuses though as it will stop them squandering the cash and will ensure it is allocated at the very highest return possible to us the owners. The profits which are still very significant over the last 13 years against current market cap even after taking into account the capital raisings, will be then distributed to fewer owners.

Or likely to be distraction for Team STU trying to perfect the fine art of selling their bits & pieces
yet again (following the past trail of failing to pull off the notion profitably up to expectations) ? ;)

Not sure what is meant here, if making correct capital allocation decisions and engaging in the most simple of all transactions is a distraction then we have bigger issues to worry about.


Money tossed at shareholders in form of a dividend would appear to far simpler for a busy
challenged Team STU trying to claw themselves back to where they previously were at ? ;)

Again not sure how being busy or challenged relates to correct capital allocation decisions, it could appear simple to simple minds though yes. This would be disturbing for shareholders.

A dividend as in cash landing in stakeholders hands is also likely to see fastest responses
in growing stakeholder's perception of the outfit rather than complex formulae of 'your slice
of the action divided by 5% fewer than the previous number of shares means you have
grown your notional share of the action' even if it's difficult to see this landing in stakeholder laps,
that is if it ever did .. ;)

Again I’ll go with Warren here, we’re not interested in cheap thrills but the best returns possible. I’m not sure about any complex formula. I’m interested in earnings per share and future dividends per share, certainly nothing complex but I can understand how for some it may be, however it doesn’t matter if people understand or not, the benefits come regardless.

Stakeholders in receipt of distributions are likely to vote accordingly & may therefore deliberate
that the ship is worth more than it's previous rating & SP, thus enhancing 'Stakeholder Value' they
see in STU, in the same way as has been seen with other listed companies eg HLG, BGR etc

Agreed and this is the exact point I'm making. The same money distributed to less owners...

If not mistaken didn't STU double it's issued Capital a few years back by Cap Raise only to completely
basically destroy all/most of the extra equity raised within 18 months with write downs & losses ? ;-)

No, this is not how I see it. The equity had already been destroyed, write downs were acknowledging money that had LONG since disappeared.

STU would appear to have some way to go to restore it's credibility in eyes of stakeholders, keeping to
perfecting the knitting & not resorting to any smart tricks on the long trail doing so .. surely ;)

'Resorting to smart tricks' is this how Buffett sees share buybacks? The one man who has campaigned against and ciiticised corporate 'smart tricks' forever? Is simple Math a smart trick? This is one of the most simple concepts in business ownership. There is nothing tricky about it but plenty smart.

Stakeholders may well be expecting STU to return to dividend paying status in short to medium term .. ;)

Perhaps. But what they should be expecting is that the company maximises their returns.

This is the same outfit that was once suggested to be worth $1.75 a share in eyes of a suitor, just a few years back. We all know what happened then, and then subsequently more recently .. ;)

We do and there is the opportunity.

[nztx]

I'm still perplexed as to how 'Warren Buffett' references are relevant to a thread on STU ... ;)

Would Warren actually even look sideways in passing at STU .. or too small .. bigger fish to fry elsewhere ?

or just too troublesome ? or the NZ Market now getting over valued ? ;)

[SailorRob]

I'm still perplexed as to how 'Warren Buffett' references are relevant to a thread on STU ... ;)

Would Warren actually even look sideways in passing at STU .. or too small .. bigger fish to fry elsewhere ?

or just too troublesome ? or the NZ Market now getting over valued ? ;)

Yes I understand that you don't get it and that's fine. Buffetts thoughts on business and investment are of course relevant to any company in the world.

Buffett like myself would be praying for STU share price to fall, not rise. See if you can figure that one out!

[Arbroath]

Yes I understand that you don't get it and that's fine. Buffetts thoughts on business and investment are of course relevant to any company in the world.

Buffett like myself would be praying for STU share price to fall, not rise. See if you can figure that one out!

I would love to see STU and MPG do share buybacks. It is frustrating in NZ that more listed companies don’t do buybacks. Unimputed dividends are just dumb when a company is trading so far below what the Board think is fair value. Remember they considered $1.70 and then $1.90 to be less than fair value only 2 years ago.

[nztx]

I would love to see STU and MPG do share buybacks. It is frustrating in NZ that more listed companies don’t do buybacks. Unimputed dividends are just dumb when a company is trading so far below what the Board think is fair value. Remember they considered $1.70 and then $1.90 to be less than fair value only 2 years ago.

Agree with you there

[nztx]

Yes I understand that you don't get it and that's fine. Buffetts thoughts on business and investment are of course relevant to any company in the world.

Buffett like myself would be praying for STU share price to fall, not rise. See if you can figure that one out!

You may be praying for fair while that Warren might find some interest

Doesn't he usually like stocks north of $10 & that's USD at that ? ;)

I think my revised 'Beat Buffet' model seems to be working better than your prayer model .. ;)

[SailorRob]

You may be praying for fair while that Warren might find some interest

Doesn't he usually like stocks north of $10 & that's USD at that ? ;)

I think my revised 'Beat Buffet' model seems to be working better than your prayer model .. ;)

My apologies if you thought my post suggested that Buffett might be interested in STU. The suggestion of such would be one of massive ignorance. I meant if he were in my shoes or that would be what he'd be advising us, were we so lucky.

Now a stocks market share price means nothing at all. Doesn't tell you if it's cheap or expensive, nothing. So North or South of $10 means nothing.

I'm sure you are able to beat Buffet whoever that is, but Buffett? I'll place any bet you like that Berkshire will destroy your returns over the next 10 years. What are you scared of, he's a washed out old man.

[Filthy]

new CFO - pretty good appointment, https://www.nzx.com/announcements/366599

[nztx]

new CFO - pretty good appointment, https://www.nzx.com/announcements/366599

For sure -- seems to be a good acquisition & STU probably need good skillsets onboard .. ;)

[Entrep]

Any of the STU bulls or recent posters care to comment on this note from Craig’s? Considering a position. Thanks



Cost out driven earnings lift. No signs of rational industry margins: STU provided a trading update showing earnings improvement over the first five months of FY21 and provided 1H21 normalised EBIT guidance of $6.5-7.5m, up 23% at the mid-point relative to the pcp. This was largely driven by cost out (FY21 c$10m guided due to staff redundancies) and sub-leasing property. Revenue for the first five months of FY21 is tracking slightly lower relative to the pcp (albeit November in line with pcp), below expectations given a soft 1H20 and elevated NZ building activity. No guidance has been provided for FY21 as STU remain cautious on the outlook for 2H21. STU had been aggressive on pricing to start FY21 and we are yet to see any signs of the industry becoming more rational on margins. As a result, it is difficult to see value. Due to limited downside to current share price, we retain our neutral recommendation.

Cost containment ahead of expectations. CIP FY21 EBIT +48%: We lift our FY21 EBIT forecast by $5m to $16m. Assuming STU achieves the mid-point of guided $6.5-7.5m 1H EBIT range, our forecast implies a $2m improvement in 2H due to the labour cost reduction being weighted to the 2H. While STU has materially improved its near-term EBIT, revenue fell with cost containment the key driver. The indicated revenue decline was contrary to our expectations given FBU's recent positive trading update.

Zero debt on balance sheet. Potential for earnings payout lift: STU’s net cash position improved over the past five months from $7m as at June 2020 to $24m currently. In the final month of the half some working capital impact is expected to support seasonal inventory holdings and STU is negotiating the sale of its remaining property as part of its property divestment programme. The current dividend policy is to payout 60-80% of normalised net earnings. With zero debt on the balance sheet there is potential for a lift or top end earnings payout. We have a FY21 NPAT expectation of $7m, this translates to a FY21 dividend of 3.5cps (top of range payout), a yield of 4.1%. STU is on a PE of 18X (1BF), not cheap rel. to peers.

Target price increased, Neutral rating retained: Our DCF derived 12-month TP (WACC 7.8% and TGR of 1.5%) is $0.80 (from $0.67). Key risks included domestic competition, volatility in steel prices and change programme execution

[nztx]

Interesting post Entrep

I have the same thoughts -- SP seems to have fallen back, now know why

The growth expected out of the current construction boom appears to be missing in
action in so far as STU are concerned -- any comment from the pundits ? ;)

A new CFO aint going to be able to help things much if Sales & Marketing Dept are
still away on holiday & missing something fairly important .. ;)

Was there more to why the last CFO left ? ;)

[Dassets]

Sure, I will have a go. Don't know the analyst but when I see an analyst increasing ebit forecast by circa 50% and dcf by 20% my mind tends to wander and I think of baby Jesus. But seriously 21F is a terrible year to be basing things off due to a myriad of macro factors that affected STU. Hopefully the analyst has got forward assumptions right for the dcf. Cashflow, in part reduction of capital deployed, is strong. Debt nil. Expect board to review the divvy policy and run more off cahgliw and the cash sloshing around. There is no reward gor directors go hold onto cash, just opens a company up to easy activism.

I like the reduction in sites and staff but maintaining rev. This will eventually flow through to margins. There are other reasons I find it interesting but the simple reasons are always the best.

[winner69]

How they do all depends on the topline

Declining sales and margins over the last few years not a good look

Still appear to be struggling to grow sales (H1 guidance) and margins probably still under pressure

The most revealing part of that report entrep posted was '.....we are yet to see any signs of the industry becoming more rational on margins.'

Book the cost savings and that's it for a few years I fear

At least the share price shouldn't go lower but even if the dog remains a dog but pays a divie STU might become a star of the NZX (after all the CEO picked it 5 times in the picking competition)

[SailorRob]

So Craigs are forecasting a FY21 EBIT of 16 million and a Net profit of 7 million... With no debt or real interest expenses... that's a heck of a tax bill?

[nztx]

So Craigs are forecasting a FY21 EBIT of 16 million and a Net profit of 7 million... With no debt or real interest expenses... that's a heck of a tax bill?

They probably need STU's new CFO to sort out their forecasted bottom lines for them .. ;)

[winner69]

So Craigs are forecasting a FY21 EBIT of 16 million and a Net profit of 7 million... With no debt or real interest expenses... that's a heck of a tax bill?

Maybe ‘leases’ now showing as finance costs?u

[SailorRob]

Maybe ‘leases’ now showing as finance costs?u

Good point, I'll take a closer look.

[winner69]

new CFO - pretty good appointment, https://www.nzx.com/announcements/366599

Missed out on CFO job at Sky after being deputy for 7 years so possibly a pushed off

STUs current CFO wise man in not wanting to shift to Auckland ...so good opportunity for Sky cast off to be a CFO of a listed company

Love how new guy calls STU iconic

[Balance]

Maybe ‘leases’ now showing as finance costs?u

Accounting treatment for leases these days seems to break up the lease payments into

1. Depreciation for right of use of assets

2. Interest on leases

So EBIT could be before he interest on leases and since STU claimed a tax credit for losses in the last FY, it stands to reason that it will have to provide for tax on profits.

That's my reading.

[nztx]

Missed out on CFO job at Sky after being deputy for 7 years so possibly a pushed off

STUs current CFO wise man in not wanting to shift to Auckland ...so good opportunity for Sky cast off to be a CFO of a listed company

Love how new guy calls STU iconic


Some of STU's past antics & results have certainly been hugely "Iconic" .. ;)

Not many if any others have got anywhere near replicating them .. ;)

[Shareguy]

I’m expecting a great result . One of the few undervalued company’s on the nzx currently in my opinion No debt , reduced costs and the largest building boom that I have ever seen. I have worked 18 years in the steel industry including at S&T in management and I’m hearing very good things.

Disc . My largest holding. In top 50 shareholders

[sb9]

I’m expecting a great result . One of the few undervalued company’s on the nzx currently in my opinion No debt , reduced costs and the largest building boom that I have ever seen. I have worked 18 years in the steel industry including at S&T in management and I’m hearing very good things.

Disc . My largest holding. In top 50 shareholders

Thanks for those snippets, I agree with your thinking. They're one of few stocks on NZX with great potential this year, if all going as per plan sp could add a dollar by year end.

[Davexl]

Can't decide quite what to do with mine. SP coming across to 30d MAv. See if it bounces off again.

Balance, you were quite positive on these - still are i take it?

[clearasmud]

Thanks. On the strength of your comments plus the new cfo's comment I topped up some more.
Now only need 1.47 to break even.

[Balance]

Can't decide quite what to do with mine. SP coming across to 30d MAv. See if it bounces off again.

Balance, you were quite positive on these - still are i take it?

Yes, I am still positive and a holder.

[sb9]

Bolly bands getting squeezed here, could be heading for a breakout, 92c is key resistance currently...

[Jantar]

Thanks. On the strength of your comments plus the new cfo's comment I topped up some more.
Now only need 1.47 to break even.

Also topped up a bit. Now need $1.45 to break even. Looks like we were both caught in the freefall a couple of years ago.

[clearasmud]

Also topped up a bit. Now need $1.45 to break even. Looks like we were both caught in the freefall a couple of years ago.
Dumb eh.
Was it disobeying "don't buy a stock in a down trend" or ignoring "new management new broom" ie they'll write off everything they can or what else?