STU - Steel & Tube Holdings

[CraftyBeer]

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.

Also nearly at breakeven following years of downtrend after buying more at .59 in early Sep last year. Hoping some of the FBU bounce will also apply to STU at some point.

[SailorRob]

Well people, the way I see it, which is very different from Craig's impressive mumbo jumbo, is that they have averaged a Net Profit of 17.4 million/year over a period of 13 years which includes a once or twice in a lifetime global recession. Now granted with a lot of those earnings they have retained them and destroyed them in spectacular fashion. They also paid out 15 million a year average in dividends and then took back a lot of money in an equity raising, net of which the dividends would have averaged 9 million a year. They at times employed significant leverage to produce these cash flows. The top-line growth over this whole period has been non existent.



So looking forward, which is I believe more difficult that Craig's would have you think - If we take one case and I'm going to call it 'best conservative case' and assume that revenues remain the same going forward, margins remain similar and thus net profit remains the same averaged over time. BUT this time they don't destroy any retained cash, they don't employ it well either, just for every $1 retained only $1 of value is created. Under this scenario we can now try and assume a multiple for this profit.



Now when deciding a multiple, we see that the NZ50 PE according to S&P, is about 45. Yes this will be somewhat because of COVID earnings but regardless it's incredibly high, all time high in fact. People will say 'yes but with the discount rate/bond yields/interest rates so low' and I will think hmmm why are they so low. Mostly because we're in the middle of another massive recession and have had abysmal economic growth really since 2007 aside from what a huge population increase has given us. I digress, but I'm not at all comfortable that we really have conditions that warrant higher than long term average PE's.



So for regular business like Steel and Tube that has kicked it's old habits but still just plodding along... It is a duopoly and now has no debt, so even if it performed as it has in the past, it's now all equity and could be goosed if that made sense in future... Hell I'm not giving it any more than 15. So say 17 million times 15 is around 250 million. There are 166 million shares so that's $1.50.

So in my opinion, anyone that thinks it is worth more than that (and I may be one of them) is speculating, probably on multiple moving balls.



Now I can do a worst case and base that on exact historical performance (it can get worse than that too) and I can do a best case in which I would attribute at least average capital allocation skills, say retained earnings reinvested at 7%, some leverage applied, growth at least in line with population growth. But I'll just stick with my case above and I can tell you I'll probably sell early as a result but I'm totally happy with that as if i don't then I may as well go to the Casino.



This is why I was ranting so hard about it when it was in the 50's. It was massively undervalued.


I see a lot of technical analysis mentions on this thread, I don't know much about it but hasn't it just formed a text book 'cup and handle' from the beginning of 2020?

[nztx]

Okay - thanks for that SailorRob, but many of the punters may wish to see some cash land in their paws
before deciding whether the Nuts Bolts & Steel Biz with more curves, bumps, joins, holes & welds in the past
than Auckland's Water Supply Service is considered sexy enough to encourage them to poke cash STU's way .. ;)


PE is one thing, but Div Yield something better than a big fat 0 is more inspiring in today's times..

SP is basically back to just under a certain point pre covid in the earlier year, back across the C19 dip
so at this point just recovering some lost ground ;)

It defies comprehension how this outfit has managed to suffer so much carnage in Stock writedowns
impairment & provisioning in the recent past.. there really cant be much left standing to impair or write off
on the balance sheet .. ;)

[SailorRob]

Okay - thanks for that SailorRob, but many of the punters may wish to see some cash land in their paws
before deciding whether the Nuts Bolts & Steel Biz with more curves, bumps, joins, holes & welds in the past
than Auckland's Water Supply Service is considered sexy enough to encourage them to poke cash STU's way .. ;)


PE is one thing, but Div Yield something better than a big fat 0 is more inspiring in today's times..

SP is basically back to just under a certain point pre covid in the earlier year, back across the C19 dip
so at this point just recovering some lost ground ;)

It defies comprehension how this outfit has managed to suffer so much carnage in Stock writedowns
impairment & provisioning in the recent past.. there really cant be much left standing to impair or write off
on the balance sheet .. ;)

I fear these punters are the ones who actually just want to see the share price start rising first. That seems to be all that governs opinion on businesses.

[winner69]

Sailor Rob makes some good points but I feel many don't grasp what he saying.

So I have charted STU's Free Cash Flow over the last 10 years - both annual figures and a cumulative figure from 2011 are shown. Free Cash Flow is Operating Cash Flow less Investment Cash Flows (excluding cash for business acquisitions)

Demonstrates what Rob is essentially saying (I think) in that STU has generated solid cash flows over the years - even through the years of turmoil

Over the 10 years Free Cash Flows have totaled $162m. In the same period they've spent $74m on new businesses and paid $121m in dividends. In addition raised $94m new capital from shareholders.

So I'm on same page as Rob in that the current market cap of $160m odd and based on likely cash generation and likely dividend flows STU is pretty cheap

[Balance]

I fear these punters are the ones who actually just want to see the share price start rising first. That seems to be all that governs opinion on businesses.

Has always been the case - nothing new there!

Rising share price = great company & great management.

Falling share price = lousy company & bad management.

BUT - there in lies the opportunities to pick turnaround stocks and make serious gains.

Eg. Diligent at 28c and Serko at 29c! Or FBU at $3.20.

[SailorRob]

Sailor Rob makes some good points but I feel many don't grasp what he saying.

So I have charted STU's Free Cash Flow over the last 10 years - both annual figures and a cumulative figure from 2011 are shown. Free Cash Flow is Operating Cash Flow less Investment Cash Flows (excluding cash for business acquisitions)

Demonstrates what Rob is essentially saying (I think) in that STU has generated solid cash flows over the years - even through the years of turmoil

Over the 10 years Free Cash Flows have totaled $162m. In the same period they've spent $74m on new businesses and paid $121m in dividends. In addition raised $94m new capital from shareholders.

So I'm on same page as Rob in that the current market cap of $160m odd and based on likely cash generation and likely dividend flows STU is pretty cheap

Thanks winner, yes that's it. Amazing cash flow generation when compared to current market cap. Some of that cash has been squandered of course but hopefully that will change. It is and always has been a cash cow, they have just had issues spending it wisely.

[SailorRob]

I did similar analysis to you winner, I accounted for every dollar in and out over 13 years from cash flow statements and made sure they roughly compared to earnings. I used earnings in my post above but it was really done on free cash flows over and above what was needed to be reinvested in the business.

[winner69]

Thanks winner, yes that's it. Amazing cash flow generation when compared to current market cap. Some of that cash has been squandered of course but hopefully that will change. It is and always has been a cash cow, they have just had issues spending it wisely.

I think you once said no matter how useless management is the business still generates cash ....chart shows that

You’d think management will get better ....some are already enamoured with the new CFO

[SailorRob]

I think you once said no matter how useless management is the business still generates cash ....chart shows that

You’d think management will get better ....some are already enamoured with the new CFO

Exactly right. Plus it was selling for less than net working capital. The value of the steel on the shelf after subtracting all liabilities was more than the company was selling for. Property, plant, equipment and brand all for free.

[winner69]

I did similar analysis to you winner, I accounted for every dollar in and out over 13 years from cash flow statements and made sure they roughly compared to earnings. I used earnings in my post above but it was really done on free cash flows over and above what was needed to be reinvested in the business.

If you did same chart for Synlait it looks completely different ...many years of cash burn

But punters seem happy to look through that

[BlackPeter]

If you did same chart for Synlait it looks completely different ...many years of cash burn

But punters seem happy to look through that

To be fair - Synlait is building up a factory (or two or three) while STU is basically a boring old retailer with a habit to burn money in case they have too much of it ...

Amazing how many new four wheel drives they bought for their staff after the Christchurch earthquakes ... though probably time to replace them now, i.e. there might be additional unplanned costs in the wings ...

Apart from that - I agree that both companies do have management teams whose performance at times was wanting and boards which both managed to make significant mistakes to be paid for by shareholders, and I agree as well that STU might have a chance to return their earnings towards their long term average EPS in the years to come ... which would be good for holders. I guess you hope they wrote off enough ... and they probably have currently enough space in their cupboards to store a new set of skeletons before they start to overflow again.

Not really convinced of the quality of board or management, but probably businesswise currently in the right spot.

Discl: Hold a (really) small parcel ...

[nztx]

Looking ahead short term - did someone point to lower turnover ?

To reach therefore higher GP & bottom line - that tends to point to higher margins..

Is that possible in today's times & competitive environment or wishful thinking ?

STU have some good brands & businesses in the fold.

Many initiatives, including co-locating into shared STU premises should have been done
long ago (while Board were apparently dreaming at the helm) and not after or forced
as a result of things hitting the fan badly .. ;)

The proof in performance & how well Directors ultimately pull things together
to regain where they were at a few years back before all the carnage, and better
above those levels will be what watchers will be looking for.

We have already had one false start on recovery tracks - with interim div, then
things abruptly slid backwards the next half with no next Dividend paid.

The current Board & many of the top brass were also onboard through the carnage
of recent years, so they also need to now prove they are up to what is expected of
them in clawing STU back out of the hole and staying there with solid performance

They have already seen wiped out in the watch of many of them - over half the
value STU had in Shareholder Funds, all of the Cap Raise a few years back
which resulted in the forced leaning down to get to the current slimmer beast, so
their credibility is very much on the line & current times suggest there is no
room for repeats or excuses on why they should be capable of delivering up
and substantially keeping STU's performance at or above those enhanced levels .. ;)

The ultimate challenge - Can STU's Board & Top Brass pull things above the $1.75 SP
that was at one point on the table - which they didn't like before it was withdrawn ? ;)

IMO - that is the line in the sand which STU's Board & Management must reach or exceed
and hold to ultimately prove they are worthy of their seats & positions with STU

If not, then new fresh talent required which is more vibrant & capable of performance
execution & delivery without further carnage.

After all, how difficult is it selling reasonable quantities of nut bolts & steel etc at a reasonable
margin and getting it closer to perfection than the beast has managed in the past how many
years it has been in existence ? ;)


Discl: hold a parcel

[SailorRob]

Looking ahead short term - did someone point to lower turnover ?

To reach therefore higher GP & bottom line - that tends to point to higher margins..

Is that possible in today's times & competitive environment or wishful thinking ?

STU have some good brands & businesses in the fold.

Many initiatives, including co-locating into shared STU premises should have been done
long ago (while Board were apparently dreaming at the helm) and not after or forced
as a result of things hitting the fan badly .. ;)

The proof in performance & how well Directors ultimately pull things together
to regain where they were at a few years back before all the carnage, and better
above those levels will be what watchers will be looking for.

We have already had one false start on recovery tracks - with interim div, then
things abruptly slid backwards the next half with no next Dividend paid.

The current Board & many of the top brass were also onboard through the carnage
of recent years, so they also need to now prove they are up to what is expected of
them in clawing STU back out of the hole and staying there with solid performance

They have already seen wiped out in the watch of many of them - over half the
value STU had in Shareholder Funds, all of the Cap Raise a few years back
which resulted in the forced leaning down to get to the current slimmer beast, so
their credibility is very much on the line & current times suggest there is no
room for repeats or excuses on why they should be capable of delivering up
and substantially keeping STU's performance at or above those enhanced levels .. ;)

The ultimate challenge - Can STU's Board & Top Brass pull things above the $1.75 SP
that was at one point on the table - which they didn't like before it was withdrawn ? ;)

IMO - that is the line in the sand which STU's Board & Management must reach or exceed
and hold to ultimately prove they are worthy of their seats & positions with STU

If not, then new fresh talent required which is more vibrant & capable of performance
execution & delivery without further carnage.

After all, how difficult is it selling reasonable quantities of nut bolts & steel etc at a reasonable
margin and getting it closer to perfection than the beast has managed in the past how many
years it has been in existence ? ;)


Discl: hold a parcel


Some great points, but the board and management should absolutely not be trying to pump the share price back up. Unless they are planning to raise more equity they should be completely agnostic to the share price, or if they are truly smart they should really try to keep it way down.

I want to make money out of my position in STU and a rising share price will make me much less money compared to what I will make if the share price stays low while the business continues to recover.

The best scenario is the share price stays well under intrinsic value for a very long time (20 years would be wonderful). This way I can increase the proportion of the cash flows the business is spitting out that goes into my pocket. I can continue to purchase shares with my own money, with STU dividends (very inefficient), and they can do the same with buybacks (best option). If the share price rises quickly to or above intrinsic valve then I will have to sell and it will just be a one hit wonder and I will have to re allocate capital somewhere else.

No rational investor wants the share price of a good business they own rising above intrinsic value unless for some reason they want to convert an equity stake into money losing cash.

[nztx]

Some great points, but the board and management should absolutely not be trying to pump the share price back up. Unless they are planning to raise more equity they should be completely agnostic to the share price, or if they are truly smart they should really try to keep it way down.

I want to make money out of my position in STU and a rising share price will make me much less money compared to what I will make if the share price stays low while the business continues to recover.

The best scenario is the share price stays well under intrinsic value for a very long time (20 years would be wonderful). This way I can increase the proportion of the cash flows the business is spitting out that goes into my pocket. I can continue to purchase shares with my own money, with STU dividends (very inefficient), and they can do the same with buybacks (best option). If the share price rises quickly to or above intrinsic valve then I will have to sell and it will just be a one hit wonder and I will have to re allocate capital somewhere else.

No rational investor wants the share price of a good business they own rising above intrinsic value unless for some reason they want to convert an equity stake into money losing cash.


but if it suddenly turned around to be so good with rising SP, intrinsic value should rise, along with dividends (hopefully imputed as well)
and so why would you entertain selling it to pocket the 'money losing cash' ? ;)

I think STU's board need to demonstrate that they've turned a lemon into something worth keeping rather than trading
and they've finally woken up with fingers firmly on the pulse .. ;)

[SailorRob]

but if it suddenly turned around to be so good with rising SP, intrinsic value should rise, along with dividends (hopefully imputed as well)
and so why would you entertain selling it to pocket the 'money losing cash' ? ;)

I think STU's board need to demonstrate that they've turned a lemon into something worth keeping rather than trading
and they've finally woken up with fingers firmly on the pulse .. ;)

Yes as long as there was a discount to intrinsic value you wouldn't sell. I meant if the SP rose to or above intrinsic value.

I'd still rather the business started to do really well, the intrinsic value increased and the SP fell like a rock but that wont happen...

[Ferg]

One of my clients *could* be a large customer for STU but never will. Why? STU are too expensive. My client imports 20 tonnes at a time from China, Vietnam and India including flat rolled coil of varying thickness, s/s fixings, square and rectangular hollow sections and all manner of bits and pieces. STU get the emergency orders for low volume items where we don't quite match supply with demand, but that would be less than 1% of the total value spent on steel. It would be good to support local but the cost of buying locally cannot be supported. My fear with companies like STU is "what is the point of difference?" versus buying in bulk offshore? Maybe someone else can answer that but I can't given the quality of the offshore product is good. I'm not sure how much of STU sales is retail versus local manufacturers....or what their strategy is for various market segments but maybe we don't fall into their target market...?

Disclosure: became a holder post-lockdown but sold all in December.

[sb9]

Someone's showing their hand and keen to accumulate...

[SailorRob]

One of my clients *could* be a large customer for STU but never will. Why? STU are too expensive. My client imports 20 tonnes at a time from China, Vietnam and India including flat rolled coil of varying thickness, s/s fixings, square and rectangular hollow sections and all manner of bits and pieces. STU get the emergency orders for low volume items where we don't quite match supply with demand, but that would be less than 1% of the total value spent on steel. It would be good to support local but the cost of buying locally cannot be supported. My fear with companies like STU is "what is the point of difference?" versus buying in bulk offshore? Maybe someone else can answer that but I can't given the quality of the offshore product is good. I'm not sure how much of STU sales is retail versus local manufacturers....or what their strategy is for various market segments but maybe we don't fall into their target market...?

Disclosure: became a holder post-lockdown but sold all in December.

Yes very good points. Also should mention that I have it on good authority that the Whangarei branch treat customers as if they have completely ruined their day by walking in. I have a friend who took his business elsewhere even though it was more expensive. When you are in a commodity business and you cant even compete with lower prices that is pretty bad.

[Balance]

Someone's showing their hand and keen to accumulate...

Powering on towards $1.00.

I suspect we will see STU report towards top end of guidance in H1, keeping plenty to provide another profit upgrade in 3 months' time.

[winner69]

Bluescope report NZ Steel had a boomer of half year

New Zealand Steel is set to report its best half-year result in two years as it benefits from strong domestic construction and cost-cutting started last year.

[sb9]

Bluescope report NZ Steel had a boomer of half year

New Zealand Steel is set to report its best half-year result in two years as it benefits from strong domestic construction and cost-cutting started last year.

And I don't think the construction boom has end in sight at least in the medium term.


Powering on towards $1.00.

I suspect we will see STU report towards top end of guidance in H1, keeping plenty to provide another profit upgrade in 3 months' time.

Very much achievable from here and not to forget possible another play by FBU to acquire them again.

[JoeM]

Based on the last few years i thought we might of seen a half year update. Or at least a date for when the half year results will be released.

[Balance]

Based on the last few years i thought we might of seen a half year update. Or at least a date for when the half year results will be released.

26 Feb

https://www.nzx.com/announcements/367085

[Balance]

Bluescope report NZ Steel had a boomer of half year

New Zealand Steel is set to report its best half-year result in two years as it benefits from strong domestic construction and cost-cutting started last year.

Thanks for that infor, w69.

Expanding further :

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02334884-3A560211?access_token=83ff96335c2d45a094df02a206a3 9ff4

NZ & Pacific operations improved substantially in H1 2021 - EBIT expected to be in excess of $55m.

Compares with $12.9m in H1 F2020.

Given that STU is Bluescope's major distributor in NZ, augers very well for STU operations.

[winner69]

Thanks for that infor, w69.

Expanding further :

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02334884-3A560211?access_token=83ff96335c2d45a094df02a206a3 9ff4

NZ & Pacific operations improved substantially in H1 2021 - EBIT expected to be in excess of $55m.

Compares with $12.9m in H1 F2020.

Given that STU is Bluescope's major distributor in NZ, augers very well for STU operations.

STU over $1 any hour now

And then onwards and upwards

[Balance]

STU over $1 any hour now

And then onwards and upwards

Getting close, W69.

Crossing after market close at 99c after big buyer mopped up all the stock at 98c (including a line of 200k shares) at market close.

[Balance]

Someone's showing their hand and keen to accumulate...

If the closing trades yesterday (big buyer mopped up over 200,000 shares, including a line of 200k, at 98c) are any guide, someone is very keen indeed to accumulate - and not afraid to pay up.

Modus operandi suggests to me it's Milford who sold out to NZ Steel at $1.75 buying back in - heaps more shares to buy!

[nztx]

Wow $1.04 .. seems like someone has an appetite .. ;)

[Balance]

Wow $1.04 .. seems like someone has an appetite .. ;)

If it is Milford, we will see $1.10 by tomorrow close - they normally pay up to get volume (if volume is available at that price) after getting set in an underlying position.

PS. Milford has been buying back into FBU in the last few months.

[nztx]

Not a lot passing across the floor (okay NZX screens) - just a bit over 209K vol

[Balance]

Courtesy of W69 :

Awesome numbers from Stats NZ re December consents.

Note the reference to non residential activity - looking good for STU!

Westpac say:

December was another strong month for consent issuance, capping off what’s turned out to be a massive year.

On the residential side, issuance was up 4.9% in December (prev. +1.2%). Over the past 12 months, 39,420 new dwellings were consented. That’s the highest level since 1974 and even more impressive given the disruptions associated with the lockdowns in the middle of the year.

Much of the strength in issuance has been centred on Auckland, where just under 16,700 new dwellings were consented over the past year (up 10% vs 2019). That’s more than enough to keep up with population growth, and if that pace can be sustained it will erode the shortage of houses in the region. Underlying this strength in Auckland has been a massive lift in the number of medium density dwellings that are being consented (i.e. townhouses), the rate of which has surged higher in recent months.

We’re also seeing solid issuance in Canterbury, while numbers in other parts of the country have remained firm.

Today’s result reinforces our expectations for a significant rise in residential construction over the coming year. That’s being underpinned by the low level of interest rates and strong gains in house prices, which are boosting developers’ confidence. Yesterday’s labour market data signalled that this is already boosting employment in the construction sector.

We’re also seeing firmness on the non-residential side. While not roaring away like residential activity, spending on commercial buildings has retraced its lockdown-related fall and is holding at a solid level. We think that businesses will remain cautious about capex over the coming year. However, investor demand for commercial property has been resilient and the ongoing recovery in the economy is likely to support increases in commercial building activity over the coming year.

[Balance]

https://www.stuff.co.nz/life-style/homed/real-estate/124150087/record-building-consents-reaching-levels-that-could-surpass-their-1970s-heyday

Bit more colour to the December building consent numbers.

Major issue for the building & construction activity will be availability of resources to meet the construction demand.

So expect the boom to spread out way into 2022 and beyond.

Extremely positive for STU & FBU.

No wonder Milford is back buying into the sector after selling down and out 2 years ago!

[Filthy]

Extremely positive for STU & FBU

& MPG. plenty of upside for all three

[sb9]

Solid upward run keeps continuing...

[Baa_Baa]

Solid upward run keeps continuing...

Happy as, very bullish sector signals emerging, STU should ride the coat tails of (imo) likely revised guidance upwards for construction sector participants. FBU result will be informative.

TBH, it's not really surprising, with the tons of money thrown at the construction sector vis a vis economic recovery, the companies would have to be complete numpties to not be making hay in this market.

[Balance]

Happy as, very bullish sector signals emerging, STU should ride the coat tails of (imo) likely revised guidance upwards for construction sector participants. FBU result will be informative.

TBH, it's not really surprising, with the tons of money thrown at the construction sector vis a vis economic recovery, the companies would have to be complete numpties to not be making hay in this market.

That they were during the last building & construction boom. That boom actually caused them to blow themselves up!

This time is different however until a few years time when the same bad habits make their way into the corporate culture again?

[Baa_Baa]

That they were during the last building & construction boom. That boom actually caused them to blow themselves up!

This time is different however until a few years time when the same bad habits make their way into the corporate culture again?

Who knows eh, I was into STU in 2012, and out during 2014 with a healthy profit when I became concerned about their execution. Was pretty upset at the time I recall, they seemed to have so much promise. Since then it's been a capital disappointment and long wait until recently. This time I've left it a bit longer getting in to see if they're on board the construction sector boom and feel reasonably confident for the meantime they'll do very well.

My price triggers are a fair way above here, assuming they perform, otherwise a fairly close stop will make the decision for me. Target 50-60% upside from here within 6 months, double that within 12 months, the monthly chart is a better tool for STU imo, smoothes out the noise. Assumes they don't "blow themselves up" again, lol!

[Ferg]

Disclosure: [snip]sold all in December.

Well that aged like milk! The reverse Midas touch strikes again......:laugh:

I'm ok with that decision given I put the funds into LGND on the NASDAQ. I am curious to see how Ligand plays out.

Good luck to STU holders.

[nztx]

Bluescope report NZ Steel had a boomer of half year

New Zealand Steel is set to report its best half-year result in two years as it benefits from strong domestic construction and cost-cutting started last year.


Didn't this outfit announce it was closing down something a while back ? ;)

Or was it another outfit in the same game ?

[nztx]

Well that aged like milk! The reverse Midas touch strikes again......:laugh:

I'm ok with that decision given I put the funds into LGND on the NASDAQ. I am curious to see how Ligand plays out.

Good luck to STU holders.


Ditto .. likewise .. playing with the Green Med Bakky stonks on the rise up there recently .. ;)

[Balance]

Thanks for that infor, w69.

Expanding further :

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02334884-3A560211?access_token=83ff96335c2d45a094df02a206a3 9ff4

NZ & Pacific operations improved substantially in H1 2021 - EBIT expected to be in excess of $55m.

Compares with $12.9m in H1 F2020.

Given that STU is Bluescope's major distributor in NZ, augers very well for STU operations.

And here's FBU's H1 F21 commentary on their steel operations :

"EBIT in the Steel business improved by $17 million compared to the prior period, supported by strong price governance, a focus on profitable sales mix and reductions in labour and property costs."

"In the pipes (Iplex, Humes) and steel businesses, gross revenue was up by 3%. These businesses experienced subdued volumes in the infrastructure and vertical construction markets, whilst civil and subdivision work showed good demand, particularly in the Auckland region."

Again, augers well for STU when they report next week - 26 Feb.

Reinstatement of dividend (however small) will be another positive development for the sp.

[sb9]

Reinstatement of dividend (however small) will be another positive development for the sp.

As per their recent trading update comments..

• Cash position remains strong with cash of approximately $24m as at the end of November 2020 (up from $7m net cash at 30 June 2020) with zero debt.

Based above and under current ultra low-interest environment, I'm picking dividend reinstatement has a strong possibility (1 to 2 cents may be)..

[Poet]

As per their recent trading update comments..

• Cash position remains strong with cash of approximately $24m as at the end of November 2020 (up from $7m net cash at 30 June 2020) with zero debt.

Based above and under current ultra low-interest environment, I'm picking dividend reinstatement has a strong possibility (1 to 2 cents may be)..

No reason they couldn't pay 5c dividend ($8m) - their cash is building up and what other use do they have for it? That would put a rocket under sp wouldn't it?
It would be unimputed though given their recent losses

[RTM]

No reason they couldn't pay 5c dividend ($8m) - their cash is building up and what other use do they have for it? That would put a rocket under sp wouldn't it?
It would be unimputed though given their recent losses

I'd rather we had the money than the company. Be great if they did.

[Balance]

No reason they couldn't pay 5c dividend ($8m) - their cash is building up and what other use do they have for it? That would put a rocket under sp wouldn't it?
It would be unimputed though given their recent losses

FBU has declared a dividend so there's every reason for STU to pay a dividend.

Given the trading update was in November 2020, there can only be surprises on the upside imo.

If there was any adverse development since the update, that would have been disclosed by now.

[nztx]

Don't be too greedy now - the training wheels are probably still on after recent earlier years' trading cards
and ledger print outs..

Last time - Acquire some earning targets for a time was an answer before that came back to bite hard
before things were put on the blocks for a period of recovery .. with all the write-offs under the sun

Many may not have too much confidence in the short time since the big bad times, the collective bottoms
around the Board table have had enough time to condition themselves to better prevailing winds and
to maintain the ship on reasonable course without going back to old bad habits with follow on consequences .. ;)

If the wind direction should change - what then ? .. and they could easily change too ..

[Poet]

Don't be too greedy now - the training wheels are probably still on after recent earlier years' trading cards
and ledger print outs..

Last time - Acquire some earning targets for a time was an answer before that came back to bite hard
before things were put on the blocks for a period of recovery .. with all the write-offs under the sun

Many may not have too much confidence in the short time since the big bad times, the collective bottoms
around the Board table have had enough time to condition themselves to better prevailing winds and
to maintain the ship on reasonable course without going back to old bad habits with follow on consequences .. ;)

If the wind direction should change - what then ? .. and they could easily change too ..

A company like this shouldn't have $24 m in the bank, it should have an appropriate level of working capital and an appropriate level of debt (appropriate, that is, to its sustainable ebitda).

The fact that we are prioritising paying down debt (to zero) is due to the poor decisions taken by poor management in the past. At some stage we should leverage appropriately and start to pay the long suffering shareholders some return.

[nztx]

A company like this shouldn't have $24 m in the bank, it should have an appropriate level of working capital and an appropriate level of debt (appropriate, that is, to its sustainable ebitda).

The fact that we are prioritising paying down debt (to zero) is due to the poor decisions taken by poor management in the past. At some stage we should leverage appropriately and start to pay the long suffering shareholders some return.

Agree with you there

but STU probably has recent bad memories of Debt & what happened in the past 4 years .. ;)

So from this is it not lessons of the past not learned on what their Balance Sheet should look like optimised ? ;)

Maybe the new Finance big wig could have some better ideas ?

[Baa_Baa]

Good result imo. Gltah

[waikare]

Good result imo. Gltah

Agree and paying a divi , be it 1.2cps...……………..

[Balance]

Good result imo. Gltah

And resumption of payment of dividends.

[BlackPeter]

Good result imo. Gltah

I'd second this:

$7.6m earnings - above top end of latest guidance
Strong balance sheet with all debt repaid and $23.9m cash (though - a bit lazy, isn't it?)

good outlook: "Strong pipeline of secured contract work for 2H21 with improving activity in most sectors"

... and yes, they are paying a divie.

This will give the SP a boost :):

[freebee]

Market not liking it ,not sure why ? topped up more on open

[macduffy]

Market not liking it ,not sure why ? topped up more on open

The market's nervous. Anything not beating expectations will be either punished or ignored, forgetting that the world is still under the influence of Covid-19.

Disc: I hold a small parcel.

[BlackPeter]

Market not liking it ,not sure why ? topped up more on open

I guess you never know what markets expected in the first place. Markets turning more and more into a huge casino ...

[CraftyBeer]

I guess you never know what markets expected in the first place. Markets turning more and more into a huge casino ...

There does seem a real betting mentality going on rather than an investing mentality. I'm grateful to have STU returning a div again and having a positive outlook after the past few troublesome years.

[Balance]

There does seem a real betting mentality going on rather than an investing mentality. I'm grateful to have STU returning a div again and having a positive outlook after the past few troublesome years.

Traders getting out - part of the ebb & flow of the market.

[Poet]

Very disappointed that them beating their own forecast and resuming dividends resulted in a 5% fall in share price. Not sure what to make of it - could it be something to do with the small size of the dividend in comparison to their cash on hand of $24m and...
"with a net cash position of $23.9m as at 31 December 2020 to support capital investment and growth initiatives."

Are we off on some new trip into crazy "growth" investments and initiatives??? - come on directors and management, just get the existing company back on track reliably and start returning some cash to your long suffering shareholders - forget about empire building and stick to your knitting.

Also, can anyone explain the following for me

The NPAT is stated at
"The company has reported a Net Profit After Tax of $4.3m, up from a loss of $(37.0)m the prior year."

and dividend is

"Given the turnaround in performance and the improved economic outlook, the Board has been pleased to resume dividend payments with an interim dividend of 1.2 cents per share (unimputed), in line with Steel & Tube’s dividend policy of 60% - 80% of NPAT."

But 1.2c dividend on 165 m shares is $1.99 million which is 46.32% of NPAT

What's going on there?

Disclosure - reasonable size stake and probably looking to buy more on current weakness, but would like to understand said weakness first

[Balance]

Very disappointed that them beating their own forecast and resuming dividends resulted in a 5% fall in share price. Not sure what to make of it - could it be something to do with the small size of the dividend in comparison to their cash on hand of $24m and...
"with a net cash position of $23.9m as at 31 December 2020 to support capital investment and growth initiatives."

Are we off on some new trip into crazy "growth" investments and initiatives??? - come on directors and management, just get the existing company back on track reliably and start returning some cash to your long suffering shareholders - forget about empire building and stick to your knitting.

Also, can anyone explain the following for me

The NPAT is stated at
"The company has reported a Net Profit After Tax of $4.3m, up from a loss of $(37.0)m the prior year."

and dividend is

"Given the turnaround in performance and the improved economic outlook, the Board has been pleased to resume dividend payments with an interim dividend of 1.2 cents per share (unimputed), in line with Steel & Tube’s dividend policy of 60% - 80% of NPAT."

But 1.2c dividend on 165 m shares is $1.99 million which is 46.32% of NPAT

What's going on there?

Disclosure - reasonable size stake and probably looking to buy more on current weakness, but would like to understand said weakness first

1. Indiscriminate selling yesterday by traders and cautious /nervous investors in some stocks like STU which have performed exceptionally well YTD, rather than anything inherently wrong with the companies or economic settings imo. STU started the year at 93c and in a market which has gone backwards 7% YTD and 10.5% from its high, has still performed very well.

If inflation becomes a problem (which appears to be main reason for recent global selloff), then we know that well managed cyclical stocks with proven track records are actually the best inflation hedge.

STU is still a turnaround story so will need a few more runs on the board before investors and the market gain more confidence in the stock.

2. The 60% - 80% of NPAT will be made up with the final dividend. Directors are just being cautious and that's fair enough in the pandemic environment we are still in.

[Poet]

1. Indiscriminate selling yesterday by traders and cautious /nervous investors in some stocks like STU which have performed exceptionally well YTD, rather than anything inherently wrong with the companies or economic settings imo. STU started the year at 93c and in a market which has gone backwards 7% YTD and 10.5% from its high, has still performed very well.

If inflation becomes a problem (which appears to be main reason for recent global selloff), then we know that well managed cyclical stocks with proven track records are actually the best inflation hedge.

STU is still a turnaround story so will need a few more runs on the board before investors and the market gain more confidence in the stock.

2. The 60% - 80% of NPAT will be made up with the final dividend. Directors are just being cautious and that's fair enough in the pandemic environment we are still in.


Thanks Balance,
I think I'll continue to accumulate and hope the price stays down while I do.

[Shareguy]

I thought it was a pretty good result. The second half is always far better than the first half. Currently there is a real supply issue ,so prices are rising with a lot more margin and less discounting. Couple with a big drop in costs I’m expecting a very good year end result.

[SailorRob]

I thought it was a pretty good result. The second half is always far better than the first half. Currently there is a real supply issue ,so prices are rising with a lot more margin and less discounting. Couple with a big drop in costs I’m expecting a very good year end result.

Yeah likewise. Absolutely unreal they're not buying back shares hand over fist. Just goes to show they still haven't got a handle on capital allocation. Criminal paying a dividend when stock so far under intrinsic.

[Entrep]

I was a happy buyer at 98c

[Scrunch]

A “perfect storm” had led to Carter Holt Harvey not being able to meet demand for a structural wood product called “wides” – 245mm wide timber used in a wide range of building applications, from flooring to trusses.

He said Carter Holt Harvey was the biggest manufacturer of wides in New Zealand, and it had been caught off guard by a rise in demand from multi-storey housing builds.

“We’re seeing all these multi-storey units – two or three floors requiring much more timber.
https://www.stuff.co.nz/business/industries/124676884/carter-holt-harvey-supply-shakeup-could-change-the-future-of-housing-in-new-zealand-federation-says

I wonder whether this will see a progressive shift to the use of steel rather than wood for this this structural building work. This would obviously help steel suppliers like STU.

[nztx]

https://www.stuff.co.nz/business/industries/124676884/carter-holt-harvey-supply-shakeup-could-change-the-future-of-housing-in-new-zealand-federation-says

I wonder whether this will see a progressive shift to the use of steel rather than wood for this this structural building work. This would obviously help steel suppliers like STU.


whats to say that the same issues wont also come to the fore with steel and other supplies / services ? ;)

are there enough chippies & sparkies around to do what's needed ?

Last time - with CHCH recovery they were importing them from afar to fill the Skills gaps ..

[Entrep]

Solid interest today, waiting for the real fireworks to begin

[nztx]

Solid interest today, waiting for the real fireworks to begin



hopefully they have long enough memories to know how to still handle them

the day before Good Friday looks like it was a bit of a fizzer .. ;)

may still be a few days left for folks to requisition their crash helmets .. ;)

[Snow Leopard]

Got an email from S&T today telling me how it is better than wood for houses and things and infinitely recyclable and excellent for the environment.

Go do your bit for nature, the planet and my net worth by building with steel tubes.

[nztx]

Got an email from S&T today telling me how it is better than wood for houses and things and infinitely recyclable and excellent for the environment.

Go do your bit for nature, the planet and my net worth by building with steel tubes.

you missed mention of 'strong cages' - snow ;)

also whether to lock in a large stack of S&T or to keep the large feline guarding the stash in
or busy on the outer edges, in case of other predators coming by .. ;)

[sb9]

Steady rise over past few days, next trading update whenever that is will be key driver.

[Shepherd]

Yes, great to see upward movement at long last. I am looking forward to the next trading update. Volumes seem quite healthy too.

[Shareguy]

Don’t think you’ve seen anything yet. Still well undervalued and only trading currently at NAV. It’s going to be a very good result however the lazy balance sheet needs addressing . 23 million in cash in the bank and no debt as at 31st of December. Expect over 30 million in the bank for end of year results. If they can’t find any acquisitions then Either a share buyback or special Dividend needs to be considered.

[SailorRob]

Don’t think you’ve seen anything yet. Still well undervalued and only trading currently at NAV. It’s going to be a very good result however the lazy balance sheet needs addressing . 23 million in cash in the bank and no debt as at 31st of December. Expect over 30 million in the bank for end of year results. If they can’t find any acquisitions then Either a share buyback or special Dividend needs to be considered.

Finally someone gets it. A massive share buy back at these prices would be supreme capital allocation and mean a massive return for shareholders.

[RTM]

Finally someone gets it. A massive share buy back at these prices would be supreme capital allocation and mean a massive return for shareholders.

While I get it....prefer a dividend.
There are ways to do a special dividend and return capital ?

[Balance]

While I get it....prefer a dividend.
There are ways to do a special dividend and return capital ?

Share cancellation - like I believe AIA did years ago. Singularly successful.

[SailorRob]

While I get it....prefer a dividend.
There are ways to do a special dividend and return capital ?

I prefer making money! And tax efficiently.

No way Buffett would pay a dividend and screw his shareholders out of triple the return vs dividend.

[macduffy]

I prefer making money! And tax efficiently.

No way Buffett would pay a dividend and screw his shareholders out of triple the return vs dividend.

No need to involve Warren Buffett in this debate. Berkshire Hathaway is, naturally, managed to maximise its return to its biggest shareholders.

[Baa_Baa]

The STU price chart is encouraging (https://invst.ly/uhxih), medium term a nice run up from $0.47 Covid low, consolidation short term around $1 and a bolt upwards this week above the 50MA on good volume. Indicators suggest the overhead resistance at $1.09/1.10 will be a near term test.

Long term, this monthly chart gives something to aspire to. For anyone holding STU the past 20 years, hopefully the dividends were worth it. It's a long haul back to $5

12440

Disc: hold at 5% of portfolio and planning to add above $1.10. Been a while since last bought Jan 2012, sold Oct 2013.

[winner69]

I prefer making money! And tax efficiently.

No way Buffett would pay a dividend and screw his shareholders out of triple the return vs dividend.

I think you should explain to some why buyback is better for shareholders - esp if returns are triple v dividend

Get them on board

[SailorRob]

No need to involve Warren Buffett in this debate. Berkshire Hathaway is, naturally, managed to maximise its return to its biggest shareholders.

The most incorrect statement I have ever read in my life. Offensive in fact.

The most small shareholder friendly company in the world.

[SailorRob]

Good point.

So if the company pays out excess capital to shareholders as a dividend then all of them will have to pay tax on that dividend. Some will pay tax at different rates but for most it will be at 30 or 33 cents on the dollar, turning $1 of dividends into 70 or 67 cents. So you've just taken a perfectly good dollar that you own as a shareholder and realised a 33% loss on that capital instantly.

Instead that WHOLE dollar could be used to buy shares in a pretty decent business and thus a share of all future earnings not to mention a share of the assets which will include the leftover cash, at a 33 to 50% discount. Essentially that's what's happening. They're using the companies money to buy shares for you. Or concentrate your ownership, so if you work out your ownership of the company before and after the repurchase you will now own more of the company.

The math all depends on the discount to intrinsic value the shares are repurchased at, and this is not a fixed number and will change somewhat due to future performance, but the returns could well be 10 x higher vs the dividend depending what happens in future.

And I guess this is why some want a dividend in the hand rather than 2 in the bush. But a Dividend now immediately destroys value and a repurchase below intrinsic immediately increases value.

Buybacks at higher than intrinsic value will destroy value, and this is what most companies do unfortunately.

Cheers

[winner69]

Good point.

So if the company pays out excess capital to shareholders as a dividend then all of them will have to pay tax on that dividend. Some will pay tax at different rates but for most it will be at 30 or 33 cents on the dollar, turning $1 of dividends into 70 or 67 cents. So you've just taken a perfectly good dollar that you own as a shareholder and realised a 33% loss on that capital instantly.

Instead that WHOLE dollar could be used to buy shares in a pretty decent business and thus a share of all future earnings not to mention a share of the assets which will include the leftover cash, at a 33 to 50% discount. Essentially that's what's happening. They're using the companies money to buy shares for you. Or concentrate your ownership, so if you work out your ownership of the company before and after the repurchase you will now own more of the company.

The math all depends on the discount to intrinsic value the shares are repurchased at, and this is not a fixed number and will change somewhat due to future performance, but the returns could well be 10 x higher vs the dividend depending what happens in future.

And I guess this is why some want a dividend in the hand rather than 2 in the bush. But a Dividend now immediately destroys value and a repurchase below intrinsic immediately increases value.

Buybacks at higher than intrinsic value will destroy value, and this is what most companies do unfortunately.

Cheers

Be a bit of a bugger if they decided the spare cash better off in shareholders hands and did a pro-rata buyback (like Tilt did)

If so in theory EPS etc would increase and share price go up eh so all hunky dory

[SailorRob]

Be a bit of a bugger if they decided the spare cash better off in shareholders hands and did a pro-rata buyback (like Tilt did)

If so in theory EPS etc would increase and share price go up eh so all hunky dory

Yeah you're absolutely right, would be a bugger but not the end of the world, you'd have the option to use the cash to buy more shares I guess, or not to sell in the first place.

The biggest danger to us all is that they try and spend it on something other than dividends or buy backs, if they do there is a virtual certainty that they will destroy value.

[nztx]

Yeah you're absolutely right, would be a bugger but not the end of the world, you'd have the option to use the cash to buy more shares I guess, or not to sell in the first place.

The biggest danger to us all is that they try and spend it on something other than dividends or buy backs, if they do there is a virtual certainty that they will destroy value.


Goodness .. now what does STU's past history tell us about this ? ;)

More of the same repeated & all the eager holders may end up with a large CAP RAISE instead to then try to fix the job again .. ;)

[Poet]

Yes this is definitely a company that should be prey, not predator

[nztx]

It would be real good if Fletcher's got interested in this curious kettle of fish again .. ;)

No-one would care about a Div, buyback or any other distractions then ..

[Greekwatchdog]

I hope not. The board more or less told them to F**K Off when they came in at $1.95. Commerce Commission will also have a say.

[nztx]

I hope not. The board more or less told them to F**K Off when they came in at $1.95. Commerce Commission will also have a say.


but then the Board would have to up their game to pull a whole line of rabbits out of the hat & deliver .. ;)

probably exactly what shareholders could have hoped the Doctor would have ordered too (Part II)

[Greekwatchdog]

STU have under delivered for so long. I am surprised shareholders allowed the Chair to stay. It won't happen and like you say the "Board"' had better deliver. Shareholders deserve that much

[winner69]

What is STU's dividend policy? Seem hell bent on paying a final divie don't they

[winner69]

Analysts don’t think much of STU ...target prices range from $0.66 to $1.00

And Shareclarity DCF value is $0.70

[Dassets]

Who covers them? I didn't think anyone mainstream still covered them in any meaningful way. To me that is a lot of the attraction.

[winner69]

Who covers them? I didn't think anyone mainstream still covered them in any meaningful way. To me that is a lot of the attraction.

Just what the 3 on marketscreener have them at

If you were a broker analyst what target price would you put on STU?

[Balance]

Analysts don’t think much of STU ...target prices range from $0.66 to $1.00

And Shareclarity DCF value is $0.70

Probably the same analysts who were very dark on FBU at $4.00?

Thank you very much for their outstanding research and fine efforts, I say!

[Dassets]

As some of you may know I was an analyst many moons ago. But you can never take the anal out of analyst. In fact I think I covered STU back in the 90s. I would only put a target price on something if I had done a stack of work eg top down and bottom up. For this company 2-3 months full time work to establish then move to monitor/observe. Oh I forgot also write brokerage!!

I have a view based on a fraction of that full analysis. I think the company has made the moves that indicate the beginnings of a successful turnaround but early days. I think the balance sheet will have to be addressed at some point. I think the dividend "policy" needs a full re-think based on cashflow. I do not believe that the company has any realistic large acquisitions on the horizon. I think shareholders can signal to the board that support for this is weak/non-existent.

I think the price should be well north, no longer a value trap. I will disclose that I own stock.

[SailorRob]

Re post from earlier, still think valid, in fact the immediate future outlook may be slightly clearer now.

Still seems very cheap and appealing against the wider market particularly, only NZX stock I own.

Are these analysts running their own capital? Why do they need salaries from firms for doing research - if they're any good they'll be running their own and close friends and family money?

Do people realise how expensive the NZ50 is compared to any historical precedent...


They have averaged a Net Profit of 17.4 million/year over a period of 13 years which includes a once or twice in a lifetime global recession. Now granted with a lot of those earnings they have retained them and destroyed them in spectacular fashion. They also paid out 15 million a year average in dividends and then took back a lot of money in an equity raising, net of which the dividends would have averaged 9 million a year. They at times employed significant leverage to produce these cash flows. The top-line growth over this whole period has been non existent.

So looking forward, which is I believe is difficult - If we take one case and I'm going to call it 'best conservative case' and assume that revenues remain the same going forward, margins remain similar and thus net profit remains the same averaged over time. BUT this time they don't destroy any retained cash, they don't employ it well either, just for every $1 retained only $1 of value is created. Under this scenario we can now try and assume a multiple for this profit.

Now when deciding a multiple, we see that the NZ50 PE according to S&P, is about 45. Yes this will be somewhat because of COVID earnings but regardless it's incredibly high, all time high in fact (look at the CAPE). People will say 'yes but with the discount rate/bond yields/interest rates so low' and I will think hmmm why are they so low. Mostly because we're in the middle of another massive recession and have had abysmal economic growth really since 2007 aside from what a huge population increase has given us. I digress, but I'm not at all comfortable that we really have conditions that warrant higher than long term average PE's.

So for regular business like Steel and Tube that has kicked it's old habits but still just plodding along... It is a duopoly and now has no debt, so even if it performed as it has in the past, it's now all equity and could be goosed if that made sense in future... Hell I'm not giving it any more than 15. So say 17 million times 15 is around 250 million. There are 166 million shares so that's $1.50.

So in my opinion, anyone that thinks it is worth more than that (and I may be one of them) is speculating, probably on multiple moving balls.

Now I can do a worst case and base that on exact historical performance (it can get worse than that too) and I can do a best case in which I would attribute at least average capital allocation skills, say retained earnings reinvested at 7%, some leverage applied, growth at least in line with population growth. But I'll just stick with my case above and I can tell you I'll probably sell early as a result but I'm totally happy with that as if I don't then I may as well go to the Casino.

This is why I was ranting so hard about it when it was in the 50's. It was massively undervalued.

[Shepherd]

Great to see a slow but steady rise in the share price with not insignificant volumes.

[sb9]

Great to see a slow but steady rise in the share price with not insignificant volumes.

For sure, slow but steady price rise over past few days, wonder if we're due for a trading update anytime soon...

[Dassets]

I am hearing that local construction companies are going back to STU after saving themselves a dollar or two with Chinese product and are finding STU is busy servicing loyal clients. It will be interesting to see what happens with margins, I hope STU doesn't push it too hard and supports its loyal clients by not pushing margins too hard. This is an opportunity for STU to show the construction industry that it should stay with domestic suppliers long term, and therefore burn off these other suppliers. Any one with construction industry connections want to throw in your 2 cents worth?

[Ferg]

Any one with construction industry connections want to throw in your 2 cents worth?
Local companies are trying to gouge. The local steel cost is double or triple versus importing. It's better to wait out the logistics issues and hold extra stocks where you can, rather than be shafted. Steel prices ex China are up again from 1 May.

[winner69]

I am hearing that local construction companies are going back to STU after saving themselves a dollar or two with Chinese product and are finding STU is busy servicing loyal clients. It will be interesting to see what happens with margins, I hope STU doesn't push it too hard and supports its loyal clients by not pushing margins too hard. This is an opportunity for STU to show the construction industry that it should stay with domestic suppliers long term, and therefore burn off these other suppliers. Any one with construction industry connections want to throw in your 2 cents worth?

STU shareholders would be a bit peeved if they weren’t trying to ‘maximise profit’ with this opportunity

[Getty]

Steely resolve is required

[Balance]

STU shareholders would be a bit peeved if they weren’t trying to ‘maximise profit’ with this opportunity

Exactly!

There is no loyalty left in the commercial world out there these days.

[BeeBop]

I am in the construction industry...it is not just the suppliers gouging....it is rife with kick-backs and absolute short-term thinking. Unfortunately all of this is driving inferior construction choices - I am watching one house go up with much much cheaper non-steel roofing, if it leaks it will be after year 5, well after those responsible for the construction and sale have moved on. My steel roofing costs for a medium density development has not changed from pre-COVID *circa 550m2 of roofing plus overs).

[Dassets]

I take a different view as that approach is part of why STU got into the s*** before. I think shareholders would rather a more stable business rather than gouging customers whenever they could. Why, this spins into dividend stability and reduces perceived risk by the market hence better multiples. But hey what would I know.

[Dassets]

Thanks BeeBop, sort of what I have heard. I hope STU directors/mgmt are reading this. I will certainly be asking these questions at the AGM and sooner. If this company is going to go forward it had better be prepared to tell shareholders how it is approaching this issue.

[SailorRob]

I take a different view as that approach is part of why STU got into the s*** before. I think shareholders would rather a more stable business rather than gouging customers whenever they could. Why, this spins into dividend stability and reduces perceived risk by the market hence better multiples. But hey what would I know.

Exactly right. All this short term thinking damages long term results.

Much like everyone hanging out for am increasing share price. Much better it falls. 50c beats $1.50 but few think like this.

[BeeBop]

As to the kick-backs 'aka rebates', a 1085 GFA development (half of which has a complex roof design, the other half is simple) has been charged 47k for steel roofing where the supplier was carefully selected to avoid 'rebates'. Another development with a GFA of 580 using a well known supplier (not STU) is also paying 47k for a standard steel roof design. The costs are in the entire ticket clip from consultants owning/trading their 'clients', through to rebates and the final government ticket clipping.

[Shepherd]

Hi BeeBop, that sounds like interesting stuff, but please explain more, - what is GFA? and please explain hw these rebates work?
Cheers

[Shareguy]

Caught up over the weekend with someone in the industry. World wide steel prices have increased dramatically in some cases over 40%. The roofing division is Flat-stick and I would imagine that Stu would’ve sold the current inventory at replacement cost therefore making a big gain. Still extremely undervalued in my opinion and I’m expecting an upgrade.

[thegreatestben]

Hi BeeBop, that sounds like interesting stuff, but please explain more, - what is GFA? and please explain hw these rebates work?
Cheers

GFA in construction terms is Gross Floor Area

[mfd]

GFA in construction terms is Gross Floor Area

I have one of those underneath my oven.

[Entrep]

Down massively today for some reason

[Shepherd]

Thanks for the definition.

[Habits]

I have one of those underneath my oven.

Took me a while to get that, very well done

[BeeBop]

Hi BeeBop, that sounds like interesting stuff, but please explain more, - what is GFA? and please explain hw these rebates work?
Cheers

Rebates I think are endemic in construction i.e. a purchaser is enticed to put most of their orders through a company and provided they meet a certain 'target' volume, they will get a cash-back or equivalent. People think it is the cost of materials that is causing the problem but it is way way way more than that. There is constant ticket clipping: 'clients' are valuable; council seem to demand over the top testing; utility companies have crazy pricing (some can bring a quote of nearly 400k down to 15k when 'moved' to another way of doing things). If costs of about 10k are added to a unit by the time it is multiplied up by the developers margin, real estate fees and GST, the added cost to the end purchaser will be around 14k. No wonder Williams etc can do it cheaply as they will be avoiding much of the ticket clipping....there is a lot of money to be made out of the mum and dad backyard developers and Williams will be able to feed off the price 'buoyancy' provided.

[BeeBop]

I expect the price decline could be related to Mr Roberston's announcement yesterday.

[Balance]

I expect the price decline could be related to Mr Roberston's announcement yesterday.

FBU powers higher so probably not the reason.

[sb9]

Good to see CEO buying a decent parcel on market.

[Shareguy]

Yes it is. Maybe it’s because we’ve got the biggest building boom in recent history. A Lazy balance sheet with plenty of cash and no debt and a NAV not far from the current sale price.

[Ferg]

Not 100% relevant to STU (although they are named as a stage 3 producer) but NZ Steel are attempting to shut down imports of zincalume rolled steel from Korea and Taiwan on the dubious claim of "dumping". Such a claim is laughable and without merit given volume constraints imposed by exporters. The export prices they quote are not correct. What we have is an inefficient local producer trying to get protection for their patch, while gouging locals. No thank you.
https://www.mbie.govt.nz/dmsdocument/14954-application-for-korea-and-taiwan-aluminium-zinc-coated-steel-anti-dumping-duties
and
https://www.mbie.govt.nz/dmsdocument/14951-initiation-report-application-for-dumping-investigation-aluminium-zinc-coated-steel-from-korea-and-taiwan

[nztx]

Yes it is. Maybe it’s because we’ve got the biggest building boom in recent history. A Lazy balance sheet with plenty of cash and no debt and a NAV not far from the current sale price.


Some of us may be waiting to see how much of the large Boom just goes sailing past STU's front door down the road unnoticed .. ;)

[nztx]

Good to see CEO buying a decent parcel on market.


Most would be hoping the CEO is doing a fair bit more than just organising a buy up of a bundle of STU shares .. ;)


Any other signs of perhaps increased activity being emitted ? ;)


Any other beeps, pings, muffled yells, or increased tea trolley service in the Boardroom's general direction yet ?

[Balance]

Some of us may be waiting to see how much of the large Boom just goes sailing past STU's front door down the road unnoticed .. ;)

Could say the same about FBU and look at how that company has powered on from strength to strength, without too much of that sonic boom echoing through their board room?

[Shareguy]

Could say the same about FBU and look at how that company has powered on from strength to strength, without too much of that sonic boom echoing through their board room?

I still have a number of contacts in the steel industry and from what I’m hearing Stu is doing very well. I think everyone is going to be very pleasantly surprised at the result. The CEO topping up is another good sign.

Disc My largest position by a long way.

[Shareguy]

Could say the same about FBU and look at how that company has powered on from strength to strength, without too much of that sonic boom echoing through their board room?

I still have a number of contacts in the steel industry and from what I’m hearing Stu is doing very well. I think everyone is going to be very pleasantly surprised at the result. The CEO topping up is another good sign.

Disc My largest position by a long way.

[tommy_d]

Disc My largest position by a long way.
I did a lot of reading and thinking on STU, thought they were chronically undervalued, held and watched a little while, second-guessed myself, didn't hold the faith. Bought a parcel at $0.70 in april 2020, sold at a small loss in october 2020 when I decided I must be missing something...

[Arbroath]

I still have a number of contacts in the steel industry and from what I’m hearing Stu is doing very well. I think everyone is going to be very pleasantly surprised at the result. The CEO topping up is another good sign.

Disc My largest position by a long way.


If you're on the money so to speak they should be issuing a forecast earnings upgrade shortly. I guess the CEO might want some space between buying more and doing that though...

[winner69]

Mark acquired those shares from Ngaire Malpass

Whats the gossip

[Shareguy]

No, the shares were acquired on market ,in the name of his wife.

[RTM]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/374044/348354.pdf

Hmmmm….not quite sure what to think of this. Presumably they wouldn’t be doing this if things were going badly ?
Bit on wood buildings for Govmnt “interesting”.

[percy]

Well they were certainly talking the talk.

[Dassets]

Pity they call the RNZAF RNZAL, great to harp on about a project - bad to get the client's name wrong. Oh well. The investor relations certainly need a pull through.

[Shareguy]

Thought it was a very positive update. Distribution doing well is the key.

[RTM]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/374044/348354.pdf

Hmmmm….not quite sure what to think of this. Presumably they wouldn’t be doing this if things were going badly ?
Bit on wood buildings for Govmnt “interesting”.

[nztx]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/374044/348354.pdf

Hmmmm….not quite sure what to think of this. Presumably they wouldn’t be doing this if things were going badly ?
Bit on wood buildings for Govmnt “interesting”.

Good point .. not alot said however about financial nuts & bolts or any guidance ..

Remember these guys on the Board probably have access to monthly trading P&L reports
for the company..

Most listed companies of any consequence probably have Financial Accountants spitting
these things out each & every month .. STU should be no different on it's size

Memory tells me that STU was a Company that hoisted on the market not so many years ago
massive impairments on year end reporting. This sort of thing they should have been aware
of being likely through the year rather than dumping it on the market.

In comparison TRA in quarterly distributions appear to be right on top of their trading reports
in that they know where things are going to be able to declare quarterly distributions..

This is yet another area where STU tidying up their act is well overdue & should be looked
for from the Directors by their stakeholders..

[Shepherd]

I also agree that putting out an investor news letter with no figures is very poor. They must have the data and as investors we deserve to know what the figures are.

[Balance]

I also agree that putting out an investor news letter with no figures is very poor. They must have the data and as investors we deserve to know what the figures are.

Give it a few weeks (post 30 June year end) and I am picking STU to be one of the first companies to provide some figures/numbers with a nice earnings upgrade.

My neighbor in front had to wait 6 weeks to get his steel beams for his house reno and that's after he paid up to get them.

So there must be some very nice margin improvements happening out there with steel prices going up and no requirement to compete on prices like in the last few years.

[nztx]

Is it time to back the truck on STU or are some still digesting the recent figureless update
and enjoying all the Board's glossy pics & feel good .. ? ;)

[Balance]

Give it a few weeks (post 30 June year end) and I am picking STU to be one of the first companies to provide some figures/numbers with a nice earnings upgrade.

My neighbor in front had to wait 6 weeks to get his steel beams for his house reno and that's after he paid up to get them.

So there must be some very nice margin improvements happening out there with steel prices going up and no requirement to compete on prices like in the last few years.

Just been told by one of my contacts in the building industry that STU has advised them of further price increases in July and for certain products, to expect further delays in deliveries as well.

Things are getting really grim out there for the independent building industry players who were buying their construction & building materials (in previous years) like steel from direct importers who are now squeezed out of the supply chain. Only loyal & long staying customers are getting ready access to supplies - pays to have a good relationship with established distributors like STU.

[BlackPeter]

Just been told by one of my contacts in the building industry that STU has advised them of further price increases in July and for certain products, to expect further delays in deliveries as well.

Things are getting really grim out there for the independent building industry players who were buying their construction & building materials (in previous years) like steel from direct importers who are now squeezed out of the supply chain. Only loyal & long staying customers are getting ready access to supplies - pays to have a good relationship with established distributors like STU.

Good to know ... well, for STU share holders this is :):

Discl: holding;

[Snow Leopard]

Just because STU is charging more does not mean that they are making more, possibly the opposite.

Disc: Hold

[BlackPeter]

Just because STU is charging more does not mean that they are making more, possibly the opposite.

Disc: Hold

True, however - given that they are selling into a booming market with supply constraints (i.e. a sellers market) ... if they don't make money in this situation, they should not run a company ...

[Sideshow Bob]

Wind Farm Project with Meridian

Steel & Tube Wins Significant Wind Farm Contract - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/374589)

[Sideshow Bob]

Wind Farm Project with Meridian

Steel & Tube Wins Significant Wind Farm Contract - NZX, New Zealand’s Exchange (https://www.nzx.com/announcements/374589)

[Snow Leopard]

$7.1M value over 3 years.

Better than nothing, hopefully.

[freebee]

$7.1M value over 3 years.

Better than nothing, hopefully.

I like the sound of last line in the announcement:

We have a disciplined approach to tendering for large projects to ensure an appropriate return for our business and are delighted to have secured this contract on the basis of our value proposition, technical support and expertise.”

Disc: Happy holder

[Sideshow Bob]

$7.1M value over 3 years.

Better than nothing, hopefully.

Wasn't marked as price sensitive

[Arbroath]

Wasn't marked as price sensitive

That would be because it represents around 0.5% of revenues likely over the 3 year period = not material.

Still good news though at the margin

[Balance]

I like the sound of last line in the announcement:

We have a disciplined approach to tendering for large projects to ensure an appropriate return for our business and are delighted to have secured this contract on the basis of our value proposition, technical support and expertise.”

Disc: Happy holder

Exactly the message the company and management are communicating to the market - it’s a sea change from STU’s sales at all costs a few years ago which got the company into trouble.

[Snow Leopard]

Wasn't marked as price sensitive

Stung by the criticism here of their recent newsletter for containing nothing worth while they are trying to mollify us :mellow:

[nztx]

Stung by the criticism here of their recent newsletter for containing nothing worth while they are trying to mollify us :mellow:


Aha .. watching with interest .. and nowa few days before their EOY - with still no real Guidance & a Tidbit flung out

I mean they must have some idea on how the show is going with monthly reporting etc - not difficult even if
it is subject to Audit .. ;)

Do they really think investors are idiots ready to swallow anything unquestioning, after STU's past antics ? ;)

[winner69]

Aha .. watching with interest .. and nowa few days before their EOY - with still no real Guidance & a Tidbit flung out

I mean they must have some idea on how the show is going with monthly reporting etc - not difficult even if
it is subject to Audit .. ;)

Do they really think investors are idiots ready to swallow anything unquestioning, after STU's past antics ? ;)

You will be pleasantly surprised mr nztx me old mate

And F22 outlook will be really good

Shares over 130 after that I reckon

[Shareguy]

I agree with you winner69. The result is going to be a good one. Big margin improvement and with the reduced overheads are going to make for a very good result.

Disc. I have been in the steel industry a long time including at STU . My largest position by far.

[Arbroath]

I agree with you winner69. The result is going to be a good one. Big margin improvement and with the reduced overheads are going to make for a very good result.

Disc. I have been in the steel industry a long time including at STU . My largest position by far.

I’m also optimistic but given they have continuous disclosure obligations if they were doing that well you’d think they’d have to update the market.

[nztx]

I’m also optimistic but given they have continuous disclosure obligations if they were doing that well you’d think they’d have to update the market.


You're onto it -- in 2021 - surely we're well past the Boardroom stone age hide everything until forced to disclose antics already ? ;)

[nztx]

You will be pleasantly surprised mr nztx me old mate

And F22 outlook will be really good

Shares over 130 after that I reckon


this pony does have the low hurdle of what was offered by Fletchers a few years ago
to redeem itself - does it not ? ;)

STU's board may need to learn from & watch the likes of HLG & TRA on how to steadily
grow the SP & appease stakeholders -- after the past chapters of wealth destruction STU
has delivered .. ;)

[winner69]

1) Consensus F21 ebit is 15.4m

And

2) STU guidance is we expect a ‘continuation of current trading performance trends’. H1 Ebit 7.9m

So 1) and 2) sort if says 15m to 16m is going to be it

Disclosure guidelines say say something if result going to be +/-10% previous guidance or market expectations so unless ebit going to be about 18m no need to say something

But STU management read this thread so they’ll pick a good day before mid August to tell us the good news

What we should do though is keep saying things I’ve heard H2 is not that good and full year ebit is going to be about $13m or even less. Enough bad stories and we will get an update pretty quick :)

My guess for what it’s worth is $17.3m

Nztx …year not ended yet …you mentioned HLG - they usually wait until after year end to say anything

[nztx]

Thanks for your thoughts - winner ..

But as all will be aware most if not all listed companies are NOT tin pot companies which throw their box of records
and papers at the Accountant just once a year.

They have finance & accounting staff employed on the deck all the time.

These Companies should and would be aware of what their figures look like - quarterly if not monthly

That is what their Management & Boards would be seeing continuously .. ;)

There is absolutely no excuse for listed companies to leave their stakeholders in the dark
bordering on ongoing failure to adhere to continuous disclosure.

Look at the number of companies issuing trading updates .. it is for the benefit of the company as well
to have the markets see indication direct from the Boards of how trading is going..;)

there are numerous examples of companies doing well on this point of reporting .. along with
another bundle who have a bit to learn on how it's done.. ;)

Given STU's past antics, then Quarterly reporting to the market may well auger well as something
they should impliment .. ;)

[winner69]

STU PR going well though nztx

Enough excitment for a while

Financial guidance in due course …be patient

My Food Bag due for a upgrade

[Balance]

STU PR going well though nztx

Enough excitment for a while

Financial guidance in due course …be patient

My Food Bag due for a upgrade

Mentioning MFB & STU on the same thread is like comparing a buggered limping greyhound with a rejuvenated racehorse with a strong pedigree!

I cannot see why nztx is so aggro with STU as you are indeed right, W69 - company's PR is measured and on song.

SP performance mirrors that of FBU - up 24% YTD vs FBU up 26%, with NZ50 down 3.6%.

After the debacles of missing market expectations in the last few years, STU should be cautious about releasing numbers.

Meanwhile, they have given plenty of indications that things are going along well.

Another profit upgrade is inevitable imo but it could be that the company chooses to leave most of the upgrade to 2022.

Happy holder of both FBU & STU.

[nztx]

Mentioning MFB & STU on the same thread is like comparing a buggered limping greyhound with a rejuvenated racehorse with a strong pedigree!

I cannot see why nztx is so aggro with STU as you are indeed right, W69 - company's PR is measured and on song.

SP performance mirrors that of FBU - up 24% YTD vs FBU up 26%, with NZ50 down 3.6%.

After the debacles of missing market expectations in the last few years, STU should be cautious about releasing numbers.

Meanwhile, they have given plenty of indications that things are going along well.

Another profit upgrade is inevitable imo but it could be that the company chooses to leave most of the upgrade to 2022.

Happy holder of both FBU & STU.


I'm sorry if it seems that way Balance..

but in checking past notes on STU:

In 2019 H1 (31.12.18) STU basically doubled it's issued Cap to repay Large Debt
(approx $86 mil Term Debt repaid in H1 accounts)

that was following 2018 H2 & 2018 YE carnage - 2018 EOY Pre Tax Loss $35.80 mil

So basically Holders bailed STU out big time to tidy up the Company's position

Roll on to 2020 Year - more carnage, impairments & write-offs in both H1 & H2
resulting in 2020 EOY pre tax Loss of a further $65.9 Mil

STU has in recent past effectively LOST ALL the NEW SHARE CAPITAL it raised within 2 years

It appears that STU's board have a considerable amount of ground to prove they
can operate effectively & have a sustainable ship, without further carnage seen in 2018 & 2020 years.
And that's not just in artificially pumped up years stemming from Covid demands or in
response to the whims of the reigning Serf party mouthpieces currently flapping their tongues, as well.. ;)

That includes elevation to reporting continuously without fail - not just after Auditors
knife the accounts savagely once or twice a year.

If any of the current STU Board members from the old guard still on deck from
earlier times do not understand what Stakeholders demand of them then perhaps
they should be planning for their final trip out the gate down the road IMO .. ;)

[SailorRob]

Mentioning MFB & STU on the same thread is like comparing a buggered limping greyhound with a rejuvenated racehorse with a strong pedigree!

I cannot see why nztx is so aggro with STU as you are indeed right, W69 - company's PR is measured and on song.

SP performance mirrors that of FBU - up 24% YTD vs FBU up 26%, with NZ50 down 3.6%.

After the debacles of missing market expectations in the last few years, STU should be cautious about releasing numbers.

Meanwhile, they have given plenty of indications that things are going along well.

Another profit upgrade is inevitable imo but it could be that the company chooses to leave most of the upgrade to 2022.

Happy holder of both FBU & STU.


NZ50 Down nearly 5% YTD. You're talking about the con job that is the NZ50G index which includes reinvested dividends (only one in the world that does). Look at the NZ50 Capital index for the real figure.

[Balance]

Just been told by one of my contacts in the building industry that STU has advised them of further price increases in July and for certain products, to expect further delays in deliveries as well.


Update to the above - structural steel prices to go up another 20% from July on top of the 30% increase in the last 6 months.

Building material suppliers like STU or even Placemakers have stopped giving firm prices for supplies.

Smells to me like suppliers are going to be reaping ‘windfall’ profits from their stock carry.

In the case of STU, inventory was around $90m at end of Dec so a 10% increase in such a windfall would equate additional $9m additional profit.

[Dassets]

Here are the price increases through to September, note transportation increases also
Effective today

Structural Sections + 10%

Plate + 15%

Coil & Sheet + 10 to 15%

Stainless Steel + 10%

Engineering Steels + 5 to 10 %

Fasteners + 8%

Selected other products (primarily palletised products such as fittings, valves, chain & rigging, imported rural products etc) +5 to 15% and selected regional freight/courier charges.

Effective 1 August 2021

Pipe, RHS, and SHS + 7 to 9%

Line Pipe +13%

Merchant bar + 8%

Effective 5 September 2021

Colorsteel products + 6%
Zincalume + 6%
Galvanised +6%
ComFlor +6%
Coil & Sheet +10 to 15%
Purlins + 6%
Fasteners +8%
All Accessories (paper, netting, etc) +3%
Selected other products and selected regional freight/courier charges +5 to 15%

[winner69]

Couldn’t keep quiet forever

Huge upgrade ……EBIT over $20m

This should see share price surge

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/375952/350678.pdf

[Shareguy]

Yes. If I was not so overweight in STU I would get some more.

[Arbroath]

Couldn’t keep quiet forever

Huge upgrade ……EBIT over $20m

This should see share price surge

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/375952/350678.pdf

Normalising the NPAT will be around $13m which at dividend policy midpoint should see a final dividend of around 4.3cps so a total DPS of 5.5cps for the year

[macduffy]

After dithering for a couple of weeks I bought a few more today - after the announcement! And will buy some more if the SP reverts.

[Balance]

STU is doing the old ‘underpromise & overdeliver’ with its results.

Plenty more upside ahead imo.

Happy holder.

[sb9]

STU is doing the old ‘underpromise & overdeliver’ with its results.

Plenty more upside ahead imo.

Happy holder.

Couldn't agree more, this is their time and they should thrive on such huge construction tailwind.

PS - This site sucks...:t_down: about time someone took the bull by horn and fix it. Happy a to pay small subscription fee to help out.

[Balance]

Couldn't agree more, this is their time and they should thrive on such huge construction tailwind.

PS - This site sucks...:t_down: about time someone took the bull by horn and fix it. Happy a to pay small subscription fee to help out.

Government is going to be throwing billions of dollars more into the infrastructure & construction sectors so the pipeline will keep growing for established and proven players like STU & FBU.

Suspect that STU has kept plenty of potential earnings up its sleeves to deliver in the next few years.

A nice dividend coming up in Sept to sweeten our shareholding.

Yes, heck of a pity that the site is so bogged down with whatever is bedeviling it.

[sb9]

Government is going to be throwing billions of dollars more into the infrastructure & construction sectors so the pipeline will keep growing for established and proven players like STU & FBU.

Suspect that STU has kept plenty of potential earnings up its sleeves to deliver in the next few years.

A nice dividend coming up in Sept to sweeten our shareholding.

Yes, heck of a pity that the site is so bogged down with whatever is bedeviling it.

Agree 100%.

Trading depth indicates bolly bands squeezing for next leg up..

[Shareguy]

They have 15 cps in cash. Would of been a lot more but they have increased inventory plus cost increases. For over 20 years this was a $2.50 stock, at current price will be interesting to see if still listed in a year.

[Balance]

They have 15 cps in cash. Would of been a lot more but they have increased inventory plus cost increases. For over 20 years this was a $2.50 stock, at current price will be interesting to see if still listed in a year.

If sp stays around current level, a share buyback will be a good use for the $25m.

[Greekwatchdog]

For Bar have come out with a new target of $1.25. Up from $1.00

[Balance]

For Bar have come out with a new target of $1.25. Up from $1.00

Forbar has been playing catch up with its forecasts & recommendations on FBU & STU since last year.

[Greekwatchdog]

Hasnt everyone been playing catch up Balance? No one new what was coming due to too much uncertainty..

[Balance]

Hasnt everyone been playing catch up Balance? No one new what was coming due to too much uncertainty..

Making an observation - neither criticising or praising them!

Have to say that there are some of us here who were and are still ahead of the game though.

[Greekwatchdog]

I take their advice for what it is. DYOR its your money your investing! That way buck stops with yourself.
There are always some who are and they deserve the rewards. STU management have been rather poor over the years and then considering they knocked back FBU offer of $1.95. Shareholders never had a chance so they had better deliver to them. Its a long way to $1.95.

[SailorRob]

If sp stays around current level, a share buyback will be a good use for the $25m.

As you probably know I've been beating the drum on this for a while, most people didn't seem to understand and wanted dividends...

I was demanding a large share buy back sub $1. Would have been the cleverest use of capital ever achieved by this company and provided share holders with a MASSIVE return.

Now at $1.20 this opportunity is vastly diminished but would still create value far above a dividend.

Go back through the thread and see what some people were saying in response to my buyback suggestion. The level of sophistication and ability to comprehend simple math is astounding.

[nztx]

Lets hope the Inventory Management system has seen enhanced attention so things don't come out
half baked, exhibiting signs of quantities of invisible AWOL lines & overstatements for expensing off in
a large pile again .. ;)

Remember Boys & Girls - the Beancounters & Board at STU have or should be seeing AcCuRaTe monthly or
at bare minimum - Quarterly figures as the year runs through - so this sort of nonsense of the past should no
longer be tolerated from STU in any future shock announcements accompanied by a shower of red ink .. ;)

Hopefully STU have learnt well & purged out all Bad Habits & Tendencies seen in the past .. ;)

[Arbroath]

As you probably know I've been beating the drum on this for a while, most people didn't seem to understand and wanted dividends...

I was demanding a large share buy back sub $1. Would have been the cleverest use of capital ever achieved by this company and provided share holders with a MASSIVE return.

Now at $1.20 this opportunity is vastly diminished but would still create value far above a dividend.

Go back through the thread and see what some people were saying in response to my buyback suggestion. The level of sophistication and ability to comprehend simple math is astounding.

SailorRob I agree with you 100%. Its fair enough that through the early months of Covid the Board were probably too scared to consider a buyback but at least for a few months now (and sub $1) a buyback was a great use of capital. Remember they raised at $1.05 when they were in a spot of bother and that was a huge discount to the takeover bids at $1.75 and $1.95 that they rejected as insufficient!

No excuses for not doing a buyback when they can't pay imputed dividends. As things are now I'd rather they spent $25m over 12-18 months buying back stock sporadically at anything sub $1.30. They could reduce shares on issue by around 12%.

However, given the Boards history don't hold your breadth!

[Ferg]

Any word on how STU are navigating their way through current supply-side issues of steel sourced from Asia? I'm assuming STU buys (some) steel out of Asia - is that correct? Also, any word on STU's response to the dumping claims being made by NZ Steel from Chinese and Korean mills? Or are they not impacted by this? I believe the complaint is about AZ rolled steel.

[winner69]

Vulcan looking to list on NZX abd ASX

Another option if one wants to invest in industry

And multiplies could be interesting ….should show how people cheap STU is at the moment

[winner69]

Talk of Vulcan listing at 10 times EBITDA

STU valued at same about $2.50 (my rough sums)

Goodness gracious me

[Beagle]

I take their advice for what it is. DYOR its your money your investing! That way buck stops with yourself.
There are always some who are and they deserve the rewards. STU management have been rather poor over the years and then considering they knocked back FBU offer of $1.95. Shareholders never had a chance so they had better deliver to them. Its a long way to $1.95.

I can never forgive gross arrogance and incompetence like that which at least in my mind was a gross breech of their fiduciary duty to put shareholders interests first and was potentially actionable. Its clear management and the board put their own interests, (scoffing at the trough), ahead of shareholders. Quite aside from that who knows if there aren't more skeletons in the closet in regard to dodgy steel.

[Balance]

Talk of Vulcan listing at 10 times EBITDA

STU valued at same about $2.50 (my rough sums)

Goodness gracious me

You mean 10 times EBIT rather than EBITDA?

FBU is currently trading on 6 times EBITDA (F21 est).

[Snow Leopard]

You mean 10 times EBIT rather than EBITDA?

FBU is currently trading on 6 times EBITDA (F21 est).

AFR article (https://www.afr.com/street-talk/vulcan-steels-for-1b-float-maiden-pitch-to-aussie-funds-20210726-p58czc) reckons EBITDA

[winner69]

You mean 10 times EBIT rather than EBITDA?

FBU is currently trading on 6 times EBITDA (F21 est).

No It says EBITDA

FBU way undervalued as well on that basis …but we knew that eh

[sb9]

Talk of Vulcan listing at 10 times EBITDA

STU valued at same about $2.50 (my rough sums)

Goodness gracious me

Forget $2.50, the way things are going $1.20 proving to be huge hurdle. Need one to big boys support here to push through.

[Balance]

Forget $2.50, the way things are going $1.20 proving to be huge hurdle. Need one to big boys support here to push through.

Stocks don't stay undervalued forever - the catalyst could be Vulcan's listing.

Remember FBU trying to break through the $4.00 level - seemed to take forever but broke through it did after 6 months and off the sp went.

[Scrunch]

Talk of Vulcan listing at 10 times EBITDA

STU valued at same about $2.50 (my rough sums)

Goodness gracious me

I wouldn't have thought Vulcan was worth over double the multiple STU is. If brokers get the listing away at price it will be interesting to see multiples realign. MFB mark2?

[Balance]

https://www.nzherald.co.nz/business/vulcan-steel-may-list-on-asx-nzx-after-a1b-float/PATI6I6HEIBS2XNTAQPVEYKSL4/

Write up on potential Vulcan IPO.

Sounds like the fundies love it.

[nztx]

Hmm - AU 1.0 Billion float

STU Mkt Cap is currently NZ$ 192.5 Mil

Perhaps Vulcan can be encouraged to vacuum up STU and spit out the pips it doesn't like .. ;)

[Scrunch]

Hmm - AU 1.0 Billion float

STU Mkt Cap is currently NZ$ 192.5 Mil

Perhaps Vulcan can be encouraged to vacuum up STU and spit out the pips it doesn't like .. ;)

Entirely possible, particluarly if the analysts behind the float say you need to grow EBITDA even if its by acquisition. Think MPG going after growth in Australia.

[Dassets]

Not a chance with NZ Steel there.

[nztx]

Not a chance with NZ Steel there.


you never know -- where a bit of 'the right price' comes into play .. ;)

[sb9]

Wonder if it was a upgrade or downgrade they announced last week going by trading depth.

[winner69]

Wonder if it was a upgrade or downgrade they announced last week going by trading depth.

Probably depends on what ones expectations were - a consequence of the company giving no firm guidance previously except H2 activity could be similar to H1

Hasn't set the world on fire has it

[Balance]

Probably depends on what ones expectations were - a consequence of the company giving no firm guidance previously except H2 activity could be similar to H1

Hasn't set the world on fire has it

Underpromise & over deliver.

[Balance]

Wonder if it was a upgrade or downgrade they announced last week going by trading depth.

Somebody paid up after market close yesterday for 100k shares at $1.16 - that's the real depth.

Meanwhile, STU is up 27% YTD.

Compare & contrast with NZX down 3% and one of the top picks (ATM) down 48%!

[Entrep]

I was adding at 115 today

[winner69]

Bluescope reported NZ Steel had a boomer of a year ….sales up about 14% and ebit margin 15% (made a loss last year)

[Balance]

Bluescope reported NZ Steel had a boomer of a year ….sales up about 14% and ebit margin 15% (made a loss last year)

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/FBU/377445/352418.pdf

Page 31 - Huge turnaround in Fletcher's Steel Division - from loss of $14m in F20 to profit of $40m in F21.

Expecting STU to do just as well - may even see a share buyback too!

"Stronger for longer" - FBU's view of the building & construction sector outlook.

[winner69]

Normalised ebit $19m pretty respectable

Ebit margin of 4% still pretty woeful

Need to improve that in coming years

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/377776/352872.pdf

[Shareguy]

NPAT $16.1m
Cash in bank $25m
NAV $1.11.

What is not to like. A steel at current price is what I think.

[Balance]

NPAT $16.1m
Cash in bank $25m
NAV $1.11.

What is not to like. A steel at current price is what I think.

Too much cash in the bank.

Should do a share buyback of 10% of the outstanding shares.

[sb9]

Too much cash in the bank.

Should do a share buyback of 10% of the outstanding shares.

Agree, that's better use of funds to create shareholder value than paying unimputed divvies.

[RTM]

Too much cash in the bank.

Should do a share buyback of 10% of the outstanding shares.

Good problem to have.

[BlackPeter]

Normalised ebit $19m pretty respectable

Ebit margin of 4% still pretty woeful

Need to improve that in coming years

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/377776/352872.pdf

NPAT $16.1m - that's a cracker, isn't it?

Analysts have egg all over their faces, the achieved EPS is 50% over analyst consensus. I recon this will lead to some cautious adjustments of buy recommendations in the coming days / weeks.

STU - can't have too many (well, not now).

[Count von Count]

They mention acquisitions... money may be earmarked for that.

[Count von Count]

Not massive margins in the construction industry ATM...

[Poet]

NPAT $16.1m - that's a cracker, isn't it?

Analysts have egg all over their faces, the achieved EPS is three times more than analyst consensus. I recon this will lead to some cautious adjustments of buy recommendations in the coming days / weeks.

STU - can't have too many (well, not now).

Yes good result indeed.

They also mentioned they are exploring capital management opportunities.

IMO this company shouldn't be wholly equity funded, they should be holding a prudent level of debt (say $50m) and return the surplus equity to shareholders. Shouldn't be even thinking about acquisitions given their history - Jeez they've only just managed to start managing the company they have! and that's with a big tailwind (unless it's STU being acquired by a bigger that they are thinking about, I'd be on board with that)

[winner69]

Not massive margins in the construction industry ATM...

That dog FBU has ebit margin approaching 10%

Much better than STU's woeful 4%

[winner69]

Agree, that's better use of funds to create shareholder value than paying unimputed divvies.

Better to buy something and grow - faster than eeking out small increases in profit year after year

[winner69]

What's happened to the ebit target of $40m they were going to achieve by now?

[Count von Count]

Agree, but FBU has a much wider exposure to the construction industry than STU

[Entrep]

Very happy holder and had been somewhat surprised at the recent dip from 1.20 to 1.12. Let's see where we end up today. Future looks bright.

[Balance]

What's happened to the ebit target of $40m they were going to achieve by now?

That's to come and the sp will be $2.50 then.

I have no issue with STU's EBIT margin of 4% at this stage of their turnaround - takes time to rebuild and FBU's 10% is an excellent target in the meantime to shoot for and deliver EBIT of $48m.

Current sp means STU is trading on EBITDA multiple of 4.25X and Enterprise multiple of 8.5X - cheap stock given turnaround just bearing fruit and company is in an oligopolistic industry.


That dog FBU has ebit margin approaching 10%

Much better than STU's woeful 4%

FBU ain't no dog, W69 - been a stellar performer for some of us who bought in last year.

[Balance]

Looking at consensus forecasts from 3 brokers' covering the stock, STU has delivered in F21 the consensus forecast of F22.

[Entrep]

Well someone is not impressed

12874

[macduffy]

I'm happy to hold but like Poet, wouldn't want to see STU acquiring anything at this stage. Just manage the business without complications for a couple of years.

[777]

Well someone is not impressed

12874

Well it is not someone. There are 6 sellers.

[artemis]

I'm happy to hold but like Poet, wouldn't want to see STU acquiring anything at this stage. Just manage the business without complications for a couple of years.

Good comment, but they have funds to step in for a bargain. Which BTW STU was last lockdown.

[sb9]

Few points of note from investor call:

- Capital management in the form of buy back or special divvy being considered, but very early days for that

- Price increases put through from Sep onwards

- Staff on full pay during current lockdown and applying for wage subsidy

- Impact of lockdown not material as it just shifts demand further out as seen from last year

- All in all good progress across the board and positive outlook.

[Balance]

Few points of note from investor call:

- Capital management in the form of buy back or special divvy being considered, but very early days for that

- Price increases put through from Sep onwards

- Staff on full pay during current lockdown and applying for wage subsidy

- Impact of lockdown not material as it just shifts demand further out as seen from last year

- All in all good progress across the board and positive outlook.

Thanks for that, sb9.

[Snow Leopard]

Good: NTA
Pretty Reasonable: Cash Flow
Poor: Profitability
Really Poor: Wasting money on Unimputed Dividend.

They better deliver on the improvements going forward.

[Arbroath]

[QUOTE=Snow Leopard;903025]Good: NTA
Pretty Reasonable: Cash Flow
Poor: Profitability
Really Poor: Wasting money on Unimputed Dividend.


I don't disagree that the profitability is sub-optimal but ex-cash they are selling for 10x earnings and it is likely that FY22 will see a further improvement in earnings though this is not guaranteed given their patchy record in recent years.

No debt, nearly half a billion of revenues and $30m+ operating cashflow....I hold at around $1.25 average and think they are worth $2.00+ if they can execute well in the next 12-18 months. Dividends should become at least partially imputed again in FY22 also.

[winner69]

They say 'Robust operating cashflow resulting from continued improvement in working capital management and debt collection'

But Free Cash Flow seems to be trending down the last few years ....while revenues are booming

[Balance]

They say 'Robust operating cashflow resulting from continued improvement in working capital management and debt collection'

But Free Cash Flow seems to be trending down the last few years ....while revenues are booming

Comes down to the quality of spending in operating capex.

Have you done an evaluation of that?

It is clear to me that STU is rebuilding the right stock to allow for higher level of profitable sales after the debacles of previous years.

[SailorRob]

Few points of note from investor call:

- Capital management in the form of buy back or special divvy being considered, but very early days for that

- Price increases put through from Sep onwards

- Staff on full pay during current lockdown and applying for wage subsidy

- Impact of lockdown not material as it just shifts demand further out as seen from last year

- All in all good progress across the board and positive outlook.

Continuing with their awful capital allocation record, they will wait until the share price is much higher before initiating the buyback.

I was calling for it at 80c. We'd all be much better off now.

[SailorRob]

Post from the 28/01 2021. Nothing has really changed.


Well people, the way I see it, which is very different from Craig's impressive mumbo jumbo, is that they have averaged a Net Profit of 17.4 million/year over a period of 13 years which includes a once or twice in a lifetime global recession. Now granted with a lot of those earnings they have retained them and destroyed them in spectacular fashion. They also paid out 15 million a year average in dividends and then took back a lot of money in an equity raising, net of which the dividends would have averaged 9 million a year. They at times employed significant leverage to produce these cash flows. The top-line growth over this whole period has been non existent.



So looking forward, which is I believe more difficult that Craig's would have you think - If we take one case and I'm going to call it 'best conservative case' and assume that revenues remain the same going forward, margins remain similar and thus net profit remains the same averaged over time. BUT this time they don't destroy any retained cash, they don't employ it well either, just for every $1 retained only $1 of value is created. Under this scenario we can now try and assume a multiple for this profit.



Now when deciding a multiple, we see that the NZ50 PE according to S&P, is about 45. Yes this will be somewhat because of COVID earnings but regardless it's incredibly high, all time high in fact. People will say 'yes but with the discount rate/bond yields/interest rates so low' and I will think hmmm why are they so low. Mostly because we're in the middle of another massive recession and have had abysmal economic growth really since 2007 aside from what a huge population increase has given us. I digress, but I'm not at all comfortable that we really have conditions that warrant higher than long term average PE's.



So for regular business like Steel and Tube that has kicked it's old habits but still just plodding along... It is a duopoly and now has no debt, so even if it performed as it has in the past, it's now all equity and could be goosed if that made sense in future... Hell I'm not giving it any more than 15. So say 17 million times 15 is around 250 million. There are 166 million shares so that's $1.50.

So in my opinion, anyone that thinks it is worth more than that (and I may be one of them) is speculating, probably on multiple moving balls.



Now I can do a worst case and base that on exact historical performance (it can get worse than that too) and I can do a best case in which I would attribute at least average capital allocation skills, say retained earnings reinvested at 7%, some leverage applied, growth at least in line with population growth. But I'll just stick with my case above and I can tell you I'll probably sell early as a result but I'm totally happy with that as if i don't then I may as well go to the Casino.



This is why I was ranting so hard about it when it was in the 50's. It was massively undervalued.

[Arbroath]

Personally I’m annoyed they are not doing a share buyback but looking at the $16.1m npat and 166 shares on issue the dividend for the year following their policy should’ve been 5.8cps at the 60% low end of npat policy.

Am I missing something or are the Directors just ignoring their own dividend policy?

[clearasmud]

Personally I’m annoyed they are not doing a share buyback but looking at the $16.1m npat and 166 shares on issue the dividend for the year following their policy should’ve been 5.8cps at the 60% low end of npat policy.

Am I missing something or are the Directors just ignoring their own dividend policy?
You could ask them this and also how they could cancel rather that postpone a dividend on a share that was. Already trading ex
Tell them that it's not to late to pay it.

[Scrunch]

You could ask them this and also how they could cancel rather that postpone a dividend on a share that was. Already trading ex
Tell them that it's not to late to pay it.

The record date is 10 September. The ex date is 9 September. Payment is 24 September.

The dividend has been announced, but hasn't gone ex dividend. Until the lockdown last year I'd never seen announced dividends cancelled, but this happened for a number of companies as they looked to preserve cash. There is essentially zero chance of the dividend not progressing this time because the dividend was announced when we were already in L4 lockdown so the directors knew what the current situation was when they made the decision.

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/377776/352877.pdf

[clearasmud]

Name one other company that did that

[Balance]

Name one other company that did that

FBU for one.

Do your homework - there's quite a few more.

[Jim]

Auckland international airport

[Balance]

Auckland international airport

VGL, HLG, AIR to name another 3.

[Balance]

Post from the 28/01 2021. Nothing has really changed.


Well people, the way I see it, which is very different from Craig's impressive mumbo jumbo, is that they have averaged a Net Profit of 17.4 million/year over a period of 13 years which includes a once or twice in a lifetime global recession. Now granted with a lot of those earnings they have retained them and destroyed them in spectacular fashion. They also paid out 15 million a year average in dividends and then took back a lot of money in an equity raising, net of which the dividends would have averaged 9 million a year. They at times employed significant leverage to produce these cash flows. The top-line growth over this whole period has been non existent.



So looking forward, which is I believe more difficult that Craig's would have you think - If we take one case and I'm going to call it 'best conservative case' and assume that revenues remain the same going forward, margins remain similar and thus net profit remains the same averaged over time. BUT this time they don't destroy any retained cash, they don't employ it well either, just for every $1 retained only $1 of value is created. Under this scenario we can now try and assume a multiple for this profit.



Now when deciding a multiple, we see that the NZ50 PE according to S&P, is about 45. Yes this will be somewhat because of COVID earnings but regardless it's incredibly high, all time high in fact. People will say 'yes but with the discount rate/bond yields/interest rates so low' and I will think hmmm why are they so low. Mostly because we're in the middle of another massive recession and have had abysmal economic growth really since 2007 aside from what a huge population increase has given us. I digress, but I'm not at all comfortable that we really have conditions that warrant higher than long term average PE's.



So for regular business like Steel and Tube that has kicked it's old habits but still just plodding along... It is a duopoly and now has no debt, so even if it performed as it has in the past, it's now all equity and could be goosed if that made sense in future... Hell I'm not giving it any more than 15. So say 17 million times 15 is around 250 million. There are 166 million shares so that's $1.50.

So in my opinion, anyone that thinks it is worth more than that (and I may be one of them) is speculating, probably on multiple moving balls.



Now I can do a worst case and base that on exact historical performance (it can get worse than that too) and I can do a best case in which I would attribute at least average capital allocation skills, say retained earnings reinvested at 7%, some leverage applied, growth at least in line with population growth. But I'll just stick with my case above and I can tell you I'll probably sell early as a result but I'm totally happy with that as if i don't then I may as well go to the Casino.



This is why I was ranting so hard about it when it was in the 50's. It was massively undervalued.

Relax, SailorRob.

STU is a turnaround story (with the usual hiccups along the way) and turnaround stories do take time to regain credibility and for their sp to reflect fundamentals.

Have a look at Comvita - it was stuck in a trading range for much of this year despite one profit upgrade after another, and finally it popped today on confirmation that its reset strategy is well and truly bearing fruit.

With STU, it is very telling that the CEO has been buying shares (last one being in May this year) at around current levels.

[Muse]

STU’s flaws will be further pronounced once Vulcan lists and the huge difference in financial performance are exposed. I wonder if STU have too many SKUs ehich reduces scale and profitability. Trying to be all things to many not always the soundest strategy

[clearasmud]

FBU for one.

Do your homework - there's quite a few more.
As far as I know there wasn't any other Nzx companies that canceled their dividend after the shares had traded ex dividend.
Michael Hill for eg postponed the payment (twice)

[Balance]

As far as I know there wasn't any other Nzx companies that canceled their dividend after the shares had traded ex dividend.
Michael Hill for eg postponed the payment (twice)

For the second time, do your homework. Try AIR.

You are rightly aggrieved if you bought the shares cum dividend for the dividend. Last year was an unusual time and many unusual events occurred.

[SailorRob]

Relax, SailorRob.

STU is a turnaround story (with the usual hiccups along the way) and turnaround stories do take time to regain credibility and for their sp to reflect fundamentals.

Have a look at Comvita - it was stuck in a trading range for much of this year despite one profit upgrade after another, and finally it popped today on confirmation that its reset strategy is well and truly bearing fruit.

With STU, it is very telling that the CEO has been buying shares (last one being in May this year) at around current levels.


Not sure what you're on about Balance.

Having a basic understanding of simple math I'd much prefer the share price to absolutly tank. I don't want it rising to fair value as I'd have to sell.

Longer it trades here the better.

CEO Share purchases not very compelling. Tint fraction of net worth and purchased none when he should have durig 2020.

[winner69]

Not sure what you're on about Balance.

Having a basic understanding of simple math I'd much prefer the share price to absolutly tank. I don't want it rising to fair value as I'd have to sell.

Longer it trades here the better.

CEO Share purchases not very compelling. Tint fraction of net worth and purchased none when he should have durig 2020.

So are you accumulating while still ‘cheap’?

And not really a STU long term loyalist (company wise) but just waiting to one day cash in when it reaches ‘fair value’

Is that how it is?

[Shareguy]

I already have a large position in Stu but at the current price I’m tempted to buy more.

[winner69]

Doing my best to 'fall in love' with STU .... but finding it difficult, at least from an operational point of view

In spite of years of talking about transforming the business and becoming heaps more operationally efficient many key indicators aren't improving and are in most cases are still worse than they were a few years ago

Gross margin improvement for instance comes through as top of mind. They even say staff incentives are based on gross margin growth rather than sales growth (jeez I made that happen in one place 20 plus years ago).

These charts from the results preso are a worry.

The tonnage / sales chart shows that average selling prices aren't improving - infrastructure seems the problem here

The Gross Margin chart shows margins aren't really improving with 2H21 % less than 1H20. Hardly inspiring and doesn't tie in with the glowing commentary. What's also worry that current GM% is still significantly less than 25% achieved a few years ago.

At lest they put in charts that don't look that good - must give them credit for be transparent.

Besides margins they talk about great working capital management - on the 5 year summary table they show a line Working Capital (times) whih is the number of turns per year. A woeful 2.8 times in F21 when ia few years ago it was well over 4 times - hardling inspiring and again at odds with the commentary over the last few years

Never mind - I can't see myself falling in love with STU (from a company operational point of view) but from a share trading point of view there is (as Rob points out) still potential of good returns if that $27m in cash ends up in shareholders hands somehow and the market re-rates accordingly - F22 might be that year (just like 22 is going to be the Warriors year). However I shouldn't forget that shares are often 'cheap' for a reason and being 'cheap' could be because they are slow growing low margin company with pathetic returns on capital

[SailorRob]

So are you accumulating while still ‘cheap’?

And not really a STU long term loyalist (company wise) but just waiting to one day cash in when it reaches ‘fair value’

Is that how it is?


So currently it's generating a ex cash unlevered yield of 10% which I don't consider great compared to other opportunities.

I'd prefer a 15% return which is why I'd like to see the price come down, then any money I invest from my own funds, from STU dividends and most importantly from any buybacks they do, will be invested at a much higher rate of return then present.

At current price I would potentially re invest dividends but probably not.

A one off return generated by the price rising to $1.50 and selling is much less attractive than the opportunity to re invest at a 15% unlevered yield, I could also then add my own leverage if I wanted.