TENON

[ari]

Just logged on and earlier message repeated...can someone explain[?]

[blockhead]

quote:Originally posted by ari

Just logged on and earlier message repeated...can someone explain[?]


2 + 2 = 4

Probably down 04c Ari

[Taijon]

Well here are the details of the capital return.

TEN17/11/2004CAPREC REL: 1326 HRS Tenon Limited CAPREC: TEN: Tenon confirms second capital return of NZ$321 million Auckland, 17 November 2004

Tenon announced today that it was applying tothe High Court for initial orders directing it to seek shareholder approvalfor a return of capital and associated share cancellation. Under this second capital return (which is subject to receipt of a favourabletax ruling) Tenon will cancel three out of every four shares in the Company.Shareholders will receive $1.5333 for each share cancelled, which equates to$1.15 per share held before the cancellation. The total amount of this capital return will be approximately NZ$321 million. This proposed capital return, together with the first capital return of approximately $350 million made in March 2004, equates to a total return of $1.20 per share on issue prior to commencement of the forest sale process.This is the maximum aggregate amount of capital that the Company indicated toshareholders in February this year that it expected to return as a consequence of the forest sale.

Tenon will apply to the High Court for final orders sanctioning the capitalreturn if, at the Company's Annual Shareholders' Meeting to be held on 22December 2004, shareholders approve the capital return. The Company expects the final orders from the High Court to be obtained inearly February 2005, and the capital return completed and payment made to shareholders in late February 2005.

[ari]

Anyone done the sums on value following payback????

[ari]

Anyone have any views as to why TENON shares have been so out of favour over the past 10 days? with a slow but sure decline from the high of $2.28.....

[Snow Leopard]

quote:Originally posted by ari

Anyone done the sums on value following payback????


presumably:

PostSP = ( PreSP * 4 ) - 4.6.

thus if the SP is currently 2.20 then

4.20 = ( 2.20 * 4 ) - 4.6

[Snow Leopard]

quote:Originally posted by ari

Anyone have any views as to why TENON shares have been so out of favour over the past 10 days? with a slow but sure decline from the high of $2.28.....


Well who wants to put money into this, only to get more than half of it back in three months (without interest) and with little in the way of expected growth to compensate.

Or for current holders, why wait for your money when you can get it now by selling your shares.

[Taijon]

Annual report for ye June 2004 shows TEN had earnings per share from continuing operations of 11.5 cents.

After capital return and share cancellation there will only be 25% of the number of shares.

Assuming earnings in fy 2005 are the same as those in 2004 then eps would be 46 cents. At a share price of $4.20 this would be a p/e of 9. This may well be appropriate but I think its too low. Have a look at the TEN presentation to Headliner seminar a week ago.

The share price post cancellation could go well above $4.20 and there is the prospect of dividends. A further return of capital, sale of at least one or both remaining businesses is possible, a lot of unused tax credits available, and takeover/merger with RBC a distinct possibility.

One to keep holding in my view and even accumulate at the current price. RBC AND GPG know what they are doing with TEN and its good for shareholders of all 3 companies.

[ari]

quote:One to keep holding in my view and even accumulate at the current price.
Certainly worth a look at todays price.....can't work it out, even after some good writings over the weekend in the daily's and in the Headliner'.

[Taijon]

Haven't subscribed to Headliner but Tenon's presentation to the shindig a week or so back is on their website. Future looks good but then we have heard all that before.

What does H actually say in any articles following the presentation? Any recommendation?

[Wanderer]

Anyone heard anything on the sale of the mills ie Mt Maunganui, Rainbow Mountain etc??

CHH perhaps, overseas buyer maybe, FBU ???

[ari]

quote:What does H actually say in any articles following the presentation? Any recommendation?


...Recommendation:Current share price (25/11) includes an element (capital return). The decision on continued ownership of the Structual business will attract market attention. The US market position is a great platform.There are growth plans for exports to other major markets. Tenon will benefit from a change in the currency cycle. Buy/Hold around $2.25.

Also from same article...should any of theses parties decide to pay more than the value Tenon itself places on the Structual business Tenon may decide to sell it in the interest of adding shareholder value.
There should be an outcome to this review some time in December and it is possible that it might be the focal point of interest at the AGM 22.12.04...

[donner]

Don't you guys think RBC is a better buy if you want exposure to this business?

[Taijon]

Donner, this is a good question that is difficult to answer.

Rubicon said in its 6 mths update a few days ago that following the next capital repayment from Tenon in Feb 2005 it will have no debt and $75 million in cash. There was no mention of what it proposed to do with the cash.

My pick is that following the capital repayment by TEN and share cancellation, RBC will use this $75 million + a bit more to acquire 100% control of TEN. Before this occurs TEN will make a special payment to shareholders to utilise the tax losses it has built up over the years that would be lost in the event of a takeover by RBC. A reverse takeover of RBC by TEN is another possibility. In any event it doesn't make much sense to have 2 companies and the associated extra costs when TEN is really the only substantive asset that RBC has.

Is it best to hold shares in the predator (RBC) or the prey (TEN)?

Also when will GPG make its move? It may like to get its hands on the $75 milluion cash held by RBC and sell not only TEN's structural business but also the solutions business and effectively wind TEN up. A full takeover of RBC by GPG is a real possibility soon after the capital repayment from TEN. Then GPG would be able to capture all the benefits directly from a TEN wind-up.

Should we hold GPG, RBC, TEN or none of them? Returns from all 3 have been excellent over the past 12 months.

Discl: hold GPG, RBC, TEN

[donner]

I've been buying RBC

[Taijon]

Donner, why? Because you expect GPG to take it over, or because you think its cheap relative to the others, or because you think its got the best long term prospects or?

[donner]

Because I think if you buy TEN you are buying just under half the company. If you buy RBC you are buying just over half the company. Which means you are buying the strategic control and direction.

Sure you may not get the cap return in your pocket directly but you do get it. Plus there is the added bonus of everything else RBC owns. Who owns the $75m? RBC or TEN?

For me its a no-brainer. Why bother with the risk and headaches of TEN?

[Westie]

Donner is right. RBC is better value. RBC is pretty much valued soley on its tenon stake. So when you buy RBC you get the stakes in Horizon2, Arborgen, and FTSA free.

A few things to consider, note 11 of the RBC 2004 annual report gives the carrying value of Arborgen & FTSA at roughly 35million.

RBC also invested 3million in Horizon2 which has a 9 year contract with CHH.

If you are conservative, these operations are worth somewhere between zero and RBC's carrying value, but IMHO zero is a bit low.

You should also look up Third Avenue Investments, the US fund that has 5% of RBC at circa 97c. The head of the fund Martin J. Whitman is a famous value investor in his own right and only buys shares in companies 30% below Third Ave's estimates of intrinsic value.

[ari]

Wots happening with TEN...no support recently and AGM only a week away.....surely their must be some positive movement prior, even if just a punt!

[ari]

Even favourable news fails to effect share price....I want out, I've been a fool and waited too many years for zilch......if only I had turned then over for TRH shares at .38c....that would have been a cool $m profit...if only:)


quote:GENERAL: TEN: Tenon receives favourable ruling from IRD

Auckland, 17 December 2004 - Tenon announced today that it had received a
binding ruling from the Inland Revenue Department confirming that, if the
Company's proposed $321 million capital return and merger of the current two
classes of shares (ordinary and preference) are approved by shareholders (at
the Company's upcoming annual meeting of shareholders to be held on 22
December 2004) and by the High Court, then the "available subscribed capital"
of the two share classes would merge and be aggregated across the merged
shares.

[ari]

Put a SELL in for 22500 3 days ago and adjusted down to $2.15 this morning to meet market ($2.13 at the time) as funds required by 20th...thought I would be smart and put SELL on 22500 TENPA @ $2.15....then I would cancel the order that still stood. Went out for half an hour.....both sold...BUGGER...

[madmike]

quote:Originally posted by ari

Put a SELL in for 22500 3 days ago and adjusted down to $2.15 this morning to meet market ($2.13 at the time) as funds required by 20th...thought I would be smart and put SELL on 22500 TENPA @ $2.15....then I would cancel the order that still stood. Went out for half an hour.....both sold...BUGGER...


insiders????

[ari]

With what was announced yesterday and with the next payout etc, what sort of value has been placed on the shares at the present time?
I want out, but should I be a little patient?

[ari]

Down yet again.....where to now for Tenon, or is this what was predicted some time ago with this group in control?

[madmike]

quote:Originally posted by ari

Down yet again.....where to now for Tenon, or is this what was predicted some time ago with this group in control?


the only thing that has been holding the shareprice up was the top ups for the 750 share purchase scheme due to the consolidation. me thinks there is a fall on the way...wouldn't be surprised to see the 4.10-4.00 level in 8 weeks???....your guess ari

[ari]

I think you're on the money MM.....has the CHH sale been factored in?I see it's gone unconditional..

[Bling_Bling]

After stripping all the assets, this company has nothing left. With high NZ dollar and long term low global log prices, this will be a dog.

[Sharebroker]

Sell or short us a few, Bling Bling. ;)

[Bling_Bling]

Dont need me to sell you any, there are plenty on the market for sale.;)

[Sharebroker]

Really? All mikey mouse selling of 200 here and 2000 there.

Do us a couple of hundred thousands - waiting there at $4.35 especially for you. If it's a dog, you will make heaps when the sp falls to $1.00, right? ;)

[madmike]

quote:Originally posted by madmike


quote:Originally posted by ari

Down yet again.....where to now for Tenon, or is this what was predicted some time ago with this group in control?


the only thing that has been holding the shareprice up was the top ups for the 750 share purchase scheme due to the consolidation. me thinks there is a fall on the way...wouldn't be surprised to see the 4.10-4.00 level in 8 weeks???....your guess ari


ohhhh...feel that burnnnnnnn....

hey tenon.....ya got to do something about that asthma.....

its going lower!!!!!!!

[ari]

and it has.....down 7c....it's got to be a watch now, nearing top-up time...I mean chase down time:(

[Bling_Bling]

quote:Originally posted by Bling_Bling

After stripping all the assets, this company has nothing left. With high NZ dollar and long term low global log prices, this will be a dog.



quote:Originally posted by Sharebroker


Really? All mikey mouse selling of 200 here and 2000 there.

Do us a couple of hundred thousands - waiting there at $4.35 especially for you. If it's a dog, you will make heaps when the sp falls to $1.00, right? ;)


You still waiting Sharebroker?

Price now at $4.04 today.

[Anna Naum]

Directors and the management team need to go, almost totally a US dollar income company now and no forward f/x cover.

Board meets this week coming, profit warning and downgrade is a gimmee.

[Sharebroker]

quote:Originally posted by Bling_Bling


quote:Originally posted by Bling_Bling

After stripping all the assets, this company has nothing left. With high NZ dollar and long term low global log prices, this will be a dog.



quote:Originally posted by Sharebroker


Really? All mikey mouse selling of 200 here and 2000 there.

Do us a couple of hundred thousands - waiting there at $4.35 especially for you. If it's a dog, you will make heaps when the sp falls to $1.00, right? ;)


You still waiting Sharebroker?

Price now at $4.04 today.




Still waiting, BB. You going to short a few? Papa is waiting for them. ;)

[Bling_Bling]

LOL... Sharebroker; if nothing else, a least you have a thick skin.

Good luck mate.



ps: TEN price at $4.00 Friday 8th April close

[Sharebroker]

quote:Originally posted by Bling_Bling

LOL... Sharebroker; if nothing else, a least you have a thick skin.

Good luck mate.

ps: TEN price at $4.00 Friday 8th April close


Short us a few, BB. Just trying to help you make some money.

Papa is waiting for you. If you are sure the SP is going to fall, go for it. ;)

[ari]

quote:Board meets this week coming, profit warning and downgrade is a gimmee.

At $3.85 someone must be in the know[?]

[madmike]

my response to today announcement
1)bookkeeping!!!!
2)mirrors and strings!!!!
3)they still got to pay dividends/capital returns in nzd!!!!!
4)they must think that the usd is going to fall more!!!!!

[Lizard]

quote:Originally posted by madmike

my response to today announcement
4)they must think that the usd is going to fall more!!!!!


Yes, that was my thought too!

[ari]

Finally some news.................
Tenon considers payouts in US dollars

15.04.05
by Ellen Read


If Tenon starts paying dividends this year, the cheques in shareholders’ mail may be in US dollars.

That is one option being considered by the company formerly known as Fletcher Forests, as it mulls adopting the US dollar as the currency it uses to run the business - once the sale of its structural business is settled.

A statement yesterday outlined the proposal - and also firmed up guidance that earnings for the year to June 30 will be about US$29 million ($41 million).

The forecast for operating earnings before depreciation and amortisation took into account the $165 million sale of Tenon’s structural business to Carter Holt Harvey, due to settle this month.

In February, Tenon said it expected earnings for the full year to be $60 million to $64 million - before accounting for the sale of the structural business.

On the currency issue, chief executive John Dell said most of its revenue and earnings came from US distribution operations, and the US was also the main market for its Taupo processing operations.

He said shareholders needed to understand they owned a US-dollar driven business.

"Adopting the US dollar as the company’s currency will provide greater transparency as to the performance of Tenon’s business, which is currently being masked by the translation of US-denominated earnings into New Zealand dollars."

The company’s dividend policy is not finalised but the aim is to return between 20 and 40 per cent of net cash from operating activities. Payouts could start in the second half of the year.

Chris Stone, head of research for McDouall Stuart, said Tenon would avoid currency fluctuations if it adopted the greenback.

He said it might be a little strange for shareholders to receive foreign currency cheques.

But, said Dell, "the shareholders would be looking forward to getting dividend cheques, fullstop."

[madmike]

quote:Originally posted by ari

Finally some news.................
Tenon considers payouts in US dollars

15.04.05
by Ellen Read


If Tenon starts paying dividends this year, the cheques in shareholders’ mail may be in US dollars.



Chris Stone, head of research for McDouall Stuart, said Tenon would avoid currency fluctuations if it adopted the greenback.

He said it might be a little strange for shareholders to receive foreign currency cheques.

But, said Dell, "the shareholders would be looking forward to getting dividend cheques, fullstop."





too lazy to hedge......or should it be...haven't got enough brains to hedge effectively

question...shouldn't they be hedging as part of their responsibility to their mainly nzd shareholders?

[Lizard]

I'm no chartist, but looking at the NZD:USD chart I get the impression the chart might well be getting close to confirming a downtrend...

Also, the non-farm payroll numbers out of the US last night continue to show strong growth in construction.

Surely both these factors should make Tenon start to look a little more interesting....?

[Lizard]

And actually, while I'm on this subject, can someone explain why Rubicon, with its main asset being around half of Tenon (and from memory they still have some debt on the books) has a market capitalisation greater than a debt-free Tenon?

[Bling_Bling]

TEN is going from bad to worst. Price today is $3.50 with only one buyer. [xx(]

[Lizard]

This looks cheap to me. My "back-of-an-envelope" calcs suggest NPAT at NZ$48m (including proceeds from sale of structural timber) for 2005 and NZ $32m from 2006. In addition the company will have $50m cash to spend. Dividends should start being paid and I'm figuring about 18cps for the next year? So at $3.50, this is on a prospective 2006 P/E of 7-8 and a dividend yield of 5.1% net ((7.7% gross - but I'm not sure how long before they have imputation credits available?).

In addition, falling NZD could eventually add upside - particularly when it gets below 0.60 - and positive reports on activity in US construction and home improvements should be considered positive for growth.

Anyone else got a take on it?

[Bling_Bling]

I say rising interest rates in the US and NZ and the downturn in the construction sector has a few more years to run. Wait for the turn in the property cycle.

[ari]

quote:This looks cheap to me.
She's fekin cheap now at $3.45! Gota be worth $4.00 or as the experts valued them $4.20

[Lizard]

quote:Originally posted by Bling_Bling

I say rising interest rates in the US and NZ and the downturn in the construction sector has a few more years to run. Wait for the turn in the property cycle.


Bling, Iast I looked, the NZ construction sector didn't affect Tenon any more. As for the US, yesterday I woke up to hear reports of good profits from Lowes (home improvement); this morning it was the Home Depot with a great earnings result. Non-Farm Payroll growth figures in construction were very strong in the first 4 months of the year. It looks to me more like a construction sector in an upturn...

Cheers,

[Bling_Bling]

You have to look at CAH to see how well TEN will do. It aint looking too hot.

I have been negative on TEN anc CAH since early last year and have expressed it in ST many times.

http://www.nzherald.co.nz/index.cfm?c_id=3&ObjectID=10126065

Bad news comes in twos for CHH

Chairman John Maasland is likely to spell out what is in store for CHH. Picture / Fotopress
Chairman John Maasland is likely to spell out what is in store for CHH. Picture / Fotopress

18.05.05

The country’s biggest forester, Carter Holt Harvey, is in the news for two reasons.

Number one: former managing director Chris Liddell - now chief financial officer of Microsoft - has resigned from the company’s board.

Number two: observers expect the company to miss this year’s profit forecast and say it could spell that out at today’s annual meeting in Auckland.

"Chris has let us know that his new role as chief financial officer of Microsoft will impact on the amount of time he is able to devote to Carter Holt Harvey," said chairman John Maasland.

The high dollar and a drop in Australian construction are putting pressure on CHH’s earnings.

The annual meeting is chief executive Peter Springford’s first opportunity to say whether his $300 million operating profit forecast for this year is achievable.

"It is looking pretty difficult," said James Lindsay, of Tyndall Investment Management.

The dollar has traded above 70USc for three months while building approvals in Australia, 40 per cent of of CHH’s sales, fell to a four-year low in March.

These issues have spurred speculation that International Paper, CHH’s 50.5 per cent owner, may be losing patience with its 13-year investment.

Springford had set "a bit of a stretch target" for earnings, said Andrew Mortimer, at First New Zealand Capital.

Lindsay said International Paper probably would not review its shareholding until after CHH completed the sale of about a third of its forests.

"Previously I was in the camp that said they would probably be a seller," Lindsay said. "I can’t see anything happening at the moment," given CHH’s reduced share price and the prospect of a capital return from the forest sale.

- BLOOMBERG

[Lizard]

It is misleading to group Tenon and CAH. I'm not overly familiar with CAH business, but I believe they are in forestry, logs, structural timber and pulp for both local and export markets - all the things Tenon has divested itself of... Tenon on the other hand is pretty much just export of appearance timbers - i.e. for interiors and furniture and US retailing. So CAH is heavily affected by log prices, forest values, local construction activity and exchange rates. Most of these factors are no longer relevant to TEN except exchange rates. Export winemaking would be a better comparison IMO!

I've made 30% p.a. from TEN over the past 3 years while being almost continuously advised that it is a dog. Currently I have only a small holding, but considering buying more. I think most analysts have TEN in the "too hard" basket while they wait for it to emerge with a nice "clean" set of accounts post sell-downs and have more time to assess its direction.

Cheers,

[Bling_Bling]

Lizard, like yourself I bought into TEN before GPG/RBC bought a stake in it and have done well. I agree that TEN is looking cheap at this stage, but I think there are still more downside risk to come. I think there will be a time to look back into this dog, but not yet. Maybe end or early next year, Bling will look back into the macro fundamentals and re-value TEN.

[ari]

Fund Manager picks.....
BT Funds Management
Richardson's top picks for 2005
Richardson favours forestry giant Tenon and hire equipment companies. BT is overweight in Tenon (formerly Fletcher Forests) and expects value to be recognised over the next year as the company sells more assets. He's been impressed by the performance of Tenon's US assets - substantial holdings in two moulding and millwork distributors and a 20% stake in solid wood furniture manufacturer Zenia House. When investor Rubicon took over Tenon a few months back, it indicated the wood processor would push its North American distribution assets harder. And Richardson reckons the US businesses could win higher market ratings as earnings grow.

Walker Capital Managment
Walker's top picks for 2005
He reckons Rubicon has a strong international outlook - his client portfolios own more than 6% of the company. Rubicon owns a portfolio of investments, the most significant of which is 50% of Tenon and 31.7% of US-based forestry biotech company ArborGen. What's the attraction? Tenon has built a strong position in the US with its stakes in Empire and American Wood Mouldings, which are the preferred moulding suppliers to Lowe's and The Home Depot respectively. Walker expects continued strong underlying growth from both these companies and sees the potential to leverage their distribution expertise in other markets.

[Bling_Bling]

The fact that these funds are talking up the stock gives me a clear sign not to buy.

[Lizard]

Suit yourself Bling...I've bought more at $3.40...see how it goes, eh? :)

[ari]

Wuzup? Up 9 cents and 700,000 + shares traded btween 17:00 and 17:27
Total volume for day 835,385

[Snow Leopard]

I seem to be reading more in the press and brokers comments about Tenon and what a wonderful share this is going to be given that the US$ is gaining strength against the NZ$. I

Perhaps now really is the time to take a good look at this or, to keep the RBC and GPG bods, happy it's listed principal shareholders?

Disc: Do not hold, but maybe?

[ari]

Third Avenue lifts Rubicon stake
09.06.05
By Andrea Fox

New York investment fund Third Avenue has increased its stake in Rubicon to 10 per cent, making it the fourth big-block shareholder in the wood processing and biotech investment company.

A fund manager said Third Avenue's move up from 8.5 per cent could reflect an interest in the future of wood processor Tenon, formerly Fletcher Forests, of which Rubicon owns 51 per cent.

Third Avenue's play means that four parties own 60 per cent of Rubicon's 279 million shares.

US investor Perry Corp owns 19.8 per cent, Sir Ron Brierley's Guinness Peat Group 19.9 per cent and AMP 10 per cent. AMP is building a stake in Tenon.

Third Avenue has become a significant Rubicon shareholder in the past year.

The fund manager said Tenon was regarded as undervalued, particularly in US dollar terms. If the Kiwi dollar fell, as many expect, Tenon's value would soar. Rubicon was not regarded as a long-term holder of assets but as a trader.

GPG's New Zealand director, Tony Gibbs, would only say he noted Third Avenue's increased shareholding.

Third Avenue is an unwelcome 10 per cent shareholder of New Zealand rail operator Tranz Rail, now 84 per cent owned by Australia's Toll Group. The fund stands between Toll and its hunt for 100 per cent of Tranz Rail, which it would delist from the NZX.

A commentator said that while Third Avenue's interest in Tranz Rail was viewed as a blocking stake, its motive in Rubicon was not seen as such.

Tenon got out of the forestry business in December 2003, selling its forest estate to a private consortium for $725 million.

In February, it announced the return of about $320 million to shareholders.

In the same month, it reported operating earnings of $28 million for the six months to December 31, up $3 million on the corresponding half-year.

[Snow Leopard]

yes, that was one of them. :)

[Westie]

I've been buying RBC for a couple of years now. I was happy when GPG started buying & even more happy when third ave started buying. So long as the likes of third ave are buying, it means i can ease off the research & just keep buying & holding, safe in the knowledge that these folks have a great deal more investment savvy then me. I personally prefer RBC over tenon as I am a longer term holder. Over the long term I'm expecting to get the Tenon upside + any upside from the biotech assets. If you are holding for the short-medium term then perhaps tenon might be the better buy.

Below is an article from Feb this year. I think Third Ave was the top of one of the top performing funds in 2004.

[quote]quote:The Fortress That Marty Built
by Steven Goldberg

It may have been a so-so year for the stock market, but 2004 was a bang-up year for Marty Whitman. All four of his Third Avenue funds posted double-digit gains, ranging from 16% to 22% through mid November. To what does the 80-year-old Whitman ascribe these stellar results? "I can spell it out for you in one word,"he says in an unmistakable New York accent, "l-u-c-k."

In a profession filled with massive egos and excuse makers, Whitman stands apart for self-deprecation and brutal honesty. "No one can predict what will happen short term," he says. "We're doing the right things now, but we were also doing the right things in 1999" -- when performance was nothing to brag about.

But Whitman is justifiably proud of his funds' longer-term records, and investors have taken notice. Third Avenue's assets stand at $10 billion, up by one-third over the past year. The family's flagship fund, Third Avenue Value (TAVFX; 800-443-1021), which invests in companies of all sizes, returned an annualized 12% over the past five years to November 1, 11 percentage points per year better than the average gain of diversified U.S. stock funds. It is the only fund that Whitman personally runs.

As for the other Third Avenue funds, International Value (TAVIX) has returned an annualized 22% since its launch nearly three years ago. It has been in the top 30% each year among funds that invest in small foreign companies. Real Estate Value (TAREX) earned an annualized 22% over the past five years, putting it in the top 20% of real estate funds. And Small-Cap Value (TASCX) gained 16% annualized over the past five years, putting it in the top 40% of funds that invest in small, undervalued companies.

When buying stocks, Whitman's mantra is "safe and cheap." Whitman was an expert in bankruptcy investing before entering the fund business, and he favors companies that have the strength to pay off their debts. "First and foremost, we look for stocks with fortresslike balance sheets," says Curtis Jensen, 42, manager of Small-Cap Value and Whitman's heir apparent. The funds are filled with shares of banks, insurers, energy companies, real estate developers and other asset-rich firms whose values are easily quantified.

Whitman and crew won't buy a stock unless it trades at a steep discount to the worth of the company's underlying assets. They tend to hold a stock for long periods--sometimes five years or more -- unless it becomes grossly overpriced. "Unless there are strong and compelling reasons, we don't sell," Whitman says.

Cross-pollination
Third Avenue's 15 managers and analysts work closely together. As a result, many of the stocks that are held in one fund often appear in one or more of the others. (For example, 30% of Third Avenue Value's stocks are also in Small-Cap Value.)

Jensen says finding good stocks is much harder now than it was a year ago. A sign that the pickings for Third Avenue's type of stocks are getting slim: Cash positions have built to double-digit levels in all four funds. International Value, with 36% in cash, has the highest position. Given Third Avenue's cautious approach, it's no surprise that the funds tend to lag in sharply rising markets and star in

[ari]

Interesting reading Westie...
I recently increased my RBC holding while still retaining TEN
Looks better on portfolio with more shares for same money:)
It won't happen o'nite, but it will happen.....wot that is; is anyone's guess!

[Westie]

I was thinking about the value in Tenon a bit here's there assets
Manufacturing facilities
• three North Island sawmills
• Mt Manganui plywood mill
• Taupo mouldings plant and boards plant
• Kawerau remanufacturing plant
• Ramsay Roundwood supplying post, piles, poles and other landscaping products

Distribution ownership:
• 50% stake in American Wood Moulding, a US moulding and millwork distributor, whose major customer is The Home Depot
• 67% stake in The Empire Company, a US moulding and millwork distributor whose major customer is Lowe’s
• 20% stake in Zenia House, a Danish solid wood furniture, manufacturer and distributor

Now for the distribution assets, the value will be driven by the performance of their customers. So, how are Lowes & Home Depot doing?

quote:
Lowes - 1Q05 sales were $9.9b, a 14% increase over 1Q04, and comparable store sales increased 3.8% vs. 1Q04 comp of 9.9%.

Home Depot - Home Depot Inc (HD.NYS), the largest chain of home improvement retail stores in the US, has reported a 14% rise in its first-quarter profits. Home Depot reported total sales of $18.97 billion, representing 8.1% y/y growth, and same-store sales growth of 2.1% for the latest quarter. The company's 1Q FY06 earnings were ahead of the average estimate of the Wall Street analysts. Home Depot has reiterated its full-year guidance of sales growth of 9%-12% and EPS growth of 10%-14% for this fiscal year.

So I'd imagine the likes of third ave aren't looking at Tenons earnings, they are looking at the value of the distribution assets. LEts not forget the US is going through a home improvement/house price boom like we've just been through. That is clearly driving Lowes & home depot sales. If I were is RBC's position & looking to maximize my short term gains, i'd be making Ten sell its distribution assets while the boom is going & they can fetch higher values.

A bit more on third ave....
[quote]quote:Fund Veteran Whitman Says Management Matters Most: Chet Currier March 22 (Bloomberg) -- A popular picture of bargain-minded value investors portrays them first and foremost as number- crunchers.

Never mind the headline on the press release -- show them the footnotes, the data deep in the balance sheet. In a classic embodiment of this image, a photo of veteran mutual-fund manager Martin Whitman on his company's Web site shows him with his face buried in a financial document.

So it comes as a bit of a jolt to read Whitman's latest annual shareholder letter. He writes that an ability to dig out bargains in itself probably hasn't been the key to his success as founder and chairman of the 30-year-old Third Avenue Management LLC, and manager of the firm's flagship Third Avenue Value Fund.

``Rather, the fund's best investments revolved around being in bed with superior managements who were able to be opportunistic on a long-term basis,'' he says.

Whitman can speak as a voice of experience. In the last year, as he marked his 80th birthday, the mutual-funds part of Third Avenue's business hit best-seller lists with a jump in assets from $4.9 billion at the end of January 2004 to $8.3 billion a year later, according to the consulting firm Financial Research Corp. in Boston.

Out in Front

The $4.3 billion Third Avenue Fund gained 26.6 percent in 2004 to rank among the top 1 percent of value funds tracked by Bloomberg. Over the past three years, according to Bloomberg data, the fund has returned 14.2 percent a year while the Standard & Poor's 500 Index has advanced at a 2.5 percent annual pace, including dividends.

Whitman says the superior managements of which he writes ``seem to focus on the same thing TAVF focuses on as a buy-and- hold investor, i.e., long-term wealth creation. The primary fo

[ari]

Good lift so far this week...is there something in the wind or are they heading back to the $4.20 reputed value.
When is the next set of figs. due?

[Lizard]

quote:Originally posted by ari

Good lift so far this week...is there something in the wind or are they heading back to the $4.20 reputed value.
When is the next set of figs. due?


Yes, moving up strongly in a dull market, though on quite low volumes. Brokers finally seem to have taken a liking to it - probably influenced by factors mentioned on this thread.

Next report will be FY to end of June. The balance sheet at least should finally reveal the shape of the future company, though we still have to wait a bit longer until the P&L is clear of the effects of divested assets. In a position where they might pay a dividend for the first time since 1998 (and, no, I didn't own them then!)

[ari]

quote: though on quite low volumes.
although good volumes in RBC 1,261,559....why the sentiment towards RBC over TEN?

[ynot]

Please excuse my ignorance on TEN, just that i still have a few after the FFS reshufle, but have not been following them.
From the look of the thread it sounds like TEN still has some milage to go.
Anyone venture to sugest a target price over the next 12 months?

[Lizard]

This is a difficult stock to value because firstly, the balance sheet and P&L have been evolving continuously over the past few years with the sale of assets, a higher number of guesses and assumptions have been required to come up with appropriate base data. Secondly, it is highly dependent on (notoriously unpredictable) exchange rates. Thirdly, it's performance can be expected to be cyclical.

As an investor with a long time horizon, I work on the long-term NZD:USD exchange rate returning to an average of 0.60. On this basis, I value the stock at $NZ5.24 per share. However, I don't expect it to meet my valuation in that period, as exchange rates are not going to fall back that quickly.

[ari]

Looking good again this morning, up 5c and 3c respectively:D:D

[ari]

Woops, spoke too soon...............

[ari]

Interesting article in todays SundayStar Times...'Waiting for the big farewell'.
Just cancelled my RBC sale......me thinks I'll wait a little longer:D

[Lizard]

Pretty happy with my Tenon purchase of a couple of months ago. Actually went through at $3.36, so only a cent off the low, which is always a nice feeling. :) Should be an uptrend for a couple of years I think (provided they don't cash up as per the speculation).

[Taijon]

Ari, or anyone else - are you able to post the Sunday Times article you mention?

I see another SSH notice from Avenue Investments today showing more RBC purchases. They now hold more than 11%. They must expect action on the TEN front before too long.

Thanks

[Westie]

quote:Ari, or anyone else - are you able to post the Sunday Times article you mention

Couldn't find the article online so can't post it. Basically it just said the usual about the break up of the Fletcher empire, selling tenon's remaining assets may be Rubicon's endgame especially with GPG there, the change to US$ reporting may be a signal that they are looking for potential US buyers. Can't remember much else but nothing that isn't pretty obvious already & hasn't been mentioned on the posts here. Oh yeah, a couple of brokers have buy ratings on Ten & expect it to have a good reporting season. One broker has an "underperform" rating because of the share price run up recently. I don't think this one will underperform with the prospect of corporate activity on the horizon. I imagine Third Ave will be agitating RBC for asset sales as that's what they have stated they see for the future.

[ynot]

Hi Lizard. Your $5.24 may be closer than we think.

[Lizard]

Yep. 'scuse me a moment while I have a small gloat:

gloat, gloat, gloat

Sorry, that was terribly bad form. But it's been a nice day all round.:)

[Lizard]

Guess the punters were looking for a dividend to support that price? Wonder what they're planning for all that cash.....

[ari]

I've put the SELL sign out on my TEN & RBC....I've hung on for too many years, time to move on........

[Lizard]

Maybe starting to edge up again? Would be interested if anyone can post a long-term chart with price correction for capital return included...?

[Phaedrus]

http://img.photobucket.com/albums/v418/789456/TEN98001.gif

[Lizard]

Thank you Phaedrus. I wasn't quite sure that the Reuters chart was correct there, but looks similar.

Looks like its still well above the long term uptrend, so maybe no urgent upward moves...

[Lizard]

$4.44. Guess my instincts are still better than my TA....[xx(]

Try again...

...Short term and long term uptrend... medium term? No idea?

Will carry on holding here and talking to myself. [:X]

Cheers,

[Bling_Bling]

With pulp and log prices at the bottom of the pits, why is TEN share price at these levels?

[ynot]

any ideas on the large volume drop today?
rubicon are steady since gpg ann but ten is looking shakey?

[ynot]

Hi Lizard, what do you make of TEN. Not many buyers!

[Phaedrus]

TEN gave a trendline break Sell signal back in early August. Before the month was out, there were Sell signals from a Moving average crossover and the OBV trendline. Current holders that missed all these signals might like to take a look at the On Balance Volume fall today. Abrupt drops like this generally mark the "smart money" exiting and as such are obviously Bearish. Of course no technical signal comes with a written guarantee, but just take a look at what happened last time! (Circled in red)
Not a stock that I would like to be holding right now, but you will get one last warning to quit. In my opinion, holders would be very foolish to ignore any break below the previous support at $4.18.
I have taken the risk of posting this chart before the market closes, using prices and volume as at 3.55pm. The current Bid/Ask is $4.20/$4.25. The main import of this post is contingent on a Close of $4.22 or below.
http://img.photobucket.com/albums/v418/789456/TEN927001.gif

[ari]

Thanx Phaedrus...I finally got out @ $4.40 a few weeks back, after many years (no analysis, just gut feeling) although still hold RBC. Where in your opinion do they sit?

[Phaedrus]

The indicator in the upper plot is the On Balance Volume. (Forgot to label it)
http://img.villagephotos.com/p/2004-10/848030/RBC927001.gif

[ari]

Bugger....not alot buying, so will sit this one out (yet again). 50% strike rate can't be too bad, I've done worse:D

[Lizard]

Thanks Phaedrus. And I thought the FA still looked okay with NZD carrying on down...
Still TA usually wins in the short term, so time for some profit-taking. Is there anything left in NZ worth buying atm?

[Lizard]

Phaedrus, am also interested in how you read the longer term chart on TEN - i.e. 2-3 years. Around half my current holding date back to when bought as FFS at 23cps. Was wondering if there was any justification in leaving these unless they break long term trend line at around $3.80?

[Phaedrus]

Liz,
I have plotted the long-term trendline that you mention. $3.80 is a fair bit below the current price and would give a lot of your profits back to the market should it be hit.
I would have thought that the trendline break and the OBV action would have been reasons enough to quit, but if you are still in, here are 4 exit suggestions you might like to consider :-
(1) Previous Support at $4.18 broken.
(2) 80 day Exponential Moving Average broken.
(3) 30 day Variable Moving Average broken.
(4) 60 day Directional Movement Indicator crossover.
You can see that these have given reasonably good entry and exit points in the past - far ahead of simply buying and holding. Current price action is barely cents away from all 4 being triggered.

http://img.photobucket.com/albums/v418/789456/TEN928001.gif

[Lizard]

Thanks Phaedrus.

[ynot]

Most appreciated Phaedrus.

[ari]

quote:$3.80 is a fair bit below the current price and would give a lot of your profits back to the market should it be hit.

Getting awfully close at $3.90 and RBC down 9.1% to match.

[ari]

Well that was a bit of a stuff up by Direct showing 90c and 9.1% drop, although last sale was 95c only down 4%.....it's bad enough out there without Direct adding to it!

[Phaedrus]

Updated chart showing that even the most conservative technical indicators would have you out of TEN by now. The sell signals began back in early August with the trendline break.
http://img.villagephotos.com/p/2004-10/848030/TEN1013001.gif

[Lizard]

Phaedrus,

As per earlier discussion, the Tenon s.p. has fallen back to around the long term trend line. It is not yet clear to me whether this support will hold or fail, although the s.p. has so far appeared to bounce off this on an intra-day basis. However, a continuation of the long term uptrend would appear to me to offer at least 24% capital gain over the next 12 months. What do you look for before you would buy back in to this?

Cheers,
Liz

[Phaedrus]

Liz,
Clearly you want to buy this stock - are the fundamentals that good?

"the Tenon s.p. has fallen back to around the long term trend line."
There is still about 15 cents to go before the trendline is reached.

"It is not yet clear to me whether this support will hold or fail"
Nor to me or anyone else. Waiting is the story here. Don't forget that this trendline is unconfirmed as yet. Right now, you can not count on "support" at the trendline. In any case, trendlines are not like support levels which really do mean something. A trendline is no more than a line drawn on a chart - it is there primarily to monitor an existing trend. I know that it "looks" as though trendlines give support, but really all they are doing is showing that a pre-existing linear trend is continuing.

"a continuation of the long term uptrend would appear to me to offer at least 24% capital gain over the next 12 months."
Liz, this statement is really a mixture of extrapolation, wishful thinking and chicken counting. Right now you don't have a longterm uptrend. Price action would have to go over $4.70 before there is one. (A higher high after a higher low)

"What do you look for before you would buy back in to this?"
(1) A break of the current downtrend (magenta trendline)
(2) A break above the 30 day Variable Moving average.
(3) A rising On Balance Volume indicator
(4) A break of the 80 day Exponential Moving average
(5) The +DI rising above the -DI (Directional Movement Indicator)
(6) A clear reversal at the tentative longterm trendline.
NONE of these appear to be imminent.

http://img.photobucket.com/albums/v418/789456/TEN1018001.gif

[Lizard]

I have no intention of re-buying Tenon at the moment, even though I think fundamentals are fine.

My reason for asking dumb questions is that I seem to be having some success seeing "sell" signals on stocks I own, but absolutely no success spotting "buy" signals. So, given previous discussions and the fact that from a fundamental perspective, there at least seems to me to be some chance that this WILL turn up, then it seems like a good stock for me to practice on. While I am watching, just thought I should check what I am watching for.

Of course buying confirmed uptrends is completely against my nature because I have a natural aversion to following the pack...so that maybe explains my difficulty [}:)]

Thanks for your help.

[ari]

quote:I have a natural aversion to following the pack...


Nothing wrong with following the pack, just be near the front:)

[Lizard]

Re rubicon announcement on increasing stake in Tenon - am I correct in thinking that the "creep provision" means they can acquire up to a further 5% of Tenon per year?

[Lizard]

Have been taking a break from posting, but better drop in to point out that obviously Phaedrus was right about Tenon (and I was wrong). Thanks Phaedrus.

[8D]

[shasta]

Not much talk bout Tenon of late, with the whole RBC/TEN play still ahead, it seems its business as usual.;)

Tenon sells AWM to buy a better earner

Saturday November 4, 2006


Shares in wood products firm Tenon rose 3.5 per cent yesterday after it announced it was to offload its 50 per cent stake in American Wood Mouldings (AWM) and buy another company.

Tenon believed the deal would add more than 75c per share of value to the stock.

Tenon has sold its AWM investment to its AWM partner, the Hagen family, for half of Ornamental Mouldings. The other half of the mouldings company was acquired for US$18.75 ($28.19) million.

The deal assumes Ornamental's "small" net internal debt balance of US$3 million.

Tenon said its pro-rata share of AWM's debt was approximately US$21 million.

Tenon chairman Luke Moriarty said that the Ornamental purchase was a "very positive and highly significant move for Tenon".

Tenon was in control of the total company, which had not been the case with AWM.

Earnings-wise, he said AWM had also contributed "next-to-nothing" to Tenon's bottom line last year, whereas Ornamental's operating earnings last year were more than US$7 million.

Chief executive Mark Eglinton said the transaction addressed the source of the company's disappointing first half result.

In the second half, Tenon more than doubled its first-half earnings performance from US$6 million to US$14 million. Total earnings for the year were US$20 million before interest, tax, depreciation and amortisation.

Tenon retained an agreement with AWM to supply mouldings from its Taupo site.

Shares in Tenon rose 11c to $3.21.

- NZPA

[COLIN]

Dumped these this week, along with my RBC.
"Life's too short to be spending it holding on to unrewarding investments."

[barney]

I see that Third Avenue Management increased their shareholding in Tenon during the week from 14.27% to 15.43%.They also hold 17.76% of Rubicon.No doubt at some stage in the future Rubicon will sell it's holding in Tenon and it will be taken over.However it's anyones guess when this will happen and I can understand why you've run out of patience Colin.

[Snoopy]

quote:Originally posted by Lizard

This looks cheap to me. My "back-of-an-envelope" calcs suggest NPAT at NZ$48m (including proceeds from sale of structural timber) for 2005 and NZ $32m from 2006. In addition the company will have $50m cash to spend. Dividends should start being paid and I'm figuring about 18cps for the next year? So at $3.50, this is on a prospective 2006 P/E of 7-8 and a dividend yield of 5.1% net ((7.7% gross - but I'm not sure how long before they have imputation credits available?).

Anyone else got a take on it?


Well yes actually if you check out the 'Focus Investment Group' on the other channel. With the stellar rise of Fletcher Building, I thought it was worth running the ruler over that other Fletcher share to see if it too deserves a rerating. I do hate to bring up these ghosts from two years past but it does make for an interesting comparison with what really happened.

Two years later and no dividends have been declared. Now take a look at the most recently published debt position. Tenon had total borrowings of $104m+$6m=$110m at HY2007 and $94m+$32m=$126m at FY2006. If I average the two to come out with a 'seasonal average debt', I get $118m. Based on normalised FY2006 earnings of $NZ15.7m, I get a minimum debt repayment time of 7.5 years. With that level of debt in what seems to be a fickle low margin industry I would rate Tenon's 'no dividend' policy as prudent.

I am not 100% sure how to value Tenon now given it is such a changed beast. Grant Samuel had a go three years ago in response to the Rubicon takeover offer at the time. Just like now, Tenon was meant to be coming out of an earnings slump. We could use GS's 'poor year' industry EBIT multiple of 12.3 to 14.2 as a valuation guide.

GS's valuation equation is:

Share Value=[(Earnings Multiple x EBIT)-(Net Debt)]/(No. of Shares)

Sticking in the figures for FY2006:

=[(12.3 to 14.2)x$22m-($126m)]/67.06m= $2.16 to $2.78

Note that this valuation includes a premium for control. To me Tenon looks more than fully valued at $2.75.



quote:
In addition, falling NZD could eventually add upside - particularly when it gets below 0.60 - and positive reports on activity in US construction and home improvements should be considered positive for growth.


...except the dollar didn't drop it rose, and the US housing market slowed and there were some managment issues.

Still I noticed the CEO of Tenon copied the above paragraph and put it in his AGM speech for FY2006 Lizard. With management's record of 'calling the market' and Tenon sitting on a PE of 12 I am finding it hard to argue anything other than Tenon being overvalued at $2.75. Have I missed something?

SNOOPY

[corporateraider]

Snoopy, I think that you are right.

If something looks like a dog, and barks like a dog, the chances are it is a dog.

Disc (sadly) Hold TEN

[Lizard]

Tenon is in a cyclical business which may be near its lows, heavily exposed to a cyclical forex at its toughest. Yes, it's been called before and things got tougher instead of better - 2007 year will not have been good to them. But eventually it will turn.

Cyclical businesses often look expensive near the bottom and cheap near the top of their share price cycle. Cyclicals are also usually bad investments for those like Snoopy who want to buy and hold forever. But they can make for some impressive trades on the way up (or nasty burns on the way down).

I think Tenon has been making solid progress in positioning the core business. I do not think things are likely to get much tougher. They should be able to rapidly improve margins and dramatically increase earnings in the upleg of the cycle. While I don't hold, I think they are well worth watching. Latest data out of the US may hold positives on both housing and USD strength. But for now, I will watch the chart to see if it signals an entry before the fundamentals become clearer.

FN Arena - Wall Street Volatility (http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=C053609A-17A4-1130-F59A981740CC22D5)

[Snoopy]

quote:Originally posted by Lizard

Tenon is in a cyclical business which may be near its lows, heavily exposed to a cyclical forex at its toughest. Yes, it's been called before and things got tougher instead of better - 2007 year will not have been good to them. But eventually it will turn.

Cyclical businesses often look expensive near the bottom and cheap near the top of their share price cycle. Cyclicals are also usually bad investments for those like Snoopy who want to buy and hold forever. But they can make for some impressive trades on the way up (or nasty burns on the way down).

I think Tenon has been making solid progress in positioning the core business. I do not think things are likely to get much tougher. They should be able to rapidly improve margins and dramatically increase earnings in the upleg of the cycle. While I don't hold, I think they are well worth watching. Latest data out of the US may hold positives on both housing and USD strength. But for now, I will watch the chart to see if it signals an entry before the fundamentals become clearer.


I take your point about cyclicals looking expensive at the bottom of the cycle. But the EBIT multiple method can handle that. At the top of the cycle the multiples are different, in the case of Tenon 8.5 to 9.8. If you compare those to the bottom of the cycle multiples (12.3 to 14.2) those bottom of the cycle multiples are 45% higher.

Looking at that another way, the EBIT multiple valuation method will not increase the valuation of Tenon unless the EBIT expansion from the bottom to the top of the cycle is more than 45%. Do you think an EBIT above 1.45x$NZ22m= $NZ32m is achievable? Unless it is your expected profit on Tenon would be nil if investing today.

Having said that the EBIT multiple method is notoriously volatile depending on the input assumptions. I am not sure if I have used the right debt number for instance, so any reworking of the data that would prove me wrong would be a valuable, maybe even profitable, exercise.

SNOOPY

[Lizard]

Hi Snoopy,

I don't see EBIT multiples as dealing with variation in margins and revenues resulting from market and forex cycles. In Tenon's case, a significant portion of costs is in NZ dollars, while sales are in US. The margin variation as a result of forex changes is pretty easy to guess. And just as low interest rate bonds show the best capital gains in a falling interest rate environment, low margin companies show the greatest % earnings improvement in a falling forex environment. That doesn't even touch on the effect of the market cycle running in sync at this point.

I would expect EBIT expansion from top to bottom of cycle to be much more than 45%, but I will try and bash through the numbers at some stage and see what they throw up. As you've noted, history is of limited use given the change in Tenon composition. (No hurry I suspect, since 2007 will not be pretty.)

[Lizard]

Some figures to go on with:

Last real low in the currency cycle was the 2001/2002 year, where the currency spent most of the period in the .40-.44 range against the USD. Pulling up the segmental results from off the ASX site where they were then listed (under FFS), the North American consumer business showed revenues of $NZ194m and operating earnings of $NZ24m - i.e. margin of 13%. In 2006 (forex about 0.67), revenues were translated to $NZ613m with operating profit of $NZ23m - i.e. a margin of 3.7%. (Currency is just one possible factor though).

Also, note from the agm speech that each 1 cent move in forex was said to equate to about $US0.75m in operating earnings (although I wouldn't think it was a purely straight line relationship.).

[Lizard]

Some very rough calcs - normalising both 2002 and 2006 data for currency to long term 0.60 cross rate based on that agm figure suggests operating earnings would typically fall at a margin of 6-8% of revenue. Using a doubling of first half 07 revenues (i.e. $NZ550m - down from FY06 of $NZ613m), would give a "currency normalised" NPAT of $NZ18.7 - $26.1m. This is based on slower revenues from the US housing sector. Add a 15% increase in revenue for a return to more buoyant housing conditions, and that becomes $NZ22-31m.

So with a return to just mid-cycle currency and housing conditions, could see TEN producing eps of 33-46cps by these very rough calculations.

Having said that, I don't see that being fully recognised in the accounts until at least the 2009 year. So while it suggests at least a $4 share price, discounting it for risk on timing to a 25% pa return over the next two years would mean risk/reward starts to add up around $2.50?

All this contains alot of extrapolations and assumptions, so and is just for discussion purposes!

[Snoopy]

quote:Originally posted by Lizard

Some very rough calcs - normalising both 2002 and 2006 data for currency to long term 0.60 cross rate based on that agm figure suggests operating earnings would typically fall at a margin of 6-8% of revenue. Using a doubling of first half 07 revenues (i.e. $NZ550m - down from FY06 of $NZ613m), would give a "currency normalised" NPAT of $NZ18.7 - $26.1m. This is based on slower revenues from the US housing sector. Add a 15% increase in revenue for a return to more buoyant housing conditions, and that becomes $NZ22-31m.


Good work Lizard. I tend to be less enamoured with the idea of normalized cross rate of 60c and very cynical of management that do their strategic managment around exchange rates which they cannot control.

So I started out with last years $NZ15.9m NPAT. I took on board the AGM comments about a first half EBITDA figure of $US14m being more normal, then used twice that figure (to represent the full year EBITDA) as a scaling factor on last years EBITDA of $NZ20m.

So I get NPAT $NZ15.9m x (2x$14m/0.7)/$20m)=$31.8m NPAT for FY2008. However this doesn't take into account the NZD/USD exchange rate being some 6c higher than budgeted. So I lopped $NZ4m off the above NPAT figure and came up with a projected NPAT for FY2008 of $27.8m.

Even if things are tracking along like this already 'this years' first half is a stinker, a measly $2m NPAT. So add in half the profit for my 'normalised' year of FY2008 and you get $15.9m for FY2007, or near enough to the same as last year.

The NPAT FY2008 figure is within your own projected range, leaving out any currency normalisation effects.


quote:
So with a return to just mid-cycle currency and housing conditions, could see TEN producing eps of 33-46cps by these [u]very rough</u> calculations.


I prefer to stick to my unnormalised exchange rate figure of around 28c.


quote:
Having said that, I don't see that being fully recognised in the accounts until at least the 2009 year. So while it suggests at least a $4 share price, discounting it for risk on timing to a 25% pa return over the next two years would mean risk/reward starts to add up around $2.50?


I go for a PE of 10 to 12 at the top of the business cycle which points to a share price of $2.80 to $3.40. Not a heck of a premium over today's $2.75. The absence of any compelling value here, coupled with management's poor track record of predicting their profits is enough to keep me on the sidelines.

SNOOPY

discl: no shares held

[Lizard]

I'm not sure how management could make strategic long-term decisions without taking some view on the average cross-rate. If current strategy was always based on current exchange rates, then a global business would end up continually trying to move either manufacturing or marketing with a view to optimising returns - and since they would always be lagging reality, they would probably fail to ever cover the costs of doing so.

Personally, I think the second half of 2007 is unlikely to make much profit at all - since exchange rates have been up around .72 for much of the period so far. I doubt that exchange rates will return to average 0.60 in time for FY08 either.

I think we need to distinguish between the two separate currency effects - the most important one is the effect on margins where higher NZD costs cause erosion and the second is the translation of USD financial results to NZD denominated share prices. You are perhaps correct to use current prices for the latter, despite TEN using closer to 0.60 in their reports for consistency, as the comparable opportunity to take advantage of forex is to invest your NZD's offshore in another business.

Btw, I think these figures are mid-cycle, not top of cycle. Take the exchange rate back to 0.42 and NPAT comes out closer to $NZ65m.

[Snoopy]

quote:Originally posted by Lizard

I'm not sure how management could make strategic long-term decisions without taking some view on the average cross-rate. If current strategy was always based on current exchange rates, then a global business would end up continually trying to move either manufacturing or marketing with a view to optimising returns - and since they would always be lagging reality, they would probably fail to ever cover the costs of doing so.


Agreed about the shifting of manufacturing. Isn't that why Tenon have opened an office in China? To look at procuring cheaper stuff?

And isn't that why Tenon's financial results are so consistently awful ;) ?

I think that Tenon would have to be betting on some improvement in the price of lumber. I'm not so sure if they should be betting on a particular exchange rate movement though!


quote:
Personally, I think the second half of 2007 is unlikely to make much profit at all - since exchange rates have been up around .72 for much of the period so far. I doubt that exchange rates will return to average 0.60 in time for FY08 either.


At the time of the last AGM, when the CEO made his exchange rate sensitivity comment, the exchange rate was around the late sixty cents IIRC. I had assumed the 'base case' for Tenon was based around exchange rates at those levels although I am prepared to be corrected. Where did the 60c come from Lizard?


quote:
I think we need to distinguish between the two separate currency effects - the most important one is the effect on margins where higher NZD costs cause erosion and the second is the translation of USD financial results to NZD denominated share prices. You are perhaps correct to use current prices for the latter, despite TEN using closer to 0.60 in their reports for consistency, as the comparable opportunity to take advantage of forex is to invest your NZD's offshore in another business.


Exactly. If you are really sure of your exchange rate prognosis, why not go down to the bank and grab some US dollars? It saves the company risk of investing with Tenon.


quote:
Btw, I think these figures are mid-cycle, not top of cycle. Take the exchange rate back to 0.42 and NPAT comes out closer to $NZ65m.


42c is a big bear call. I think the dairy farmers will prevent us from ever becoming that much of a banana republic again.

SNOOPY

[Phaedrus]

Here is a longterm chart of a company with "consistently awful" financial results. See how Snoopy and I can arrive at the same decision using very different methods. We don't invariably disagree!

I have overlaid the NZ/US exchange rate to illustrate the possible relationship Lizard was commenting on.

http://h1.ripway.com/Phaedrus/TEN530001.gif

[Snoopy]

quote:Originally posted by Phaedrus

Here is a longterm chart of a company with "consistently awful" financial results. See how Snoopy and I can arrive at the same decision using very different methods. We don't invariably disagree!

I have overlaid the NZ/US exchange rate to illustrate the possible relationship Lizard was commenting on.


Interesting to see that chart Phaedrus. I see the vertical axis on the left represents the exchange rate. The axis on the right doesn't seem to correspond with the current $2.00 to $4.00 price trading range for Tenon shares. But the shape certainly looks about right!

Superficially according to that chart, Lizard's speculated correlation between Tenon's performance, as reflected in the share price, and the NZD to USD exchange rate does not hold. That is even allowing for the six month dislocation between when the exchange rate actually moves and the goods from New Zealand find themselves in the hands of the end customers. However, Tenon has changed so radically over the time period this chart depicts, a simple chart like this is IMO of limited use.

Before FY2004, Tenon was still called 'Fletcher Forests'. There were a couple of large capital repayments as a result of the sale of the actual forests. Prior to that there was a cash issue when the idea of buying outright the Central North Island Forests Partnership was mooted and the company had its own issues with debt. Subsequent to 'Tenon becoming Tenon' the Structural Solutions business, which consisted of all of the old Fletcher Forests NZ manufacturing plant except Taupo, was sold to Carter Holt Harvey. Even in the last year the US based business units have been comprehensively restructured.

All of these changes have been in the interests of chasing higher margins, a worthy goal for a business in a tough industry like this. However, so far all this restructuring has not delivered improved operational results. And there is no evidence this industry has *ever* delivered the operational results that Tenon management keep telling us is their baseline business case. We keep being told things are about to come right. It is a story I would like to believe, but I find my own investment decisions that come out best have to be based on more than 'wishful thinking'.

SNOOPY

discl: no shares held

[Snoopy]

quote:Originally posted by Lizard

Some figures to go on with:

Last real low in the currency cycle was the 2001/2002 year, where the currency spent most of the period in the .40-.44 range against the USD. Pulling up the segmental results from off the ASX site where they were then listed (under FFS), the North American consumer business showed revenues of $NZ194m and operating earnings of $NZ24m - i.e. margin of 13%. In 2006 (forex about 0.67), revenues were translated to $NZ613m with operating profit of $NZ23m - i.e. a margin of 3.7%. (Currency is just one possible factor though).

Also, note from the agm speech that each 1 cent move in forex was said to equate to about $US0.75m in operating earnings (although I wouldn't think it was a purely straight line relationship.).


It would be interesting to know what the profit contribution is from North American manufacturing vs lumber imported from NZ. Despite the higher labour costs in the USA it might be up to the high value added prices N.A. can comand for specialty wood fittings that is keeping Tenon's ink black.

Shocking news from Allied Farmers yesterday with the closure of their Wanganui lumber plant. Log prices high, dollar high but prices for lumber are down. The profit squeeze is coming from both ends and I presume Tenon is in the same position!

SNOOPY

[Snoopy]

quote:Originally posted by Snoopy



I started out with last years $NZ15.9m NPAT. I took on board the AGM comments about a first half EBITDA figure of $US14m being more normal, then used twice that figure (to represent the full year EBITDA) as a scaling factor on last years EBITDA of $NZ20m.

So I get NPAT $NZ15.9m x (2x$14m/0.7)/$20m)=$31.8m NPAT for FY2008. However this doesn't take into account the NZD/USD exchange rate being some 6c higher than budgeted. So I lopped $NZ4m off the above NPAT figure and came up with a projected NPAT for FY2008 of $NZ27.8m.

Even if things are tracking along like this already 'this years' first half is a stinker, a measly $2m NPAT. So add in half the profit for my 'normalised' year of FY2008 and you get $15.9m for FY2007, or near enough to the same as last year.

I stick to my unnormalised exchange rate figure of around 28c.

I go for a PE of 10 to 12 at the top of the business cycle which points to a share price of $2.80 to $3.40.


I've made a mistake here haven't I? If I take my NPAT for FY2008 to be $NZ27.8m, I have to divide that by the 66.851m Tenon shares on issue. That gives earnings per share of 42c (not 28c as I falsely deduced above). Using a PE of 10-12 gives a Tenon share price of $4.20 to $5.04 in FY2008.

Meanwhile if we go back to FY2007 and my expected profit of $NZ15.9m, that gives earnings per share of 24cps. At a share price of $NZ2.50 for Tenon, we are on a PE of 10.4. With the possibility of rising interest rates in the US, no reversal in the US housing market and a continued high NZD/USD exchange rate I think there might be trouble matching my FY2008 profit forecasts.

SNOOPY

discl: do not hold

[Lizard]

You can get the detailed TEN accounts here (http://www.tenon.co.nz/articlefiles/Tenonannualresultsfinancials.pdf).

Result was better than I expected and the books in better shape. At $2.05, it looks tempting. The 300%+ question is where the currency and the US housing markets are heading - do we have one more bad year before the cycle turns up?

[I.T.Ancient]

Yes, I too was expecting something worse. After trading FF a few times, I came through all the restructurings with just 525 TEN shares which I never got round to selling while they slowly halved in value.

Generally, I liked the report. However, this does not seem the best of times to be increasing debt. And of course with the increased debt comes increased goodwill; I'm always suspicious of goodwill (see recent events at HBY & VTL). So this remains on the watch list.

[scamper]

I also held a few, did some mildly profitable trades then lost interest. i now hold 247!
can anyone better (do worse than) that? cheers.

[Lizard]

Getting tempted yet Snoopy? The news out of the US just keeps getting worse on house sales and the USD doesn't show any fundamental likelihood of a return to previous strength. This would be a super-contrarian play right now - and perhaps with some chance of working.

I was having a watch of depth last week - the buy side was practically non-existent until it dipped below $2. That brought out a few big volume transactions and a trickle of new buyers plugging the hole between $1.80 and $2.00.

Disc: None held

[shasta]

Getting tempted yet Snoopy? The news out of the US just keeps getting worse on house sales and the USD doesn't show any fundamental likelihood of a return to previous strength. This would be a super-contrarian play right now - and perhaps with some chance of working.

I was having a watch of depth last week - the buy side was practically non-existent until it dipped below $2. That brought out a few big volume transactions and a trickle of new buyers plugging the hole between $1.80 and $2.00.

Disc: None held

Am still thinking RBC as a contrarian play...

Will they take out Tenon anytime soon?

At these prices it must be tempting?

[Lizard]

Didn't get a mention on the NZX, but Tenon provided an investor update presentation on 4th October which is available here (http://www.tenon.co.nz/files/tenon_october_update_presentation_2007.pdf).

Worth a read for value investors with a 3 yr+ investment horizon.

[COLIN]

Whoever tried to "salt the mine'' at TEN today, with a purchase of 200 shares at a huge jump above market level, seem to have failed with their strategy to force the market level up.

[Lizard]

A thought for Luke Moriarty, forced to grasp at straws as he presented to the TEN agm today:

this next graph charts the impact that these events have had over the past 18 months on the share prices of some of the US companies that operate in Tenon's market segment. As you can see, the shares of these companies have fallen between 50-75% - and Tenon's performance is not dissimilar. Of course, this is actually a creditable performance on Tenon's part, because as we have just discussed Tenon has also been subject to the negative impact of the NZ:US exchange rate that the other stocks on this chart have not

On the other hand, given the persistently high exchange rate, sub-prime impact on housing starts/house sales and decrease in softwood lumber prices in the US, there is one thing to be agreed on; his comments in regard to his forecast that TEN should report 1H EBITDA of $US9m - in line with pcp:

If we can achieve this in the much more challenging market conditions and exchange rate environment that prevail today, then it will have been a strong performance for the Company, and one that should satisfy market expectations.

[Lizard]

No end in sight for Tenon's struggles, with exchange rate pressing higher and US softwood lumber prices down yet again in November PPI.
PPI - Softwood Lumber % change (http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=WPU0811&output_view=pct_1mth)

[I.T.Ancient]

No end in sight for Tenon's struggles

True, but when the end finally arrives it will be a great contrarian opportunity. Could be years away though with all the inflationary pressures continuing to build here (and more on the horizon). The US market is harder to read, but investment in their housing stock doesn't seem like a smart move at the moment.

[Lizard]

Another month, another PPI and softwood lumber off a further 0.6% in December. Also, crucial retail sales data released. To quote from a summary at Minyanville.com (http://www.minyanville.com/articles/CFC-C-bac/index/a/15539):

The weakest category remains Building Materials & Garden Equipment and Supplies Dealers, showing negative month-over-month sales in eight of the past 12 months, and year-over-year declines for five consecutive months, a trend that even accelerated in December, down 1.68% year-over-year.

Described mid-last year by one analyst as being caught in the "Perfect Storm", it would seem the intensity has yet to max-out.

[dragonz]

9 million shares through after the bell. Smart money moving in perhaps.

Great update.

[Anna Naum]

I would have thought the move up in the currency was not good news for them.

[AMR]

A big jump on volume is pretty bullish IMO, I might keep a watch on this.

[dragonz]

This is one of the few companies on the NZX that I'd do anything more then a day or short term trade. Exciting future IMHO

[scamper]

for some incredibly silly reason, scamper has 247 of these shares -- no, i don't remember!
anyway, it is with grrreat interest that i noticed the 2-year downtrend broken (3+-year is still in place), the 30- and 90-day MA crossover.
sadly, after the 9 mill day, no other volumes are readable -- does it mean anything?
should scamper average down?
is anyone punting on forests -- or fishes, or things that fly?
cheers.

[Lizard]

Hi Scamper. I've collected a few. Mostly because I tend to agree with valuations such as the recent one Grant Samuel did for Rubicon which came out at $4.07/share on mid-cycle earnings. There's a pretty wide sensitivity analysis on that - which means both substantial upside or downside, so I've spread funds around a few other shares like this and probably one or two will catch me out.

Given they management have been tiptoeing through the eggshells for a few years now without cracking any, I'm leaning in favour of them surviving without significant dilution. Beyond that, on a price/sales ratio of 0.1, a small increase in margins can go a long way. (MAQ:ASX is a good recent example.)

[Contrarian]

Gidday

Quality presentation, intimating a share price of $4 on the cards.

Go to July update http://www.tenonusa.com/

[Lizard]

Another year of slow grind for Tenon, and, based on the outlook statement, more patience probably required. There'll be a big gain to be made in this one sometime, IF minority shareholders don't get cleaned out too soon. Could be another year away though.

(Great job on cashflow and debt reduction though - even after allowing for the working capital facility!)

[Lizard]

Just been looking over the agm speeches. No, don't get excited just yet. Things may be improving, but only enough to raise current period operating earnings by 20% over prior 6 month period.

I scratch my head as to why directors bother to offer guidance couched in those terms rather than just spit out a number. They did clarify "operating earnings" to mean EBITDA. But still have to go back to the annual report, subtract the half year report take a stab at which currency they were referring to and guess the exchange rate they had in mind...

... all I could conclude after this exercise is that they were expecting to make 20% more than next to nothing... (okay, about $6m EBITDA - or a small loss at NPBT level).

Given hedging will mean they have a fairly good handle on the half year by now, there's probably little incentive to buy until they've passed the half year mark. However, there is still more upside than downside to Tenon at current levels, so worth keeping on watch.

[Anna Naum]

9 million shares through after the bell. Smart money moving in perhaps.

Great update.

That many shares means one of the hedge funds has got out

[Anna Naum]

That many shares means one of the hedge funds has got out

Maybe Rubicon was the buyer of some via the creep rules....or today they make a takeover bid?

[Lizard]

Been a long wait, but I think it's probably finally time to accumulate TEN shares over the next 6 months (and, yes, I know I jumped the gun and bought a few earlier). Result out tonight was pretty steady - a tad better than prior 6 months and a small rise in shareholders equity.

It's a cyclical play near the bottom of the cycle. Price/NTA at 0.61 and Price/sales at 0.12 is a promising combo - particularly since they've proved their ability to keep things on a tight rein and survive some pretty tough conditions.

At $56m market cap (84cps), they only need to squeeze about 1.5% more margin out of existing sales OR increase sales by around 4.5% at current margins to put them on a P/E of 10.

[percy]

Lizard or Anna.
Advice please;Is there a better buy TEN or RBC?

[scamper]

eeeks, Liz
the charts say not yet -- still in downtrend...
i still hold a couple of hundred -- no, i don't know how or why.
still wouldn't dream of buying more yet.
good luck anyway.
percy, the rbc chart looks better. check the fundamentals for choice, charts for timing.
cheers, scamper.

[Anna Naum]

Lizard or Anna.
Advice please;Is there a better buy TEN or RBC?

Well if you think TEN is a buy, RBC own most of it.

[Lizard]

eeeks, Liz
the charts say not yet -- still in downtrend...
i still hold a couple of hundred -- no, i don't know how or why.
still wouldn't dream of buying more yet.
good luck anyway.
percy, the rbc chart looks better. check the fundamentals for choice, charts for timing.
cheers, scamper.

I think this would be a difficult one to buy any volume when the chart triggers. Otherwise I would also agree that waiting for the TA usually makes sense. I'm also comfortable enough with the fundamentals to take the risk this time.

[shasta]

Lizard or Anna.
Advice please;Is there a better buy TEN or RBC?

Percy

I've been watching TEN for years to see where it may go, as i've held RBC before, on the basis of likely corporate activity.

RBC holds a controlling stake in TEN, but itself has a few shareholders with blocking stakes (10%+), i held RBC in the days while GPG were in it.

Both TEN & RBC report in $US, so they aren't exposed to the USD.

For someone to get TEN, they would need to grab RBC first.

Just my opinion, but i prefer RBC to TEN.

Disc: Nil held

[percy]

Anna,Lizard,Shasta,Scamper.
Thank you for your advice.

[Anna Naum]

Anna,Lizard,Shasta,Scamper.
Thank you for your advice.

More an opinion than advice.

[scamper]

wow!
congratulations liz. well done.

[Lizard]

Thanks scamper. Although I wouldn't foresee it running too far away until there is some indication on the next result. There will probably be another opportunity to accumulate on a pullback before FY, although with low liquidity, it's always harder to gauge these things.

[Lizard]

I see the dispute between CNIFP receivers and IRD (http://www.odt.co.nz/news/business/106465/cnifp-receivership-gst-disputed) re GST paid has been heard recently in the High Court - not sure how long it is likely to take for an initial decision, but interesting to watch given the vested interest Tenon holds in the outcome. High stakes, long odds...

More certain news is that the forex pressure is reducing for TEN, lumber prices remain high and the Home Depot report suggests improved sales for the March qtr in mill work. Share price holding up at 95cps, despite market weakness.

[Lizard]

Something set off a/the TEN buyer(s) today - pity, because I finally found a few spare $NZ to bid for a few more, but was well and truly beaten to the offer and reluctantly returned the petty cash to my husband's wallet...

Is the CNIFP decision due back in court?

Or maybe one other buyer turned up for TEN? Crikey!

[percy]

RBC down,TEN up??

[Lizard]

Result out and we have a Profit... albeit small, but who's arguing?

Revenue up, despite forex and US housing... (competitor Chilean mills out of action after earthquake, but hey!).

Normalised for a FY, it's around a $5m profit...which is not too bad on a $66m market cap when you're selling kitsch timber mouldings in the close-as-US-can-get-to-a depression.

Full credit... I think they are doing well, but this remains only a contrarian buy for a little longer....

[Lizard]

Has been a long trip sideways for TEN sp over past year. Could be worth watching over the next week to see if it can find the energy to break trading range. Bit more volume of late (still small though) and back to top of trading range.

Curiously, this year we have an early RBC agm (this week) - in past years it has normally fallen a day or two after the TEN agm and presented almost identical information on TEN. So, despite no agm date for TEN itself, there should be some update at the RBC agm this Friday. Perhaps the chronological separation of the agms will turn out to be symbolic of a deeper separation?

Critical info for TEN probably centres on sales volumes in the US (mild improvements in housing numbers may help), exchange rates (not good, but possible they have taken out further hedging) and possibilities for sales into other markets (progress with Lowes into Australia could be good). Even a small improvement in outlook could be significant for TEN given the minimal margin at present.

[zigzag]

I thought the TEN meeting was in Wellington on Thursday, the day before RBC. The shareprice could be firming ahead of the meeting, but I think the high NZ dollar could be a bit of a killer at the moment.

[Lizard]

Thanks zigzag - I'd presumed that the date would have been on the NZX announcements and/or on the NZX or Forbar list of diary dates - especially since RBC is on there. But you are right - I went to the Tenon site and the notice of meeting is on there, so we get an earlier than usual ASM on 4 Nov in Wgtn.

If only I had read my mail - I automatically bin agm notices, presuming them to be in either Auckland, Christchurch or some other country. i might actually have been able to get to my first ever AGM if I'd kept the invite!

[percy]

Thanks zigzag - I'd presumed that the date would have been on the NZX announcements and/or on the NZX or Forbar list of diary dates - especially since RBC is on there. But you are right - I went to the Tenon site and the notice of meeting is on there, so we get an earlier than usual ASM on 4 Nov in Wgtn.

If only I had read my mail - I automatically bin agm notices, presuming them to be in either Auckland, Christchurch or some other country. i might actually have been able to get to my first ever AGM if I'd kept the invite!
You do not need your invite.Just present yourself at the AGM.They will have a desk where you register.Just give your name,and they will tick you off the shareholders list and give you a voting paper.Do not ask questions at the meeting.Save them until after the meeting.Ask the CFO or MD or the chairman.If they do not want to answer you just tell them you will ask them and a few more at the next AGM.!!!!You will find most Directors try to look as though they are talking to shareholders.Looks good.you job is to help them!!!!Enjoy yourself and we look forward to you full and frank report of the AGM.

[Lizard]

Hi percy,

Thanks for the advice. Unfortunately, was not able to squeeze it in to the schedule. Reading through, it is disappointing to hear they've found the current half even worse than pcp, as had hoped they might be on a slight up. However, the Chairman's speech remains remarkably chirpy and upbeat despite this, with talk of considering dividends in 2011. All seems a little premature given the current pressures would presumably have them in a loss-making position. Even the optimistic "LIRA" chart (taken from here (http://www.jchs.harvard.edu/media/lira/index.html)) won't stop the currency pain.

I'm not sure they should be too focussed on those LIRA reports - while the latest one is titled "Stronger Growth for Remodeling Projected for 2011", the 4th Qtr 2009 report (http://www.jchs.harvard.edu/media/lira/lira_09_4.html) was titled "Indicator Suggests Remodeling Upturn in 2010", so it could be a moving target. Though to be fair, if there is an inconsistency in the reporting, it is more due to the March and June quarters being stronger than predicted.

No more talk of sales into other markets (something it might have been worth asking directors about over a cup of tea after the meeting).

[barney]

Lizard
If you check out the CEO's address from the Rubicon meeting he mentions Tenon expanding into Canada,Australia, and Asia.

Given the hellish economic conditions in the US over the last few years, you have to say they have done ok, especially on the debt side of things.

Damn that US dollar.

[Lizard]

I see the dispute between CNIFP receivers and IRD (http://www.odt.co.nz/news/business/106465/cnifp-receivership-gst-disputed) re GST paid has been heard recently in the High Court - not sure how long it is likely to take for an initial decision, but interesting to watch given the vested interest Tenon holds in the outcome. High stakes, long odds...

In case anyone else was interested in following this (said to be worth up to $90m to TEN (http://www.stocknessmonster.com/news-item?S=TEN&E=NZSE&N=162441)), I see the judgement on move to strike has now been published - refer Judicial Decisions On-line (http://jdo.justice.govt.nz/jdo/Search.jsp) and search for following in Auckland High Court decisions:

STIASSNEY AND ORS V COMMISSIONER OF INLAND REVENUE HC AK CIV-2008-404-0549 4 November 2010

Seems like move to strike was rejected by the judge who ruled that there appeared to be grounds, so this is good for TEN in that the case moves on.



Summary

[150] The Commissioner’s application to strike out the plaintiffs’ causes of action is dismissed.

[151] I have made the following findings, in relation to the first cause of action:

a) On the basis of the agreed facts, the receivers and the Commissioner were wrong in their view of the receivers’ personal liability for GST. The receivers were not personally liable for the GST amount.

b) Although the payment was “debtor-initiated”, s 95 of the PPSA does not bar the plaintiffs from bringing an in personam claim against the Commissioner for money had and received.

[152] In relation to the second cause of action I have held that:
a) The GST payment was made to the Commissioner by the CNIFP, and not by the receivers personally.
b) The plaintiffs have established a tenable argument that the payment was made under a relevant mistake of law as to the priority order of creditors.
c) The Commissioner gave consideration for the payment by discharging the CNIFP’s liability for GST.
d) There is a tenable argument that in the circumstances the Commissioner did not receive the payment in good faith.

[153] In my view the better course is to leave for trial the ultimate resolution of the second cause of action in the light of my findings on the first cause of action. I am satisfied that the plaintiffs (or at least some of them) have an arguable case for recovery of the payment to the Commissioner.


Market cap of TEN is currently $70m (at $1.05), so a win would not be insignificant - although may need a 3-5 year DCF on the potential outcome probability to attribute value to this "real option".

[Lizard]

Finally going for the break-out of this long-established trading range? Bit limited by a lack of sellers at the moment though.

Would put up a chart, but can't seem to get a good freebie one today, so would be good to have a decent TA view if someone is willing.

[Phaedrus]

Today Tenon closed at $1.10, breaking above the resistance at $1.07 that had held for so many months. (blue arrow). The previous resistance at $1.15 may perhaps be a more meaningful target, though, because a break above that level would confirm the existence of a long-term uptrend.

TEN is a very lightly traded stock and currently there are just 9000 shares on the Ask at $1.19 so it would not be surprising if it continued heading North from here. Technically of course, a break above previous resistance constitutes a Buy signal.

This chart shows a nice example of volume confirming buy signals derived from other indicators. You can see that 7 separate indicators all triggered Buy signals at around the same time. Note also the string of meaningless unconfirmed RSI "buy" signals (light green arrows) before one finally coincided with some other signals.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/TEN1116.gif

[Lizard]

Thank you Phaedrus :)

Yes, very illiquid, so not such a good one to buy/sell off charts for now, but good to have some confirmation. I said back in Feb that there would be plenty of time to accumulate, but did not expect it to be quite so long... 4-6 months was my thinking at the time.

At the time, I was expecting it to be moving off the back of an improving outlook for the current period - which isn't actually the case either. From a fundamental point of view, it seems it is more likely to be moving on the CNIFP decision. An improving market outlook for 2H11 is also a possibility, but seems a bit premature given the nature of the business and the currency exposure.

[Lizard]

Not surprisingly, the Commissioner of Inland Revenue has filed an appeal re CNIFP issues.

Here's a good summary of the legal arguments to date:
http://www.chapmantripp.com/Pages/Publication.aspx?ItemID=827

[Lizard]

Quick notes on the CNIFP case for interest and reference:

1. CNIFP (Central North Island Forestry Partnership) was a partnership between FCNZ (Tenon-related) and Citic. It was formed in 1996 but the partners were put into receivership (Ferrier Hodgson) by the BNZ in February 2001.

2. The first receivers report shows that at the time of receivership of FCNZ, the CNIFP had first-ranking debt (BNZ) of $US637.6m and second-ranking debt (CNI Nominees) of $US236m. CNI Nominees is a subsidiary of Tenon.

3. In October 2003, the CNIFP entered into an agreement to sell the forestry assets for $US621m +gst. This was insufficient to repay debts and therefore CNIFP was insolvent. The gst component was $NZ127.5m.

4. CNI Nominees then wrote to the Commissioner of Inland Revenue, laying prior claim to the gross assets of the sale as a secured creditor. This was followed by a similar letter laying claim from the BNZ.

5. The receivers were concerned that under legislation, if they did not pay the GST from the transaction, they might themselves be personally liable. Although this was legally unclear, they determined that the time taken to establish the legal position would be such that considerable penalties could accrue if they were shown to be liable. They therefore paid an amount of $123.4m (after adjustments) to IRD.

6. The receivers then sent IRD a notice of proposed adjustment which was rejected by the Commissioner of IRD.

7. In 2008, proceedings were filed by 5 plaintiffs (being the receivers, FCNZ, Citic, CNI and BNZ), challenging the receivers self-assessment of their GST liability and sueing for recover of the GST payment on the basis it was paid under a mistake.

8. The hearing in May 2010 was to hear an application from the IRD to strike out the claim based on four separate arguments put forward by the Commissioner:

The receivers were personally liable for the GST
The payment, having been made to the Commissioner, falls under s95 of the Personal Property Securties Act (PPSA)
The GST was actually owed to IRD and, having been paid, there is no right of recovery.
That only CNI Nominees and BNZ have preferential claim to the GST over IRD (not the other plaintiffs) and therefore the other plaintiffs should be removed.


9. The judgement issued in early November relating to this hearing upheld the plaintiffs with the following response from the judge:

The receivers were not personally liable for the GST (and therefore the payment was made in mistake)
Section 95 of the PPSA was not intended to cover a payment of this nature and therefore does not apply.
That while the IRD gave consideration for payment, there was a question over whether this payment was received in good faith, given that the Commissioner was aware of the prior claims. This was supported as being a tenable argument for claim.
The judge considered all 5 plaintiffs to have sufficient interest in the matter.


10. The Commissioner of IRD has since filed an appeal.

The gist of this is that it appears the initial ruling is quite favourable to Tenon. Based on the ruling, it appears the main point remaining to be established in a further hearing is whether or not the Commissioner of IRD received the payment in "good faith". However, this could of course change on appeal.

As far as the benefit to Tenon goes if this ends in their favour, any refund would seemingly be made with interest of 7.5%pa plus any costs awarded. What remains to pay out Tenon after the BNZ receive further payment would depend on any interest and costs, but their indication of approx $90m seems feasible. This compares to current market cap of TEN (at $1.12) of $75m, so would be significant if awarded.

However, the wheels of law grind slowly and, at best guess, would be a 12-18 month period till outcome.

[percy]

Most interesting Lizard.
I would have thought the receivers [and,or anyone] selling something with GST included is liable to pay it to IRD. The only people with a right to GST is the IRD.
In this case the property was sold including GST,so the IRD is the only party with a right to it.
Any one buying and selling anything is alowed to claim GST paid,however they must pay the GST on goods sold.
Interesting how clever lawyers can make something so simple, difficult.

[Lizard]

Yes, I also thought that percy. I read through the relevant sections of the Receiverships Act 1994 s30 and the Companies Act 1993, schedule 7 and still didn't understand it. Nor did there seem to be any debate on this point in the recent judgement - it seemed accepted that the priority existed. Possibly it related to the security interests under which the receivers were appointed.

Presumably the purchaser still received a credit for the GST paid when it came to their next GST return?

[percy]

Presumably the purchaser still received a credit for the GST paid when it came to their next GST return?[/QUOTE]

Now that could really open up a can of worms. If the IRD have to refund the GST would they seek reimbursement from the purchaser?
I can see lovely little money earner for GST specialist lawyers.
I find it interesting the receivers paid the GST. Don't think many people would risk the IRD chasing them personally for over $120 mil.

[Joshuatree]

EBITDA plus or minus 15% in next half. didnt know "flat " covers 30 %. No trades since announcment,where to from here,sideways creep?

[Lizard]

It's a bit worrying. They have to keep coming up with cash to amortise the debt facilities, so would be good to start seeing signs they were going to start generating a bit more...

[Joshuatree]

I see ebitda forecast has doubled or gone up 50% if you exclude forestry revaln and the s/p keeps dropping???

[Lizard]

As I read it, the forecast is the same as for last - i.e. flat on last half and therefore NPAT probably going to come in around $0.

With regard to share price, the elephant trampling this company has given it yet another stomp with the forex rate. Very difficult to see how they are likely to increase margins in the current environment and seems more likely they deteriorate, perhaps into cash-burn territory. Not sure what the answer is given there are no indications of any radical change in business plan - more just a "wait out the cycle" strategy.

Also, the CNIFP tax case (which is the spec lotto ticket for them) seems to have gone quiet - seemingly waiting for the IRD appeal to be heard. (There's a very good summary on the IRD site - which makes it somewhat clearer why the gst might not have been payable). The odds on that were looking a little brighter after the initial ruling, but at this rate, Tenon will have keeled over before the issues are resolved. At any rate, it seems unlikely a result will be seen within the next 12 months.

[Joshuatree]

Thanks Liz for your usual quality in depth view, will keep TEN om my longer term watchlist. cheers

[Lizard]

Results are tired... but the blurb has so much energy! Got to admire these guys for sticking it out.

I reduced my position at .95-$1.03, but I haven't been quite able to bring myself to sell out, as I remain mesmerised. Any minute they might just do something explosive... or at least add a couple of decimal points to their reporting so that we can figure out the difference between "0" and "1"...3539

[percy]

"There are also some considerable hurdles to be overcome."
Very considerable.

[Lizard]

In case anyone else was interested in following this (said to be worth up to $90m to TEN (http://www.stocknessmonster.com/news-item?S=TEN&E=NZSE&N=162441)), I see the judgement on move to strike has now been published - refer Judicial Decisions On-line (http://jdo.justice.govt.nz/jdo/Search.jsp) and search for following in Auckland High Court decisions:

STIASSNEY AND ORS V COMMISSIONER OF INLAND REVENUE HC AK CIV-2008-404-0549 4 November 2010

Seems like move to strike was rejected by the judge who ruled that there appeared to be grounds, so this is good for TEN in that the case moves on.

Market cap of TEN is currently $70m (at $1.05), so a win would not be insignificant - although may need a 3-5 year DCF on the potential outcome probability to attribute value to this "real option".

I see there is finally an appeal court hearing scheduled for 22 November.

[Anna Naum]

Lizard, could you tell me where I can see this, could not see it on the site noted above. Thanks

[Lizard]

Sorry, did not put in the link. It is in the upcoming cases on Courts of NZ.

http://www.courtsofnz.govt.nz/business/calendar/upcoming-cases/court-of-appeal/Nov-ONLINE-2011.pdf

For the detail from the old post I quoted regarding the initial judgement, go back to the Judicial decisions and search by the CIV number or just throw "cnifp" in the search box.

[Anna Naum]

Thank you Lizard

[Lizard]

The announced buyback is interesting - offered to shareholders with under 10,000 shares at 65cps....

Interesting in that $6,500 worth is hardly an unmarketable parcel, so not actually necessary. Nor are TEN particularly flush with cash. And potentially unhelpful to liquidity, although it does put a floor under the price while they go through yet another difficult half year period...

The size of the buyback is up to 1.25m shares out of 5.4m held by eligible holders. In that case, I wonder why they didn't just target the 74% of holders with less than 1000 shares, rather than open it up to those with reasonably marketable parcels? I note that out of the entire 6280 shareholders, only 129 are not eligible for the buyback through holding >10,000 shares.

Given the recent Sandell strategic presentation (http://www.sandellmgmt.com/News/Rubicon.pdf) that was posted by Random Walker on the Rubicon thread, there may be some fingerprints from Sandell influence on Rubicon and from Rubicon's influence on TEN coming through. There is always the possibility that RBC will either want to fully acquire or to divest its stake to another party, who might wish to fully acquire TEN.

Either way, I suspect this is another warning sign that another under-valued, illiquid, relatively large (by revenue) NZ company could become a dead-end for small investors before the much awaited turnaround - rather like TUR.

[scamper]

I got a letter offering to buy mine several months back -- maybe an outfit called zero commission or something -- anyway, they gave me 84c for my enormous holding of 247 shares...
did everyone else turn their noses up at this offer, or was I just lucky? Cheers.

[Lizard]

I got a letter offering to buy mine several months back -- maybe an outfit called zero commission or something -- anyway, they gave me 84c for my enormous holding of 247 shares...
did everyone else turn their noses up at this offer, or was I just lucky? Cheers.

Don't think I saw that one... then again, I probably had/still have more than 247 shares.

[ari]

I see there is finally an appeal court hearing scheduled for 22 November.
Has there been any announcement following this latest appeal?

[Lizard]

No. It might show up here if you keep an eye on it every few days - not sure how often it is updated, but may only be weekly. Plus, the length of time for judge to rule is often weeks or months - two months from hearing probably typical of the decisions I can see here.
http://www.courtsofnz.govt.nz/from/decisions/judgments

[Lizard]

I see the Rubicon agm speech says "Industry Restructuring offers near term Tenon value uplift" (one of the key points in relation to RBC share price). Does this mean they are angling for a takeover? A reasonable premium to current s.p. wouldn't be too hard to justify for a player getting full control. From RBC point of view, leaves them as a pure Arbogen play, with spare cash and probably would transfer listing to the US?

In the event of a takeover long term TEN holders probably aren't going to get back that "mid-cycle" value they might have been holding for, but it could be worth a spec punt on it at current prices.

[Snoopy]

I see the Rubicon agm speech says "Industry Restructuring offers near term Tenon value uplift" (one of the key points in relation to RBC share price). Does this mean they are angling for a takeover? A reasonable premium to current s.p. wouldn't be too hard to justify for a player getting full control.


I see Tenon is down 10% today to 68c on no news. Or is that just the effect on the very wide bid ask spread on what is not a widely traded share?

Rubicon have increased their holding through not participating in the recent share buyback, because they weren't allowed to participate. So I don't think this is the first salvo in a takeover bid.

SNOOPY

[Alz99]

Yah!! finally a bit of good news

TENON TO DISTRIBUTE NEW EASTMAN PRODUCT IN NORTH AMERICA8:38am, 9 Feb 2012 | GENERAL9 February 2012 - Tenon announced today that The Empire Company, a wholly owned subsidiary of Tenon, has been appointed as exclusive distribution partner for Eastman Chemical Company’s (“Eastman”) new Perennial Wood™ decking product into Lowe’s stores.
Eastman (NYSE: EMN), is a Fortune 500 company with more than 80 years of history in acetylating wood pulp. In 2010, 13 percent of Eastman’s total revenues were derived from sales of raw materials to the building and construction industry.
Perennial Wood is real wood that has been modified to resist changes from moisture, such as shrinking, swelling and movement. It is made possible through TruLast™ Technology, Eastman’s proprietary modification process that provides a physical barrier throughout that is warranted to protect against rot, decay and movement for 25 years. Perennial Wood is three times more stable than unmodified wood, resulting in less shrinking and swelling that cause cracking, cupping and warping without sacrificing the beauty of real wood. The first commercially marketed product line is Perennial Wood decking.
Tony Johnston, Tenon’s Chief Operating Officer, said today, “We believe the market receptiveness for Perennial Wood decking into the $4 billion North American decking and railing market segment will be strong, and that other outdoor applications will be equally well received in the future. We are very excited to be associated with the introduction of this new product platform, and we will be doing our part to ensure its success in the marketplace.”
A full copy of the joint Tenon/Eastman market announcement has been lodged with the NZX.
ENDS

[Lizard]

And now starting distribution in Australia for NZ-produced mouldings after acquiring a small existing player.

Seems like a good move - about time they had a little less reliance on the US market, given the on-going forex issues they have faced there.

[ari]

Interesting article on GST debacle.....
http://www.offenadvisors.co.nz/Current%20Tax%20-%20June%202011.pdf
scroll down to page 3

[Lizard]

Yes, still waiting for decision on the IRD appeal case. Courts get a long break over Christmas/New Year, so doesn't appear to be much happening. If appeal fails, then have to go back to high court on actual case and then probably appeal again after that. So probably at least another 2-3 years.

Can't see IRD settling given they'll probably consider it an important legal point requiring establishment in case law.

[Lizard]

Oops, IRD win their move to strike on appeal by the looks. Nothing on the judicial web-sites yet, so not sure of the reasoning.

Looks like Tenon will appeal... although appealing an appeal sounds like a long shot (I didn't know it was possible).

[Lizard]

Annual Review says they've seen the business lows... which would have to be true, because they won't survive long if they haven't!

Definitely one to watch for the AGM and/or half year result... sitting on a lot of cyclical firepower, should the spark of recovery finally ignite.

[ari]

Oops, IRD win their move to strike on appeal by the looks. Nothing on the judicial web-sites yet, so not sure of the reasoning.

Looks like Tenon will appeal... although appealing an appeal sounds like a long shot (I didn't know it was possible).
SUPREME COURT DISMISSES TENON'S CNIFP APPEAL
Bugger......was always worth a go....but what the cost?

[Lizard]

Recent AGM speech was positive and maybe today's move up to 81cps is a delayed reaction. Although, as always, volume is low.

Doubled up after the agm at 75cps, so am hoping this move can be sustained... their "mid-cycle" forecasts still make them look very cheap - provided they can get back to mid-cycle within the next decade. :ohmy:

At least it is looking like a chance of turning a profit next year (and being able to have a positive PE ratio to work with!). However, yet to see what RBC will do with their 57% holding, though no doubt they will only be interested in moves that realise more for TEN rather than less.

[Joshuatree]

Have had a buy for a while but just missed. sala bum:ohmy:

[ari]

[QUOTE=MoSteph;388131]Too soon? Housing starts down 3% for Nov
Does not appear so, another 4c today but yet to see any ruboff on RBC.

[biker]

[QUOTE=MoSteph;388131]Too soon? Housing starts down 3% for Nov
Does not appear so, another 4c today but yet to see any ruboff on RBC.

I think RBC is going to need some news on the Arborgen IPO, but just a whiff will see a substantial move IMHO.

[ari]

I certainly hope you are right biker, it's been a long wait. We could have done without the failed IPO in the mix.

[Joshuatree]

Yeah, housing starts up , supply lines in place ,Cool products to Go , 57% rubicon overhang, poised like a Jack n a Box.

[ari]

http://finance.yahoo.com/news/home-builder-stocks-soar-housing-163950714.html

It had to cycle around sooner or later

[Lizard]

Update out with improved forecast... won't be much to report in NPAT for current financial year, but 2014 could be a cracker.

Picked some more up on open at 90cps.

[ari]

[QUOTEPicked some more up on open at 90cps.[/QUOTE]
Nice move Lizard, I was watching but I'm all spent. Certainly more movement than with RBC.

[Lizard]

Nice move Lizard, I was watching but I'm all spent. Certainly more movement than with RBC.

It is hard to get excited about RBC - market cap at 29cps is $110m. Of that, their 58% shareholding in TEN is worth $40m at todays price of $1.05. That means market value ascribing a value to the 31.7% ArborGen holding of close to $70m...which seems quite pricey to me, although in line with the $74m "investment in associate" that is held on the books. The only other "asset" they hold that isn't on the TEN balance sheet, seems to be a miraculous extra $US18m of goodwill.

Add to that that RBC has its own $US8m debt and can't actually get funding directly from the two operational arms unless either of them were to pay a dividend - something they may be keen to see TEN do soon if they can't get an ArborGen IPO off the ground. Otherwise, they will need to continue with rights issues or borrowing further against assets if they are able to, or perhaps attempt to sell off some of their TEN shares. As a result, their position may be somewhat less secure.

Looking at it, there really seems little reason for RBC to exist as a separate vehicle - at some point, the separate shares in TEN and ArboGen should just be distributed to RBC holders - though I guess most would prefer to wait until ArboGen is listed (and it seems the banks will be quite keen to see that happen in the next 12 months if it is at all possible).

[ari]

Sounds very similar to what happened with FEG and Capstone.

[Lizard]

Something going on... both RBC and TEN on a run today - although it doesn't take much money to push the price around in either stock!

[ari]

I've been watching positive build figures from the States for some weeks and this is long overdue. but as Lizard said it doesn't take much......

[Arbroath]

I've been watching positive build figures from the States for some weeks and this is long overdue. but as Lizard said it doesn't take much......

I sold out few years back around $1-1.20 but am back in today 1.35-1.40. The macro story is really turning for these guys IMHO and with costs stripped to the bone during the hard times the revenue/margin expansion should feed through pretty quickly in 2014-2015 assuming the US housing market can continue to slowly strengthen in price and consents etc.

Read the Edison report from January and agree there $1.51-1.77 valuation range is conservative - back in the day the management used to pump them as being worth $4-5 mid-cycle. I'd settle for more like $3 but you never know if the macro story keeps improving the next 2-3 years...who knows.

Good luck all. I know there are many long suffering holders of this puppy!

[ari]

Ex Herald_
A weaker New Zealand dollar and signs of life in the US housing market have combined to drive the share price of timber products group Tenon higher.

The strong kiwi has in the past proven to be a major headache for Tenon because most of its sales are in the United States, so executives would have been happy to see the currency start to unravel early this year.

The New Zealand dollar traded yesterday at US79c, down from its peak in April of US86.75c and well short of its post-float record high of US88.43c, which was set in August 2011. And after many difficult years, the house construction market in the US is improving.

According to the Joint Centre for Housing Studies of Harvard University, the US housing recovery is well under way.

"While still at historically low levels, housing construction has finally turned the corner, giving the economy a much-needed boost," the centre said in its latest report.

Tenon has some big US customers in home improvement retailers - The Home Depot and Lowe's - both of which have reported earnings improvements early this year.


Tenon - once part of the Fletcher Challenge group - supplies timber products to the North American housing market. It sources products and materials globally including from its traditional New Zealand base, which also serves the Asia-Pacific region.

Tenon's shares closed down 3c yesterday at $1.45, compared with just 60c this time last year

[bonne vie]

Ex Herald_
A weaker New Zealand dollar and signs of life in the US housing market have combined to drive the share price of timber products group Tenon higher.

The strong kiwi has in the past proven to be a major headache for Tenon because most of its sales are in the United States, so executives would have been happy to see the currency start to unravel early this year.

The New Zealand dollar traded yesterday at US79c, down from its peak in April of US86.75c and well short of its post-float record high of US88.43c, which was set in August 2011. And after many difficult years, the house construction market in the US is improving.

According to the Joint Centre for Housing Studies of Harvard University, the US housing recovery is well under way.

"While still at historically low levels, housing construction has finally turned the corner, giving the economy a much-needed boost," the centre said in its latest report.

Tenon has some big US customers in home improvement retailers - The Home Depot and Lowe's - both of which have reported earnings improvements early this year.


Tenon - once part of the Fletcher Challenge group - supplies timber products to the North American housing market. It sources products and materials globally including from its traditional New Zealand base, which also serves the Asia-Pacific region.

Tenon's shares closed down 3c yesterday at $1.45, compared with just 60c this time last year
There was a similar article I think it was the Sunday Star early June which prompted me to buy at $1.06. However the trading appears to have been fairly light during the price increase. Noticed a few more buyers on Friday. Sounds as though thry have done a good job of cost cutting during the hard times, to reap the rewards now of the combination of increased building plus lower NZD. As I often pointed out to my customers in my past life as a bank commercial manager, businesses often make bigger profits after a down turn than they made before - due to the tightening of the belt. In good times many businesses get a bit laissez faire re expenses,m

[ari]

http://finance.yahoo.com/news/us-homebuilder-confidence-nears-8-high-140138539.html

[ari]

Tenon has strong supplier relationships for finished mouldings and boards with the independent pro dealer segment and has channels into two of the largest home improvement chains in the United States: Lowe's and indirectly The Home Depot.
http://finance.yahoo.com/blogs/michael-santoli/home-depot-still-most-important-stock-better-worse-171235709.html

[bonne vie]

http://www.edisoninvestmentresearch.com
The full report is 5 pages

Encouraging excerpt re SP from Edison's report 9/9/13 "Interms of valuation, using blended peer group EV/EBITDA multiples, Tenon’s inferredvaluation range is now NZ$1.77-2.27 (previously NZ$1.51-1.77) and above theupper end of this range on a P/E basis using our revised estimates (before taxlosses equivalent to NZ$0.28 per share"

Edison used average exchange rate 79.5c for forecasts.

Very comprehensive report. It surprises me there is not more discussion on here re Tenon and the share isn't traded more. No trades at all today.

Would be interested to know from the experienced investors on ST how Edisons forecasts SP's have rated in the past.

[Balance]

http://www.edisoninvestmentresearch.com
The full report is 5 pages

Encouraging excerpt re SP from Edison's report 9/9/13 "Interms of valuation, using blended peer group EV/EBITDA multiples, Tenon’s inferredvaluation range is now NZ$1.77-2.27 (previously NZ$1.51-1.77) and above theupper end of this range on a P/E basis using our revised estimates (before taxlosses equivalent to NZ$0.28 per share"

Edison used average exchange rate 79.5c for forecasts.

Very comprehensive report. It surprises me there is not more discussion on here re Tenon and the share isn't traded more. No trades at all today.

Would be interested to know from the experienced investors on ST how Edisons forecasts SP's have rated in the past.

I like Tenon as a play on the surging US housing market.

Problem is the depth in the stock - bid and offer are about a mile apart!

[bonne vie]

Balance - that is what I can not understand about this stock - the lack of trades, the standoff between bids & offers. Company appears to have the positives being in the US market for several years, an exchange rate which is expected to be more favourable this year, increased housing activity and a couple of days ago their new working capital facility in place to be able to fund the expected growth.

Is there something in the past which turns investors off the stock or is it just too low profile for the good news not to excite retail investors? Or the fact that the majority shareholder owns 58.99%. Also note that ACC have a 7.31% holding.

Disc - hold

[Anna Naum]

Edison is a paid for product. As such the report was paid for by TEN. One only needs to look at the past track record of this company to get an idea of why many refuse to invest in it.

An interesting number is the cost of HO for TEN, lots of chiefs for such a small company.

[bonne vie]

Anna Naum Thanks for answering my question in #470 re Eddison.

[Anna Naum]

Anna Naum Thanks for answering my question in #470 re Eddison.

No worries, suggest TEN is not a bad company but rather requires a good discount to value for the management, lack of liquidity and past performance. US market is looking better which is good for TEN but then FX continues to not do them any favours.

[benjitara]

TENON continues to be a hard company to follow. You'd think they'd be well positioned in the next couple of years to have a strong hand to play but with the current stimulus packages getting watered down in the usa I can't see our currency depreciating to levels that they have stated for their projections. Their margins would also be of concern, they have made gains in internal processes by the look of things and the stock will get support for its macro outlooks but it's a hard sell especially when i'm getting a price/eps of around 15-20 and can't see a huge expansion programme other than consistent cyclical demand.

[bonne vie]

http://www.stuff.co.nz/business/opinion-analysis/9258903/Remodelling-revival-the-acid-test-for-Tenons-strategy

Article by Chalkie -

[Balance]

http://www.stuff.co.nz/business/opinion-analysis/9258903/Remodelling-revival-the-acid-test-for-Tenons-strategy

Article by Chalkie -



Shhhh - keep stories like this quiet.

Hard enough to find good stories out there without too many people jumping on a good one and pushing sp up.

[psychic]

Good announcement today
I'm in. Good results and talk of dual US listing :)

[Balance]

Shhhh - keep stories like this quiet.

Hard enough to find good stories out there without too many people jumping on a good one and pushing sp up.

:)

:)

:)

[psychic]

sorry bal......;)

[ari]

FFS consigned to history....lets just hope there's better times ahead than the last few years under FFS.
Been waiting over 9yrs plus too many years under FFS to remember......it's certainly been a long haul.....

[Joshuatree]

A breakeven net profit as forecast. Gross profit $47 mill last year $40 .mill

Continuing recovery in US Housing but the chart says it all "only now recovered to the BOTTOM of previous cycles"

and "Over the past 50 years housing starts have been above the current level for almost 90% of the time".

I respect TEN's honesty here putting these details in.

One thing i read elsewhere which is pertinent to me is that despite QE ,GDP in the States is re 2.5-3% when it should be 6 % with this stimulus; and unemployment and housing really haven't improved. What happens if/ when the stimulus is tapered/ dropped."

Certainly a lot of potential here, still, still,still....

[Joshuatree]

Have you lost your bottle:p Suggest you reread the report, the chart, and look at the macro. Things are promising but not yet delivering imo.

[ratkin]

Seemed a reasonable result to me. That winter weather was very extreme covering a huge area of the country , would certainly have kept the builders at home

[Lizard]

The increase in their mid-cycle EBITDA forecast should be cheering you up, snapiti... just got to keep holding for that "mid-cycle"... or even better, top of cycle :). $45m EBITDA mid-cycle makes it maybe $24m NPAT? On a mid-cycle PE of 12, that could be worth $4.40 per share...

... of course, that all assumes we're still riding cycles...

[Lizard]

Just not sure how predictable those cycles really are. I went back to the 2007 annual report and TEN reported $20m EBITDA and said they were at "a cyclical low period in the US market". Also, in 2007, patted themselves on the back for a creditable performance in achieving "a 5% EBITDA margin at or near the bottom of a very tough US building cycle and the peak of the New Zealand dollar exchange rate". I guess after that, they had to invest in a better model of crystal ball?

They first produced the $35m estimate of mid-cycle EBITDA back in 2008 - and yet they're now saying we're still only where the bottom should have been another 51/2 years later. Are we half way there? If it's 11 years from the bottom to mid-cycle this time, how many years to the top? How many years do we need to use in a DCF valuation, because it could make a big difference over this sort of lengthy cycle?!

I've done okay out of TEN, having bought most between 50-90cps, but the mid-cycle forecasts really a futile exercise.

[Joshuatree]

Been a great ride for those in, up re 45% in the last year. I just missed an entry back in julyish re under 90 centsish. Good luck to those in; i don't have conviction atp.

I see big volumes of logs everyday at the port of tauranga going out , a lot to china i think and demand is great. looks like you're at the right end of the tree cycle Snapiti. Did you buy in to the forest midcyle say or been there all the way thru?.

[benjitara]

While I'm interested in the stock I can't see myself dipping in for some time yet. Seems like they can't trump revenue into any sort of margins and they are always going on about cyclical house markets but don't offer the links between how they are achieving progress as a company. I dislike the fact they always place emphasis on the appreciation on their share price rather than concentrate on the underlying business.
All very well to spout on about the housing market positives.... action. action. do. do

[psychic]

What a load of rubbish, employment has improved and new home starts have improved dramactically off the lows. Most of the US has seen price rise's in exsisiting homes as well.

WOOD product demand and prices around the world are at the highest in 20 years(just go down to placemakers to find that out).
If tenon cant make a profit in this market they are a dog.
Heads up rumour has it we are all about to see another across the board lift in timber prices.

But Tenon is in the business of processing wood products etc, not growing trees I understand?. (small forestry interest only these days).
High log prices aint gonna help

[psychic]

Ok, thanks for clarifying. I don't agree that they would find it any easier to make a quid with higher costs.

[Arbroath]

What a load of rubbish, employment has improved and new home starts have improved dramactically off the lows. Most of the US has seen price rise's in exsisiting homes as well.

WOOD product demand and prices around the world are at the highest in 20 years(just go down to placemakers to find that out).
If tenon cant make a profit in this market they are a dog.
Heads up rumour has it we are all about to see another across the board lift in timber prices.

"employment has improved" the participation rate is shocking around 63% and if that was at the pre-recession starting point of 66-66.5% then unemployment would still be 10-11% so the employment improvement is largely a mirage - people have just given up trying to get a job so aren't counted.

that said Tenon are doing a great job in still terrible macro market conditions and when housing recovers properly they will do very well and log suffering holders will get rewarded.

[Joshuatree]

Love the "log suffering holders" bit Arbroath :). Tenon has been def a long suffering experience for holders imo and their glassful accentuated positive feel good glowing self congratulating speak has entertained me for years. There will hopefully come a time when all the old fencing nails will have been removed from the log about to hit the shiny saw blade,so to speak.:).

[ari]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11210081

[psychic]

Nice to see the CEO and CFO buying up Tenon Shares.

[Snow Leopard]

Nice to see the CEO and CFO buying up Tenon Shares.

Well someone has too! :D:D:D

Best Wishes
Paper Tiger

[psychic]

Ouch. :)

Well, up another dizzying 2 cents today with a solid $4335 changing hands. Don't miss out PT

[psychic]

Hey Tiger, we found another Buyer!

https://www.nzx.com/files/attachments/191627.pdf

[Leftfield]

And they are still buying…… meanwhile USA building stats looking good….. now the trading graph is now looking good… are the stars aligning?

BUYBACK: TEN: Notice of Acquisition of Shares

Notice of Acquisition of Shares
End CA:00249566 For:TEN Type:BUYBACK Time:2014-04-16 17:13:59

[ratkin]

Have been patiently holding these for a while , sooner or probably later, value will be unlocked

[Leftfield]

Have been patiently holding these for a while , sooner or probably later, value will be unlocked

Agree… interesting times!

[zigzag]

Have been patiently holding these for a while , sooner or probably later, value will be unlocked

They sure have been a long time in the wilderness. During this time the landscape has changed, hopefully in Tenon's favour.

[ari]

They sure have been a long time in the wilderness. During this time the landscape has changed, hopefully in Tenon's favour.

Further weakness in the US housing market overnight does not bode well for the recovery of this stock or associated RBC.

[psychic]

TEN just added to the msci global micro index
The world now buying PT :)

http://www.msci.com/eqb/gimi/stdindex/MSCI_May14_MicroPublicList.pdf

[ari]

Long overdue......Housing market upswing
Major housing market releases last week, included existing and new home sales data for the month of April, which released on Thursday and Friday, respectively. Both existing and new home sales were up in April—suggesting the housing market might be coming out of hibernation after an unusually severe winter.

[Value Hunter]

Not sure if anyone has seen this write up yet, I think its from April

http://www.oddballstocks.com/2014/04/a-new-zealand-oddball-tenon-ltd.html