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View Full Version : Hastie Group Ltd ("HST") - Delivering!



steve fleming
14-03-2006, 10:51 PM
i bought some of these last week for my superfund as a long-term hold - any body else hold??

sorry...being lazy...this is cut and paste from Huntley's:


Last Price $ 1.58
Market Cap $ 160 (million)
52 Week High/Low $ 2.09 - $ 1.39
Sector: Capital Goods
intrinsic Valuation $1.95

"Hastie Group (HST) is the largest air conditioning and refrigeration company in Australasia. Growth comes mainly from acquisitions and the highly fragmented market offers numerous attractive targets. Competitive pressures subdue margins, though less so in maintenance. The underlying industry is mature and cyclical - primarily dependent on the non-residential building cycle. HST is a good business making headway in a difficult industry. Suitable for growth oriented investors comfortable with above-average risk."

"Demand for air conditioning services is expected to remain solid for the remainder of FY06 in Australia and NZ. Refrigeration orders should steadily pick up but the full year contribution will be down on last year. HST anticipates the continuation of favourable market conditions into FY07. Further acquisitions are expected and should drive earnings higher. Our forecasts remain unchanged. At current prices HST is an Accumulate"

Lizard
25-04-2006, 02:20 PM
Have bought a few too Steve (ca $1.68). Prospectus for the Mar 05 float was weak, but looks like they listed lower than planned and have made some good acquisitions. My valuation $2.16 - possibly higher than Huntleys as they have had another good acquisition since you posted. Upside to that if they don't deliver any bad news in the next 12 months.

steve fleming
21-06-2006, 10:01 PM
$1.45....whats going on here???

Huntley has upgaded to buy again noting no change to fundamentals....surely too late in the year for a downgrade???

Div yield of 7%

PE (07) of 7.8

Lizard
04-07-2006, 09:52 AM
Happy now Steve? Confirms 2006 forecast and forecasts eps of 16-18cps for 2007 - 30% increase on normalised 2006. 2007 P/E of 8.5 at the mid-range, though my figures say the top of range is a fair pick. On this basis, would expect the sp to clear $2 and be heading to $2.50 within 9 months.

Cheers, Liz

steve fleming
04-07-2006, 08:29 PM
Hi Liz!....yes....today's HST action ( and a few other good rises today) has put a smile on my face!...

HST's strategy makes lots of sense - buy private company's on cheap multiples then benefit both from synergies/improved efficiencies and also the multiple re-rating..(ie BOL type strategy)...plus they seem to have the management experienced enough to pull it off....

Nicely bid up all day to finish on highs...wouldn't surprise me to see some more small/mid cap funds accumulating...HST is going to be a great medium/long term growth story

Lizard
20-07-2006, 04:40 PM
Nice move today - currently $1.81 and could finish higher. Announcement today re Dubai JV might not add much to NPAT until 2008, but has at least reinforced that HST makes it as a "growth" possibility as well as a "value" play. [8D]

Lizard
05-09-2006, 10:26 AM
Result out of $18.7m NPAT - normalised, about $14.0m or P/E of 13.0 on sp of $1.75. Final dividend of 5.3cps to give annual 10.6cps or yield of 6.1% plus franking. Based on this result and previous forecast for 2007, I value at $2.38.

New acquisition of Heyday group announced which will increase the size of the group by about 25%. Equity raising of $15m should increase shares by about 8.5 - 9.0m or an 8.6% increase. Allowing for debt, I calculate the acquisition as still adding to NPAT by around $2.5m in 2007, so should work out eps positive and increases valuation to $2.50.

Currently, HST look comfortable carrying relatively high debt levels, and I assume the DRP remains underwritten to help with debt management.

Edit: further to above, I estimate 2007 NPAT at $23.6m. Allowing for equity raising and underwritten DRP, shares of 116.6m, so eps of 20.3cps - towards the top of the guidance given by HST of 18.5-20.5cps. Forward P/E of 8.6 at price of $1.75. Assuming they can achieve this, will look cheap for a company of $200m market cap and attractive buying for instos. However, some risk still in the high debt levels and appears to be some margin pressure, which needs watching.

steve fleming
05-09-2006, 07:16 PM
Hi Lizard,

Results as expected but at least help in establishing managements credibility in the market.

It is all looking very positive, certainly the debt levels is an issue (and the subsequent to year end Heyday Group purchase is 50% debt funded)...but management must be reasonably comfortable given that the capital raising is relatively light, and the dividend appears on the generous side.

Interesting strategy to diversify into electrical installation–an admission of the perhaps limited growth in the a/c market but it certainly represents a great opportunity for HST and the ability of the 2 divisions to feed off each other

Looking forward to an exciting 2007, and a decent re-rating as the mid-cap funds look to get on board this very good news story

Lizard
07-09-2006, 10:55 AM
Good to see the cap raising heavily oversubscribed, with 8.4m shares issued at $1.85 - the top of the book-build range of $1.70 - $1.85. Should open nicely :)

Lizard
07-09-2006, 04:18 PM
Got that nice break through $2 today with current price at $2.03. Hope it can stay here!:)

steve fleming
14-10-2006, 01:25 PM
Hi Liz,

been away for a bit, but see that the HST re-rating has continued.

Touched 2.47 y/day and closed at 2.38, which i note, was your target valuation for HST.

Are you reducing at these levels? The Dubai potential, a successful acquisition of Heydey and the increased interest in quality mid-caps should see this positive momentum continue??

Cheers!

Lizard
14-10-2006, 01:48 PM
Hi Steve,

I sold the trading lot for a quick 35%, but will keep the rest. With a share like this with good immediate growth prospects, good liquidity and large enough cap, am happy to let it run to 20% over valuation. After that, would be very cautious. Hopefully the valuation drifts up before we get that far.

Very happy with this weeks run though :)

Liz

steve fleming
14-10-2006, 02:14 PM
quote:Originally posted by Lizard

Hi Steve,

I sold the trading lot for a quick 35%, but will keep the rest. With a share like this with good immediate growth prospects, good liquidity and large enough cap, am happy to let it run to 20% over valuation. After that, would be very cautious. Hopefully the valuation drifts up before we get that far.

Very happy with this weeks run though :)

Liz


Hi Liz, am continuing to hold mine - i also like the DRP at a 2.5% discount. It would be nice to get an update as to how the Heyday acquisition is going...although HST management have succesfully 'bedded down' a number of previous acquisitions, so you'd think that Heyday has been successful as well, though Heyday is substantial ($120m t/o) and outside of HST's core area of expertise....cheers

Lizard
19-10-2006, 04:23 PM
Forty million dollars... that would be a good sized contract then, huh? :)

steve fleming
19-10-2006, 10:50 PM
quote:Originally posted by Lizard

Forty million dollars... that would be a good sized contract then, huh? :)


Some big $$$'s Liz!!...and someone liked it! Bidding HST up to 2.88 at one point, being a 100% increase on its lows of 3 months ago.

This is a very significant day for HST...fundamentally changing its medium and long term growth/earnings profile...currently trading on 2008 PE of 11...expect this to be re-rated as the market digests the signifcance and magnitude of this (and hopefully more) UAE deal.

steve fleming
22-10-2006, 11:08 PM
Hastie Group has been on the acquisition trail recently.

It now has 4 operating divisions as follows:

[u]Maintenance</u>

The Hastie Group is Australasia’s largest mechanical maintenance organisation servicing both the commercial air conditioning and refrigeration segments. With a capability to service any client in every state and territory in Australia and across New Zealand, the Hastie Group is the clear leader in its field.

[u]Air Conditioning</u>

The Air Conditioning division of the Hastie Group provides a diverse and comprehensive range of commercial and industrial Air Conditioning design, engineering, manufacturing, installation and maintenance ingeographic locations across Australia and New Zealand.
Hastie Group's capabilities in Air Conditioning are extensive and commence at the point of project inception through to budgeting, detail engineering, project management, fabrication, construction, commissioning and final support maintenance management.

[u][u]</u>Refrigeration</u>

The refrigeration division of the Hastie Group consists of commercial and industrial refrigeration companies.

In commercial refrigeration, Austral Refrigeration specialises in the design, manufacture, installation and maintenance of refrigeration equipment and systems for supermarkets, convenience stores and liquor stores. Hastie Group is at the forefront of high performance, energy efficient commercial refrigerated display cases.

In industrial refrigeration, Gordon Brothers Industries is Australia's market leader in the design, manufacturing, installation and maintenance of industrial refrigeration systems across a wide range of industries.

[u]Electrical</u>

The Electrical Division provides project delivery strongly focused on providing a wide range of design, implementation and maintenance services within the Australian construction and office fit-out industries.

These service offerings cover a complete range of building utility services integrated into a single and cohesive project delivery structure such as electrical infrastructure, fire detection and suppression systems, building controls, energy management systems, security and data and voice structured cabling systems. Additionally, this Division provides voice & data networking systems for the IT sector, carrier infrastructure builds for various Telcos, and private digital radio networks

---------------------------------------------------------------

HST have recently establisded a joint venture to undertake air conditioning, electrical and fire & hydraulics installations in Dubai. The JV partner is Al-Futtaim Engineering, a wholly owned subsidiary of Al-Futtaim Group, a regional conglomerate with 70 years' history.

Last week HST announced their second Dubai contract - a twin 50 story hotel/office complex, worth $40million to HST and commencing immediately. THe JV also recently won a A$20m air conditioning installation contract for part of Dubai Festival City, a 650 hectare multi-billion dollar mixed use development. Work is to begin in 2Q07

In Dubai Huntleys note that there are about 50 major developments either planned or already underway, estimated to be worth about US$100Bn. A 10% share of that would equate to $1 of value per HST share.


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For NZ'ers, Hastie Group was awarded the Auckland Hospital contract in 2001 which was to become the largest mechanical contracting project in New Zealand and was completed successfully by Hastie New Zealand. This business has continued to grow with major contracts currently in hand for the Sky City Convention Centre and Hotel plus a number of smaller contracts and maintenance contracts.

--------------------------------------------------------------

HST also offers a DRP with shares issued at 2.5% discount to weighted average of recent trading

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http://www.hastiegroup.com.au/home.html

steve fleming
22-10-2006, 11:23 PM
Further to the above:

*HST's multi-service capabilities is becoming a higher priority for property developers

*HST has recurring revenues (maintainence contracts) of around 25% of total rev

*top 10 customers account for only 25% of total rev

*Geographically diverse: NZ, Aus (all states), UAE and UK

*Company guidance is for EBIT in the range of $38-41m for FY07, (PE of 12.4)

*EPS for FY07 between 18.5-20.5c (excludes any impact from UAE deals - UAE is all upside!)

steve fleming
04-11-2006, 09:42 AM
So MD Jerry May****is leaving Hastie to become MD of CSR... pretty good credentials actually for CSR, being the immediate past chair of Cement Australia, and having worked most of his life in the cement industry.

Jerry has " good leadership credentials and a proven ability to drive strategy, restructuring and performance”says CSR...if he is half as succesful in driving CSR as he has been with HST, then CSR will be in good shape,unless private equity gets to it first

bit disappointing for HST but...will have to reassess my position

Lizard
04-11-2006, 10:16 AM
I agree Steve. Am planning to take a closer look at CSR.

steve fleming
01-12-2006, 11:12 PM
New closing highs on strong volumes this week.

still cheap with 07 PE of 12.5 and div yld of 5%

Lizard
02-12-2006, 06:11 AM
Hi Steve

It is interesting comparing Heyday with ASX:KLM. There are similarities - originally Heyday made KLM shares look cheap, but with KLM's recent re-rate, it may be the other way around.

I'm still holding both, though I've taken them off the "accumulate" list.

Lizard
18-01-2007, 11:46 AM
And another great contract win in the UAE at $52m.

Middle East business now forecast to add $5m to earnings in 2008. No change to current forecasts for 2007 though, despite work on the latest contract being due to start immediately.

steve fleming
18-01-2007, 09:14 PM
Hi Liz,

Yep, another massive contract in the lucrative UAE market

I was pretty close to selling my HST a few months back, but glad i held on...touched 2.95 today and finished up 11%

HST is very much a growth stock, and should be re-rated accordingly to a PE of at least 17/18 +

Also, it was about this time last yr that HST downgraded...nice to see their guidance confirmed today.

Cheers

Lizard
19-01-2007, 09:58 AM
Pleased to see it touch over $2.90, bringing it up 100% off the low of $1.45 you mentioned in your post of June last year, Steve.

My valuation is now $2.64, but I'll probably allow it to run about 20% beyond that before I consider selling. Growth upside is there and could keep pushing the valuation northwards (though not without risks).

steve fleming
22-01-2007, 07:59 PM
another massive day for HST as the re-rating from $2.50 continues

Nice 100% + (plus dividends) since this thread was started about 9 months ago

good to know you can still get decent returns on a substantial mid cap Industrial in this climate

steve fleming
28-02-2007, 11:09 PM
Pretty reasonable performance - all things considered.

Heyday acquisition seems to be successful and ahead of expectations.

Record order book at 31 December 2006.

UAE a strong “pipe-line” of prospects in a booming market.

Margins in Installation & maintenance down, but recovering...installation obviously down due to sunk costs in relation to UAE

Working capital increased which is likely to reverse in second half

No real surprises and market seemed reasonably happy with it.

Tolhurst Noall have recently commenced coverage on HST, and have an initial $3.30 target.

steve fleming
01-03-2007, 08:50 PM
Touched record highs today.

Also MAcquarie Equities, on the back of yesterday's announcement, today have put HST on Out-perform with a short term target of $3.40

Lizard
01-03-2007, 09:26 PM
Performing very well Steve :).

I thought the HY was towards the low end, but they have done a good job of keeping the communication flow going. Market likes the upside in the Middle East I think.

They are demonstrating how the "growth by acquisition" strategy should be done. Too many companies seem to mess it up!

OneUp
01-03-2007, 09:29 PM
quote:Originally posted by steve fleming

Touched record highs today.

Also MAcquarie Equities, on the back of yesterday's announcement, today have put HST on Out-perform with a short term target of $3.40


Mac bank have a very cosy investment banking relationship with HST. IMO theirs views on this stock are worse than useless, given their considerable incentives to spruik it.

PS: could just be me being bitter, turned down the chance to buy this one at $1.50 [xx(]

Lizard
01-03-2007, 09:33 PM
I was just thinking that too - will Macquarie be underwriting the DRP again do you think? And does this affect their view?

steve fleming
01-03-2007, 09:41 PM
quote:Originally posted by Lizard

I was just thinking that too - will Macquarie be underwriting the DRP again do you think? And does this affect their view?


Theoretically the whole 'chinese walls' should protect integrity of research division v capital markets division in investment banking.

My understanding is that Macquarie is generally very reputable in this regard...as you would expect given the number of conflict of interest that would potentially involve Macquarie.

OneUp
01-03-2007, 10:40 PM
quote:Originally posted by steve fleming


quote:Originally posted by Lizard

I was just thinking that too - will Macquarie be underwriting the DRP again do you think? And does this affect their view?


Theoretically the whole 'chinese walls' should protect integrity of research division v capital markets division in investment banking.

My understanding is that Macquarie is generally very reputable in this regard...as you would expect given the number of conflict of interest that would potentially involve Macquarie.


Hi Steve, yes I know a few people working in equity research at investment banks and they also maintain there is a Chinese Wall.

But trading commissions only cover about 50% of the costs of research departments at investment banks. They have to pay the rent somehow.

Companies with underwriting arrangements have been proven in academic studies to be way too over optimistic with recommendations and growth forecasts - relative to other analysts and ex post actual numbers.

Take AMA. Pattersons reckons it's worth $1 vs $0.40 current share price. But surprise surprise Pattersons underwrote that issue!

There have been some real scandals over the past few years, especially in the USA. Analysts touting stocks publicly they thought were not good enough for toilet paper.

Presumably some companies are worse than others.

steve fleming
01-03-2007, 11:07 PM
Hi Oneup,

Yes some less reputable IB's are likely to compromise their ethics, however in the case of MBL, it has far too much to lose...and they are doing OK 'paying the rent'!

The only reason i mentioned this was Macqaurie Equities updated their HST target price to 3.40 today (from 3.00 earlier this week)....i assume that they had some basis to this upgrade, presumably as a result of the h/y annoucement...

steve fleming
02-03-2007, 10:56 PM
quote:Originally posted by OneUp


Hi Steve, yes I know a few people working in equity research at investment banks and they also maintain there is a Chinese Wall.

But trading commissions only cover about 50% of the costs of research departments at investment banks. They have to pay the rent somehow.

Companies with underwriting arrangements have been proven in academic studies to be way too over optimistic with recommendations and growth forecasts - relative to other analysts and ex post actual numbers.


Hi again One-up….one other thing on this, Bloomberg actually ranks each individual research analyst (who supply their targets to Bloomberg – which is most analysts) on all their stated price targets versus actual stock returns… and amongst analysts there is a fair bit of prestige/respect associated with a top ranking.


So even if Mr/Mrs research analyst is from the company’s house broker, for the sake of their own credibility, they would generally submit what they believe to be legitimate price target...obviously its not going to make much of a difference to a less reputable analyst, but hopefully there are less of those in Aus than America!



quote:Originally posted by OneUp



Take AMA. Pattersons reckons it's worth $1 vs $0.40 current share price. But surprise surprise Pattersons underwrote that issue!





As of 15 Feb, Pattersons now have AMA on a $1.36 target - don't know if the half yearl will bring this down a little - but an interesting little company with some great potential

OneUp
05-03-2007, 10:15 PM
Hi Steve,

that's certainly one view.

But we see 'Buy' recommendations outnumbering 'sell' by up to 20-1 and a lot of other things that suggest that broking divisions of investment banks aren't always acting in their clients best interest.

Morgan Stanley once sent a memo to staff that "Our objective . . . is to adopt a policy, fully understood by the entire firm, including the Research Department, that we do not make negative or controversial comments about our clients as a matter of sound business."

steve fleming
11-03-2007, 11:40 PM
Huntley's have just increased their HST valuation from $2.95 to $3.48...

"Outlook remains for FY07 EBIT of $38 - $41m. Air-conditioning installation order book in Australian and New Zealand is “…well ahead of last year.” Our forecasts assume the partial recovery in commercial refrigeration continues. We maintain our FY07 and FY08 forecasts. Growth in Australian operations will continue through acquisition in what remains a mature and fragmented market. Further contract wins in the United Arab Emirates provide earnings and valuation upside should HST prove successful in capturing the colossal construction dollars being spent. Our valuation of $3.48 is 12x FY08 earnings."

Almost exactly 1 year ago (14/3/06) when i started this thread, Huntley's had HST on a valuation of $1.95...since then, HST has demonstrated consistently strong EPS growth on the back of some prudent acquisitions, plus a PE multiple re-rating to reflect the promise of strong growth from UAE...resulting in the significant increase in its intrinic value and a sp increase from $1.55 to $3.15.

steve fleming
19-03-2007, 07:20 PM
quote:Originally posted by steve fleming



Tolhurst Noall have recently commenced coverage on HST, and have an initial $3.30 target.


Target reached today.

Next target is Austock Securities which has a $4.30 target for HST.

Lizard
20-03-2007, 09:08 AM
Nice target Steve! Seems fairly ambitious for the coming year I would have thought, but I certainly won't be complaining if it gets there.

steve fleming
17-04-2007, 07:39 PM
Takeover of a large-ish NZ company today.

http://www.aquaheat.co.nz/

290 employees
$49 mil t/o

Leading airconditioning, plumbing, drainage and fire protection systems installers in Wellington. Do you know them Liz??

Normal HST modus operandi - buy on cheap multiples and benefit from the public/private company multiple re-rate.

steve fleming
17-04-2007, 07:41 PM
quote:Originally posted by steve fleming

Takeover of a large-ish NZ company today.

http://www.aquaheat.co.nz/

290 employees
$49 mil t/o

Leading airconditioning, plumbing, drainage and fire protection systems installers in Wellington. Do you know them Liz??

Normal HST modus operandi - buy on cheap multiples and benefit from the public/private company multiple re-rate.


A rare comment on HC re HST from Stigmata today.

---------------------------------------------------------------
These guys are one of the absolute locks for the years to come. Great management, smart decisions, proven business and so much more potential.

Still flies under the radar, but wont be doing that for much longer. They just keep on growing, and their market dominance will just keep on increasing.

Financials, management, potential its all there........ consistently making profits.......

$3.34 now....... and being as tightly held as it is, when it goes, it really goes, you only have to look at the chart to see that.

Given its position in its field, in Australia, New Zealand and the developments in the UAE, nothing is out of the question in terms of price.

This is not a speculative stock, in my opinion, its an absolute certainty. Fundamentals are SCREAMING out, BUY ME!
-----------------------------------------------------------

Totally agree.

Snow Leopard
17-04-2007, 08:41 PM
I think this is worthy of further research on my part (no offence meant sf) as I have some A$ to park somewhere.

Lizard
17-04-2007, 09:04 PM
quote:Originally posted by steve fleming

Takeover of a large-ish NZ company today.

http://www.aquaheat.co.nz/

Do you know them Liz??


Yes, see them around a bit and, from what little I know, seem like a good company. Not flashy, but strong on engineering has been my impression, so would think a good acquisition. Might find out more when I'm back in town.

Happy to keep holding.

steve fleming
21-04-2007, 05:37 PM
Nice half page write up on HST in the May issue of the AFR Smart Investor - out this week.

Smart Investor rates HST's presence in the 'booming UAE construction market'. SI also notes that with HST's ambitous growth plans more deals are expected to be in the pipeline, including possible expansion into new industry segments such as hydraulics.

steve fleming
01-05-2007, 10:15 PM
Excellent appointment of a new MD today:

"Mr Harris is currently chief executive of United Group's Services Division which provides worldwide property services to
major private and public sector organisations and has over 3,300 employees internationally... president and chief executive officer of Millicom International's Cellular’s Asian
operations.....six years as a consultant in McKinsey's London industrial practice...... strong record of strategy development and of initiating and integrating acquisitions, both in Australia and overseas...... demonstrated the skills that will be required to lead Hastie successfully during the next stage of the company's growth."

Also nice reaffirming of profit guidance today.

Insto's are fighting to pick up stock as HST continues to reacn new highs.

steve fleming
04-06-2007, 08:01 PM
First day at work for the new MD today - and further strengthening of HST's board.

"Hastie's chairman, Mr Trevor Bourne, said: 'With David as managing director, Chris as finance director and experienced divisional CEOs, Hastie has a strong team to drive further revenue and earnings growth'."

steve fleming
17-06-2007, 06:41 PM
Excellent large upgrade by Huntley's on Friday....plus HST has had a couple of very positive write-ups in the AFR over the last couple of weeks.

From Huntley's

"We increase our valuation from $3.00 to $3.85 which includes 40 cents per share for UAE prospects (see SCG9, 07/03/07). We upgrade our recommendation from Hold to Accumulate as our price bands are adjusted to reflect the new intrinsic value.

We increase our valuation on stronger non-residential construction forecasts for FY07 through FY09, a more aggressive acquisition schedule, and a slight improvement in refrigeration margins from FY08 onwards.

Our valuation adopts the Australian Industry Group’s May 2007 forecasts for non-residential construction, predicting 5% growth in FY07 and FY08. We assume 4% non-residential construction growth for FY09 and FY10. The outlook for offices and shops, the most important segments for HST, remains strong"

Still on an 08 PE of approx 13-14

steve fleming
24-06-2007, 11:08 PM
quote:Originally posted by Z_Man

I see that Deutsche Bank has initiated coverage with a Buy recommendation and a price target of $4.20 With the last traded price at 3.60, there's still plentry of room for further price rises.:D


From h/c courtesy of Bwana
-------------------------------------------------------------------
Is The Market Underestimating Hastie's Earnings Potential?
FN ARENA NEWS - 20/06/2007


For companies with operations in mature and or cyclical sectors the ability to expand into faster growing market segments is an important way to generate stronger earnings growth, which in turn is usually rewarded by the market with higher earnings multiples.
Hastie Group (HST) represents such an example of a company expanding away from its core refrigeration operations, which was initially focused on supplying refrigeration needs for supermarkets but via expansion has moved into the higher margin industrial refrigeration supply and refrigeration maintenance markets as well as into the air conditioning industry.

According to Deutsche Bank, which this week initiated coverage on the stock with a Buy rating and $4.20 price target, the market is now underestimating the growth potential the company's new structure offers.

Deutsche expects organic growth will actually be as much as 10% higher than market consensus earnings forecasts for FY08 suggest, helped by both its now national footprint and ongoing acquisitions, one of the more recent being the purchase of industrial refrigeration company Gordon Brothers.

Given the refrigeration market remains very fragmented the broker expects more deals to be announced, particularly as there is still capacity on the balance sheet for further acquisitions. Intersuisse, who rates the stock as a Long-Term Accumulate, agrees, expecting more consolidation in the air conditioning sector in particular as the group attempts to build on its current 20% market share.

But growth is unlikely to just be domestic as Deutsche notes the company's market share in New Zealand is also increasing, while the recent entry into the United Arab Emirates market is also showing signs of delivering benefits to shareholders.

With management having provided the market with earnings guidance for FY07 there is unlikely to be too great a surprise when the company reports in August, as earnings per share (EPS) should come in close to the guidance of 19.5c.

In Deutsche's view it will be the shift to focus on FY08 earnings that generates a re-rating for the stock as on its numbers the shares are trading cum an earnings upgrade. As an example, it is forecasting EPS in FY08 of 28c while Intersuisse forecasts 24.7c. It is also more bullish on the likely dividends the company will pay, forecasting a FY08 payout of 17c against 14c for Intersuisse.

Assuming Deutsche is close to the mark it implies the stock is trading on a FY08 P/E (price to earnings ratio) of just 12.6x, with a yield of almost 5%. Such numbers would suggest the stock is good value at current levels, as does the broker's forecast of capital annualized growth in earnings over the next three years of 34%. This reflects its new position as a business with low capital and cash intensity but a high return on equity.

Aspect Huntley is also relatively positive on the stock, having this week upgraded its rating to Accumulate from Hold. Its more positive view is along the lines of the Deutsche outlook in that it sees potential for additional earnings growth, with expansion in the UAE potentially adding as much as 40c to its valuation.

Its valuation currently stands at $3.85, which is close to the Deutsche Bank number of $3.99. Allowing for additional acquisitions has seen Deutsche set its target price for the stock at $4.20, while Macquarie also has a Buy rating on the stock according to the FNArena database

ruethewhirl
03-07-2007, 04:23 PM
Hastie up today on announcement:

Hastie purchases CDC Plumbing & Drainage

http://www.theage.com.au/news/Business/Hastie-purchases-CDC-Plumbing-amp-Drainage/2007/07/03/1183351180003.html

Disc: Hold HST

Lizard
03-07-2007, 06:12 PM
Since this acquisition is forecast to contribute to earnings by 1.9cps, it should add 20-30cps to valuations.

steve fleming
03-07-2007, 10:58 PM
quote:Originally posted by Lizard

Since this acquisition is forecast to contribute to earnings by 1.9cps, it should add 20-30cps to valuations.


Yes Liz, 1.9cps @ P/E of 15 represents a 30cps valuation increase.

Current consensus target price is approx $3.90, so that should now be upgraded to $4.20.

HST should kick on from these levels, esp as every broker who covers them rates HST as a buy.

steve fleming
04-07-2007, 08:05 PM
quote:Originally posted by Z_Man

Another jumps onboard the ship.

ABM Amro has initiated coverage with a BUY recommendation and a price target of $3.90

They see strong earnings growth over the next 5 years and consider it cheap at 12.5 times FY08 earnings.


Decent upgrade from ABN Amro today, following on from yesterday's positive announcement

steve fleming
05-07-2007, 09:57 PM
quote:Originally posted by steve fleming



HST should kick on from these levels, esp as every broker who covers them rates HST as a buy.


Kicking on to new all-time highs!

Macquarie came thru with a 50 cent upgrade for HST yesterday.

steve fleming
14-07-2007, 09:13 AM
Well HST continues into blue sky territory - breaking through the $4 barrier this week.

Nice update from Huntleys y'day:

"New CEO David Harris says CDC gives HST a solid platform from which to build a national commercial plumbing and drainage business.

In a typical commercial building airconditioning installation accounts for ~10% of development cost, electrical installation just under 10%, and fire and hydraulics just over 5%.

With the CDC acquisition HST now claims to be able to bid for all three increasing its potential to ~25% of development cost, although the depth of offering varies between States"

"HST typically acquires businesses at 4-5 EV/EBITDA multiples. Currently trading at close to double this multiple allows HST considerable public/private multiple arbitrage. "

Its not rocket science why a boring building services company has increased from $1.50 to $4.00 in just over a year....same thing will happen to AMA as well.

steve fleming
17-07-2007, 07:37 PM
The AFR must have shares in HST or something.

Today another very prominent 1/2 page write up on HST and its new CEO.

Talking about how he wants to grow HST to a billion dollar company, (ie over twice its current market cap)....how it is an unprecedent opportunity...continued expansion by acquisition (Macquarie are quoted as saying HST can afford another $30 mil in acquisitions this year without stretching its BS)...strong order book out to 24 months....all positive positive positive

Lizard
16-08-2007, 08:29 PM
Down to a low of $3.29 today and then back to close up 16cps to $3.92... Must have been temporary dyslexia on the part of the seller. :D

Lizard
28-08-2007, 10:01 AM
Good result from HST. NPAT on target at $22.2m (up 66% on normalised prior year) and with 47% increase in eps to 19.3cps. At last price of $4.09, is on a P/E of 21 and yield of 2.8%.

However, could make a case for perhaps another $12m+ increase in NPAT this year based on comments to date - say $5m from UAE, $2m from Cooke & Carrick acquisition, $3m from return to "normal" margins on services and $2m for organic growth?

Happy to let profits run on this one for now anyway.

steve fleming
28-08-2007, 09:13 PM
Good result from HST. NPAT on target at $22.2m (up 66% on normalised prior year) and with 47% increase in eps to 19.3cps. At last price of $4.09, is on a P/E of 21 and yield of 2.8%.

However, could make a case for perhaps another $12m+ increase in NPAT this year based on comments to date - say $5m from UAE, $2m from Cooke & Carrick acquisition, $3m from return to "normal" margins on services and $2m for organic growth?

Happy to let profits run on this one for now anyway.

Yep, HST solid as ever.

The best thing to me was the cash that HST is now generating - $32m in the second half, compared to $6m in the first half. So working capital management is much more effective.

Plenty more acquisitions to come.

Nice work HST.

steve fleming
06-10-2007, 11:10 AM
As highlighted by Huntleys during the week, Norfolk Group Ltd ("NFK") is shaping up as a succesful smaller version of HST (1/2 HST's market cap).

NFK IPO'd a couple of months ago.

NFK lacks HST's exposure to UAE, but has recently entered the Indian market.

With HST being a very easy 2-bagger for me over the past year, probably time to think about shifting some of my HST profit.

steve fleming
17-10-2007, 09:48 PM
As highlighted by Huntleys during the week, Norfolk Group Ltd ("NFK") is shaping up as a succesful smaller version of HST (1/2 HST's market cap).

NFK IPO'd a couple of months ago.

NFK lacks HST's exposure to UAE, but has recently entered the Indian market.

With HST being a very easy 2-bagger for me over the past year, probably time to think about shifting some of my HST profit.

Interesting to see that the 2 small cap stocks featured by Trevor Hoey in the November S.I. magazine (out today) are HST and NFK.

Very positive comments on both.

Lizard
29-11-2009, 09:50 AM
Pulled up HST for a look and was interested to see that they'd managed to prove the downside to the growth by acquisition model - i.e. when there's a slowdown and pressure to restructure the balance sheet, suddenly the growth in eps doesn't quite seem to match up to the flashy headline growth numbers.

Now sitting at $1.78, they're perhaps a little on the cheap side, but with current year outlook not so strong, it's probably too late for the bounce and too early for the recovery.

steve fleming
29-11-2009, 09:21 PM
when there's a slowdown and pressure to restructure the balance sheet, suddenly the growth in eps doesn't quite seem to match up to the flashy headline growth numbers.


Yep, shares on issue have doubled since start of 2008 (120m to 240m) so there goes your eps growth. The price of keeping your bankers happy.

The (mostly) debt funded $200m acquisition of Rotary looks as though it has been a dud....no growth expected in the UK for the next 12 months.

UAE is going to be a struggle, you would think, and the strong A$ will also be an issue.

Better return for risk elsewhere i think.

Lizard
25-08-2010, 09:08 PM
Another 6 months on and HST at $1.47 and going nowhere.

Result today looks to have been a disappointment to the market and debt levels seem a bit unwieldy by current standards, despite the usual "strong balance sheet" line in the presentation. Not altogether convincing, since they cut the div to 4cps final (now 9cps total for year - I think 25% lower than peak?).

On the positive side, they are talking 10%+ growth in earnings levels and a 20% increase in order book over pcp - though seems there are some large multi-year contracts in there. Not all going to get delivered in 2011. Forward P/E probably around 8, so cheap enough, but difficult to get excited for now.

winner69
13-04-2011, 05:51 AM
One that says there is some credence in Mr P's favourite saying ... the market giveth and the market taketh away .... or something like that

Wow .... market taketh nearly everything away now HST back trading as the price plunges to 26 cents .... bit bad when even analysts lambblast the quality of management

Obviously a lot needs to happen overt he enxt few months if HST is to get on to solid footing but a amrket cap of $58m on a forecast EBIT of $50m means goes onto the watch list to see if any money making opportunities here sometime

Was the Steve / Liz thread ... any views

Lizard
13-04-2011, 09:08 AM
Big fall from grace. Big debt, low margins and contract-based revenue is pretty high risk combo in a slow down.

I wouldn't buy HST for now. It seems almost certain that they will need additional capital. Difficult to understand why they would come out of suspension without an underwriting agreement in place for a rights issue. No matter how unpalatable the price investors wanted for an issue, it is hard to see how the price being offered could improve in the next few months. Logically, it would seem likely to trade in death spiral until an underwriting price puts a floor in.

Either this is a strategic blunder or they are really on the ropes and couldn't find an underwriter. Some are making comparisons with the recent ISF situation, but the odds for HST are still in favour of dilution rather than takeover and the risk/return doesn't stack up. ISF was in a position where they had something valuable (Lorenzo/NHS contract/established customer base that would continue to use ISF products) that could not be immediately supplanted in the marketplace by competition. And even so, I didn't trade ISF as still could have gone the other way. Personally, find the psychological cost of 100% losses is too high for me to take double-digit risk. I think this is now more similar to NPX at the peak of their crisis - the time to buy would be close after an announcement of an underwritten cap raising and count on taking up rights.

The value of contracts on the books would typically generate about $130m EBIT, so that maybe provides some sort of benchmark to add back to tangible assets - i.e maybe $30m of value for current shareholders is about where the distressed value sits... 12-13cps. For now, it seems likely they will be able to continue to pay interest on their loans so banks should remain supportive provided they can demonstrate improvement in the second half trading. Unless the uncertainty surrounding them further undermines their business or they are still being less than honest about their situation, then I think they SHOULD be able to raise capital and odds of complete failure are below 20%.

winner69
13-04-2011, 09:33 AM
Good post Liz

Without knowing much about the past I assume taht the mess has been created as a result of a debt funded growth strategy of buying things and hoping for the best

If so they probably deserve whatever fate comes their way

The world will learn one day that growth (as we measure it today) is a bad thing ... esp growth for growth's sake ... waht the world needs is sustainable growth ... but that discussion is ofr another day

STRAT
13-04-2011, 10:53 AM
Hmmm.
I wouldnt be upset to see them out of the construction industry in NZ.

winner69
13-04-2011, 11:14 AM
Hmmm.
I wouldnt be upset to see them out of the construction industry in NZ.

Do they own Aquaheat?

Then again should be making heaps in NZ using slave labour (a la Englsih talk)

STRAT
13-04-2011, 11:32 AM
Do they own Aquaheat?

Not sure actually. Shouldnt be too hard to find out though.

winner69
13-04-2011, 11:55 AM
Not sure actually. Shouldnt be too hard to find out though.

Yeah they are part of the Hastie empire .... made $3m on sales of $45 for year June 2010

Lizard
23-02-2012, 07:35 PM
Back on the ropes again and in discussions with the bankers...

... never quite looked like enough capital last time to de-risk so thankfully stayed clear. They've been consolidated 10 for 1 since the last bout of nausea, so the current 50.5cps is equivalent to 5.05cps if comparing against earlier posts. Big fall from the 14-20cps that the $160m+ of capital was raised at last year. Banks will be happy with that kind donation towards their cause.

Still don't think this is a business the banks will want to see fail - the majority of assets are intangible and so won't yield much in a liquidation scenario. The hard part is knowing what parts of the business they will be left with after winding back operations. Taking all into consideration, although I'd expect something to survive, I can't see a price that has much in it for shareholders until they can produce something close to their forecast 2H EBIT of $28m and reduce the debt through wind down. At that point, the current price might be fair value. Until then, it's one for the gamblers.

Lizard
04-05-2012, 07:04 PM
A week after that last post, HST signed agreement for a new facility with the banks.... but still not enough. A dispute over a Middle East project has put them back in trading halt just a few days after the new facility took effect. Share price at time of halt was down at 16cps, so the market clearly wasn't convinced prior.

Expecting a recapitalisation announcement either tonight or early Monday. Think it will still take some time for this one to make it onto the recovery stock list - right now, it's more like a cat with nine lives and no traffic sense.

Lizard
25-05-2012, 10:04 AM
Still in suspension - and looking something of a debacle with 7 banks arguing over submitted recapitalisation proposals and now the announcement of accounting irregularities discovered on audit that will result in a further $20m charge against accounts.

Ongoing drama, but I think the audience would be relieved to see the curtain come down, given how slowly it drags on. Sympathies for employees and suppliers who must have all digits crossed at this point.

winner69
25-05-2012, 04:09 PM
This sums up this debacle ....The company's market value is about $20 million - roughly the size of the accounting losses

steve fleming
26-05-2012, 12:33 AM
You would think the accounting irregularities would be the last straw for the banks.

If they hadn't already been sceptical about the forecasts, they are likely to have lost all confidence in the numbers now.

Plus when you have senior directors resigning, you know the end is very near....

winner69
28-05-2012, 05:54 AM
In receivership ..... beyond redemption methinks ... and the big 4 banks take a decent haircut ..... along with a few superfunds

Acccording to google shareprice was once 49 bucks

Lizard
28-05-2012, 07:52 AM
Interesting going back over the thread. Looks like Steve and I had some fun with it back in 2006/2007. Looked up my contract notes - I didn't manage to sell anywhere near the peak, but sold half at $3.70 and half at $3.20 (it's since been consolidated 1 for 10). Worked out okay with divs from the $1.68 entry.

Sad to see it end like this. Think the Jerry Maycock who was MD for the good days is now a director at NPX?

Toulouse - Luzern
28-05-2012, 09:38 AM
A week after that last post, HST signed agreement for a new facility with the banks.... but still not enough. A dispute over a Middle East project has put them back in trading halt just a few days after the new facility took effect. Share price at time of halt was down at 16cps, so the market clearly wasn't convinced prior.

Expecting a recapitalisation announcement either tonight or early Monday. Think it will still take some time for this one to make it onto the recovery stock list - right now, it's more like a cat with nine lives and no traffic sense.

Great post.

Really like: "right now, it's more like a cat with nine lives and no traffic sense".