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OutToLunch
30-03-2004, 08:52 AM
At a PE of 12.5 and further down the profitability track than WDT, for example - surely SCT is a screaming buy?

By the way, (although I haven't spent much time studying them in great detail aside from when I held WDT), surely F&P appliances, SCT and WDT have a lot in common when it comes to developing small appliance technology? I wonder what SCT and WDT could do if they worked together, say if WDT provided the small motor technology and SCT worked on the production line side of things. Surely a combo of these two would be appealing to the big manufacturers. Hmmmm... any thoughts, anyone?

Disc: Hold none of these, wish I had some $ to grab a few SCT though

winner69
30-03-2005, 08:32 PM
Always interesting looking back at what people say a year ago ... and how sentiment changes

SCT was at 295 on 30/04/04 ... 1 year on 240

OutToLunch
31-03-2005, 08:48 AM
I'm still watching SCT, didn't buy any last year in the end though I have been keeping an eye on them since, esp lately as they started falling below $3. Seems it's the high NZD that's hurting them more than anything else. However maybe the NZD has peaked? Depends on how our economy goes from here and how much more the USD falls, but surely any fall in the kiwi can only be good for SCT, eventually.

Disc: Hold none, but watching closely

wsheridan
31-03-2005, 12:49 PM
quote:Originally posted by belgarion

Hmm. Both stop losses fired. Now hold just 33% of original holding. Shame. THis company has been good to me. No matter, I still feel this is a good company and have cash ready and waiting when good news makes an appearance. I just can't see SCT mgnt sitting on the hands given the probs they face. The probs aren't that significant IMHO and SCT will bounce back.


Seems to me a rather conservative stop loss to have on what was supposedly a long-term portfolio.

Snoopy
08-12-2007, 09:11 AM
I have pulled a non charting 'Scott Technology' thread out of the archives. That is really because I don't think Scott Technology is a good trading share because of poor liquidity. Last Friday only 95 (not a misprint) shares were traded! I dare not think how much less than a marketable parcel 95 shares is.

This thread starts with 'out to lunch' suggesting SCT was a 'screaming buy' at somewhere near $3 on 30/04/2004. Yet now the share price has retreated to a '$1.82 buy and $1.85 sell' spread, this same share barely gets a mention on this forum. For those who like the FA statistics $1.82 today represents an historic PE of 15. That is greater than the 12.5 PE when SCT was regarded as a 'screaming buy' at $3 two and a half years ago. Consequently I don't think SCT is a 'screaming buy' at close to $2. I am buying more for portfolio rebalancing purposes. But if you believe that exporting from NZ has any future then I think SCT is worth accumulating at around this $2 level.

I notice the engineering director, Kevin Kilpatrick, sold all of his shares late last month. Ordinarily an insider 'selling out' like that is not good news. However, Kilpatrick has already signalled his retirement from the company to go 'grape growing' in Marlborough in August 2008. Given he is still a director of Scotts, Kilpatrick had a limited window of opportunity to 'sell out' while the company annual results are fresh. If he had waited he could have been accused of insider trading. So I don't think Kilpatrick selling out to fund his new grape growing activities in Marlborough should necessarily be seen as a loss in confidence in Scott Technology itself.

Kilpatrick selling out of 170,000 odd shares during 2007 has worked well for me because I have been buying SCT shares in trickles all year - boosting my own holding in this company by something like 80% in the process. My average purchase price of these 'new' shares was $2.07. That doesn't look very clever if you consider the current buy price is $1.82. But that is assuming that I could have bought the number of shares I did buy at 'todays price' of $1.82. And that would not have been possible. It also ignores the dividends that I have accumulated during the year, which makes my 'theoretical loss' (it was a 'theoretical profit' two weeks ago) much less painful. I know that I couldn't have bought my shares at $1.82 because it has taken over a month for me to buy my 'November tranche', a very modest number of shares on market at a price around $2.

So when do I expect my profit margin on my latest SCT acquisition to rise into the black again? I have no idea. But I am prepared to wait. And if the market weakens further I am prepared to buy more shares in the interim. I don't know if buying SCT shares at $2ish today will look clever in two and one half years time or not. But I think it is more likely to look clever than buying SCT at $3 looks now, viewed with two and one half years of hindsight.

SNOOPY

discl: hold SCT

Snoopy
08-12-2007, 12:45 PM
interesting to read the old threads and thoughts

*first sign of avoid would have been the appearance of Belgarion holding/ spruiking SCT:D

good post Snoopy, and good luck, are you seeing the NZD getting weaker the major SP driver going forward?

A weaker NZD/USD relationship would help SectorSurfa, but who knows when or if that will happen? RBNZ Governor Bollards comments re NZ interest rates last week seem to have pushed the NZD/USD relationship the other way. That is possibly why some selling pressure has emerged in SCT over the last few days.

Of more concern to me is the NZD/EURO relationship as the two competitors globally that SCT have operate out of Italy and Spain respectively. As long as Scott's competitive advantage is maintained relative to those two European based competitors, I think that Scotts will be able to compete whatever happens to the NZD/USD exchange rate.

New CEO Chris Hopkins is onto the exchange rate problem anyway and has embarked on a strategy of sourcing more of the raw material input costs directly from overseas. Also SCT are looking for a domestically orientated business acquisition to smooth some of the peaks and troughs of workload that come with being so overseas focussed.

When it comes down to it, I guess I am backing on the existing employee skills base to work their way around whatever problems the market throws at them. I am betting on the robotics division finally making a meaningful contribution to profit. And with the retirement of Chairman Marsh, after 38 years at the helm, I am betting on the new governance broom revving the company up a bit.

SNOOPY

discl: hold SCT

Snoopy
16-05-2008, 10:47 AM
There has been some comment on other threads about SCT being a great place to put money to take advantage of the NZD weakening. So I thought an update was overdue.

----------

GENERAL: SCT: Securing an order from a major appliance manufacturer

2 May 2008

Dear Sir/Madam

Scott Technology Limited are pleased to announce it has secured key contracts
for the supply of equipment into the international market. These contracts
have been gained despite the difficult trading environment that was indicated
at both the Annual Meeting in December and in the interim announcement in
April.

Scott has secured an order from a major appliance manufacturer in Brazil
worth several million dollars. It is expected that the manufacturing line
will be completed and shipped at the end of 2008 and installed in early 2009.

In addition, Scott has secured an order for its meat processing side of the
business to supply multiple beef de-boning products to a customer in
Australia.

Yours faithfully

Stuart J McLauchlan (Chairman) Christopher C Hopkins (Managing Director)

---------

The above news is certainly good for SCT in securing the continuity of the workforce which is SCTs best asset. However it is no surprise to me that the share price has not moved. Because these projects would have been secured at the high exchange rates prevailing earlier in the month. If management behave according to historic precedent then they will have hedged these two new contracts already. So any depreciation of the NZD will not help the profitability of these projects or the bottom line of SCT. Indeed these two contracts may have been secured at minimal profit or even a small loss.

Where the NZD decline will help is in the next project. I think SCT has turned the corner. Until that next project is announced, though, I wouldn't be looking for any big moves in the share price.

SNOOPY

discl: hold SCT

Steve
16-05-2008, 06:09 PM
SCT are about to move into their new larger premises in Dunedin...

Snoopy
26-05-2008, 01:19 PM
GENERAL: SCT: Securing an order from a major appliance manufacturer

2 May 2008

Scott Technology Limited are pleased to announce it has secured key contracts for the supply of equipment into the international market. These contracts have been gained despite the difficult trading environment that was indicated at both the Annual Meeting in December and in the interim announcement in
April.

Scott has secured an order from a major appliance manufacturer in Brazil worth several million dollars. It is expected that the manufacturing line will be completed and shipped at the end of 2008 and installed in early 2009.

In addition, Scott has secured an order for its meat processing side of the business to supply multiple beef de-boning products to a customer in Australia.

---------

these two contracts may have been secured at minimal profit or even a small loss.


Significant news from SCT today. They are to become suppliers to the mining industry!

26/05/2008
TAKEOVER

REL: 1328 HRS Scott Technology Limited

TAKEOVER: SCT: ACQUISITION OF ROCKLABS

The Directors of Scott Technology Limited are pleased to announce that they have completed satisfactory due diligence for the acquisition of the business of Auckland based manufacturer, Rocklabs Limited. The remaining outstanding
conditions of sale are expected to be satisfied during the month of June.

Rocklabs are manufacturers of mechanised and automated sample preparation equipment and suppliers of gold reference materials to the mining industry. Manufactured products include rock crushers, ring mills, sample dividers and integrated systems. Rocklabs are based in Onehunga, Auckland and employ 35 staff, plus it has a network of nearly 30 sales agents worldwide. Rocklabs exports virtually all of its production and has customers in 98 countries.

Both Scott Technology and Rocklabs have a strong focus on product quality which is one of the factors that attracted Scott Technology to Rocklabs. While Rocklabs supply the mining industry which has not traditionally been the domain of Scott Technology, both companies share a common core business of engineering and automation.

Part of Rocklabs' business strategy is to move towards greater automation of their products and systems. This is an area in which Scott Technology can provide enhanced design and technical expertise.

The current owner of Rocklabs, Dr Ian Devereux, will remain with Rocklabs in a management and technical role while Scott Technology intend operating Rocklabs as a standalone subsidiary with few changes to its current operating structure.

The consideration for the purchase will be a mixture of cash and shares in Scott Technology and the transaction will be earnings positive for the Scott Group.

---------

I'm disappointed we do not know how much cash or how many shares are going to be issued to acquire Rocklabs. Perhaps adding the rider that:

"the transaction will be earnings positive for the Scott group."

means that management have decided that they don't need to tell us. I would turn that around.

Even given I know nothing about 'Rocklabs' I'm picking that the previous owner Devereux is making good profits now and will not be selling out cheaply. If buying into Rocklabs is 'earnings positive' from day one, that must mean that the current profitability on the rest of the SCT business, production line design build and installing and the meat processing robots, is minimal! Oh dear, it is hard to see the SCT share price reacting positively to this announcement.

SNOOPY

discl: hold SCT

Snoopy
26-05-2008, 01:27 PM
SCT are about to move into their new larger premises in Dunedin...

Are you based in Dunedin Steve? If so how much do you reckon the old site is worth?

SNOOPY

Lizard
26-05-2008, 02:53 PM
I would have thought it was pretty good news. From what I know, Rocklabs is fairly similar business to ASX:ESS - a company which has performed rather well in recent years.

I think this will create some interest in SCT - though whether the transaction was at a fair price or can be integrated successfully with SCT current business is difficult to tell.

Steve
26-05-2008, 05:57 PM
Are you based in Dunedin Steve? If so how much do you reckon the old site is worth?

SNOOPY

Unfortunately, SCT rent the premises from a company associated with Graeme Marsh who was involved with SCT for years.

I believe that the new premises will also be rented from interests of graeme as well, so Graeme will most likely end up being the major winner here...

Snoopy
28-06-2008, 10:19 AM
I'm disappointed we do not know how much cash or how many shares are going to be issued to acquire Rocklabs. Perhaps adding the rider that:

"the transaction will be earnings positive for the Scott group."

means that management have decided that they don't need to tell us. I would turn that around.

Even given I know nothing about 'Rocklabs' I'm picking that the previous owner Devereux is making good profits now and will not be selling out cheaply. If buying into Rocklabs is 'earnings positive' from day one, that must mean that the current profitability on the rest of the SCT business, production line design build and installing and the meat processing robots, is minimal! Oh dear, it is hard to see the SCT share price reacting positively to this announcement.


Well no ultimate positive reaction as I anticipated. In fact someone dumped 10,000 SCT shares late on Friday sending the share price down to a new low of $1.12. Perhaps the following announcement had something to do with it:

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

The Directors of Scott Technology Limited advise that the company is to reduce staff numbers by approximately twenty across its Dunedin and Christchurch sites. Three quarters of these redundancies are voluntary.

Management undertook a lengthy consultative process involving staff and the EPMU. Management considered the current and anticipated trends in each of its revenue streams and has been able to focus redundancies on under-performing and non-core parts of the business. The level of voluntary redundancies has greatly assisted this process.

Following the completion of this process, Scott Technology Limited's staff numbers will be approximately 60 in Dunedin, 70 in Christchurch and 35 at newly acquired subsidiary, Rocklabs, in Auckland; a total of approximately 165 staff.

Scott Technology Limited is experiencing a change in its business model, with less demand for the traditional machining and fabrication parts of the business and greater demand for our innovation, design and robotics skills.

Lower worldwide demand for appliances has resulted in appliance manufacturers reducing or cancelling capital expenditure on new production lines. This has impacted on our Christchurch based appliances division over the last nine months. While we are faced with reducing staff numbers now, we are also continuing to pursue new opportunities for our appliances division, particularly in China and Europe, albeit with long lead and build times.

However, opportunities for our automation and robotics division continue to be plentiful and underlie the increasing demand for our innovation, design and robotics skills. We have recently won a contract to build a robotic welding cell for a New Zealand based equipment manufacturer and are undertaking the development of new automated processes for the dairy industry.

Significant progress also continues to be made with the automated boning room systems for the meat industry and we anticipate being able to announce further sales in the near future.

With the continuing growth of the mining industry, newly acquired Rocklabs is showing excellent results. Our automation division is currently working on a major laboratory analysis system which will add a robotic interface to one of Rocklabs' existing systems. We see these jointly developed automation systems as being a significant contributor to the Scott Group in the future.

Many of these automation and robotics systems are heavily biased towards "front end" design, rather than final manufacture which has driven the need to reduce staff numbers.

Despite the need to reduce staff numbers, the Directors and management remain very confident of Scott Technology Limited's future prospects.

Yours faithfully

Chris Hopkins
Managing Director
End CA:00166695 For:SCT Type:GENERAL Time:2008-06-27:16:05:50

-----------

The problems that SCT face are mirrored by every other exporter, not tied to the dairy industry. In fairness SCT look like they are adapting better than most, even though these adaptations will take time to flow through to the bottom line.

The breakdown in staff numbers:

60 in Dunedin (Robotics),
70 in Christchurch (Appliance Production Lines) and
35 at Rocklabs (Mining Industry), in Auckland

is very interesting and not something I have seen disclosed before. It seems unfortunate that SCT are moving to a bigger and brighter premesis in Dunedin just as the downturn bites. I hope thay haven't lost key personnel in the workforce downsizing! The offer of voluntary redundancy seems to have been made across the two south island sites rather than targeting the appliance division where the main downturn in work is perceived. Mind you we don't know the 'before redundancy' workforce breakdown. So perhaps my interpretation of what SCT wants to achieve has the wrong spin.

Still no announcement on the final 'cash and shares terms' associated with the Rocklabs acquisition. Until that comes out, plus some indication of the new cost structure associated with the move to the new Dunedin base, valuing the new combined group will be difficult.

SNOOPY

discl: hold SCT

Snoopy
13-08-2008, 12:50 PM
Significant news from SCT today. They are to become suppliers to the mining industry!

26/05/2008
TAKEOVER

REL: 1328 HRS Scott Technology Limited

TAKEOVER: SCT: ACQUISITION OF ROCKLABS

<snip>
The consideration for the purchase will be a mixture of cash and shares in Scott Technology and the transaction will be earnings positive for the Scott Group.
<snip>
---------

I'm disappointed we do not know how much cash or how many shares are going to be issued to acquire Rocklabs.



More details of the payment to Rocklabs has come out. 3,313,452 shares have been issued at a price of $1.2072. I calculate that 'payment' to be worth.

3,313,452 x $1.2072 = $4m

Some of those shares are temporarily in escrow pending the profit performance of the new acquisition. That is all the information we know for sure. But I'm prepared to guess some more details. Say half of those shares will only be released upon profits reaching a certain level. That means $2m worth of shares now and $2m worth shares later. Possibly the cash part of the deal matched the initial shares issued, let's say $2m. That makes a nice ultimate retirement nest egg for Rocklab's founder, Devereaux. A $2m cash payment is quite manageable by SCT,without moving them too far from their previous 'debt free' position.

Annual earnings of some 0.08 x $2m = $160,000 would be needed to cover a $2m debt and we can assume that Rocklabs as a stand alone business unit is capable of banking that much right now.

A USD:NZD exchange rate of under 70c is encouraging for all exporters. Although I note previous chairman Marsh was complaining bitterly at the end of 2006 when the exchange rate was a low as 64c! Can SCT make any decent money at these exchange rates?

For the newly acquired Rocklabs division the answer is yes. They are doing it now and the weakening of the NZD:AUD exchange rate will do that division no harm. For the appliance production line division productivity improvements have been made. But I predict that division will remain subdued in profitability until housing markets worldwide and the associted boost in new whiteware that goes into a new house look to improve. Nevertheless SCT should be one of the first companies to feel any upturn because of the long lead time between building a production line and the appliances it makes hitting the showroom.

The meat industry joint venture with PPCS has been thrown a curved ball with Craig Norgate entering the industry via the proposed PPCS merger with PGG Wrightson. Ultimately I expect this to work out positively for SCT, and again the recent NZD:AUD exchange rate drop will help. Australia is targeted as a big potential market for meat industry robotics.

All this has given me the confidence to continue accumulating SCT shares, at the right price. My holding is now twice what it was only a year ago! But it is a painfully slow process. My latest order for only a very few thousand shares took a week to fill, and was only finished today!

I was looking for more diversification in my 'nz exporter' portfolio. With the addition of Rocklabs, SCT now provides that diversification across three quite different industry fronts.
The low liquidity means SCT is very hard to accumulate. So waiting for the share price to turn is not really an investment option. The SCT share price was forced down by the effective liquidation of substantial shareholder 'Walker Capital Management'. Management have been in there buying at prices between $1.10 and $1.20. Term debt is zero to minimal, so the company will not be put under pressure in any worsening credit crunch. For me all the ducks are lining up. Don't let anyone say I didn't tell you so.

SNOOPY

discl: hold SCT. Will buy still more SCT if the share price weakens any further!

duncan macgregor
14-08-2008, 09:01 AM
[QUOTE=Snoopy

This thread starts with 'out to lunch' suggesting SCT was a 'screaming buy' at somewhere near $3 on 30/04/2004. Yet now the share price has retreated to a '$1.82 buy and $1.85 sell' spread, this same share barely gets a mention on this forum. For those who like the FA statistics $1.82 today represents an historic PE of 15. That is greater than the 12.5 PE when SCT was regarded as a 'screaming buy' at $3 two and a half years ago. Consequently I don't think SCT is a 'screaming buy' at close to $2. I am buying more for portfolio rebalancing purposes. But if you believe that exporting from NZ has any future then I think SCT is worth accumulating at around this $2 level.
Kilpatrick selling out of 170,000 odd shares during 2007 has worked well for me because I have been buying SCT shares in trickles all year - boosting my own holding in this company by something like 80% in the process. My average purchase price of these 'new' shares was $2.07. That doesn't look very clever if you consider the current buy price is $1.82. But that is assuming that I could have bought the number of shares I did buy at 'todays price' of $1.82. And that would not have been possible. It also ignores the dividends that I have accumulated during the year, which makes my 'theoretical loss' (it was a 'theoretical profit' two weeks ago) much less painful. I know that I couldn't have bought my shares at $1.82 because it has taken over a month for me to buy my 'November tranche', a very modest number of shares on market at a price around $2.

So when do I expect my profit margin on my latest SCT acquisition to rise into the black again? I have no idea. But I am prepared to wait. And if the market weakens further I am prepared to buy more shares in the interim. I don't know if buying SCT shares at $2ish today will look clever in two and one half years time or not. But I think it is more likely to look clever than buying SCT at $3 looks now, viewed with two and one half years of hindsight.

SNOOPY

discl: hold SCT[/QUOTE] A good lesson to be learned here about the worth of fundamental analysis without having any sell strategy when it all turns to custard. Needless to say most TA investors are sitting the market out watching the slaughter. Plenty of opportunity to average down in this market SNOOPY. Macdunk

Snoopy
14-08-2008, 01:04 PM
A good lesson to be learned here about the worth of fundamental analysis without having any sell strategy when it all turns to custard. Needless to say most TA investors are sitting the market out watching the slaughter. Plenty of opportunity to average down in this market SNOOPY. Macdunk

Macdunk, traders would not have been in this share at all, because it is not liquid enough to allow them to 'get out' easily. Of course investors main objective is to 'invest' and pick up future dividend streams along the way. Not to withdraw from the market and sit on the sidelines sniping. So such liquidity concerns do not worry 'the investor'.

My latest purchase means my average entry price to SCT is now $1.60. That may not look so clever to you when the current market price is $1.18. However your implied assumption that $1.18 is the price for the number of shares that *I* want and indeed own is wrong. I could buy the number of shares I have now on the market today. But only by paying up to $1.40 per share (just checked the SCT market depth with my broker). The point you do not appreciate Macdunk is that the share price is set by supply and demand. That means if the demand suddenly increases (like if I wanted to buy my entire shareholding today), then the share price is no longer the quoted market buy price of $1.18!

A loss of $1.60 to $1.40 (let's leave dividends out of it this time as I know you are a well known 'dividend denier') or a 12.5% loss is not great news. But neither is it a 'slaughter'.
A 'slaughter' might better be akin to a PEM shareholder where 90% of their investment has disappeared over the past two years.

My 'sell strategy' Macdunk, is to sell when a share becomes overvalued above and beyond normal market fluctuations. In my judgement, without the benefit of hindsight, that hasn't happened yet with SCT.

SNOOPY

Dr_Who
14-08-2008, 01:54 PM
Hey Snoopy. Is there a restricted period the owner cannot sell the 3.3 million shares issued at $1.20?

Interesting little company. I am gonna do more reading into it.

Snoopy
08-09-2008, 05:55 PM
Hey Snoopy. Is there a restricted period the owner cannot sell the 3.3 million shares issued at $1.20?


We are told that not all of the shares will be issued to Devreaux until after a 'performance hurdle' has been satisfied. We aren't told when the hurdles have to be jumped. But given that Rocklabs is now a subsidiary of Scott Technology and the Scott Technology balance date is 31st August....

I would guess some shares will be restricted until this years results are totted up, maybe more released next year and perhaps still more the year after.

All this might be moot though if you are trying to 'time' your entry point into SCT.

The news today that the old PPCS (now Silver Fern) and PGW have agreed to a new joint venture is sensational news for SCT. I didn't see the SCT share price move much today. Perhaps the market hasn't figured out the implication yet? So I will spell it out.

SCT is Silver Fern's partner in the meat robotics project. The merger PGW/Siler Fern joint venture will accelerate the investment in robotics in those Silver Fern plants (we are talking tens of millions of dollars here) and SCT is the world leading designer and manufacturer of those meat industry robots!

I have been strategically accumulating SCT over the last few months in anticipation of the moment when the robotics technology would take off. The need has always been there, but only now is there the money in the customers pocket to spend up big. Perhaps the SCT robotics division is about to move into the limelight it deserves? Good luck to anyone who wants to accumulate a position in SCT tomorrow. But SCT has been firming in price for several weeks now, so I don't like your chances.

SNOOPY

discl: hold SCT, and have strategically doubled my holdings over the last twelve months.

Sideshow Bob
08-09-2008, 10:12 PM
Think it was a couple of weeks ago it was announced that Alliance had bought one of the robots. The downside with it at present is the huge decrease in lamb numbers in NZ due to dairy expansion.

Snoopy
09-09-2008, 08:49 AM
Think it was a couple of weeks ago it was announced that Alliance had bought one of the robots. The downside with it at present is the huge decrease in lamb numbers in NZ due to dairy expansion.

AFAIK, the 'Robotic Technologies Ltd.' robots (SCT and Silver Fern are 50/50 partners in this company) have only installed meat processing robotics at one Silver Fern site, the old PPCS Silverstream plant.

While the reduction in lamb numbers is a threat to the meat processing industry in the sense it will force more restructuring on the industry, this is no threat to Scott Technology expanding the production of their robotics. I guess the aim will be to equip all of the old PPCS meat processing plants with robotics, which is a huge opportunity for SCT.

The downside to SCT would be that the meat industry players become financially weak that they cannot afford to invest in high tech. The PGW/Silver Fern agreement has 'fixed' this problem in the Silver Fern corner of the industry at least.

SNOOPY

discl: hold SCT, PGW

Sideshow Bob
09-09-2008, 06:30 PM
More robots....I wonder if they get them half price?

http://www.odt.co.nz/news/business/21022/6-million-finegand-upgrade-firm-looks-expansion


$6 million Finegand upgrade as firm looks at expansion
By Glenn Conway
Created 05/09/2008 - 05:00

Click photo to enlarge
[1]
Silver Ferns Farms Finegand plant manager Graeme Stanbury in the old chilling room, which will be expanded over the coming weeks. Photo by Glenn Conway. A multimillion-dollar fit-out during the off-season at Silver Ferns Farms' Finegand plant should lay to rest any doubts about the long-term future of Clutha's largest employer, manager Graeme Stanbury said.
Following a $20 million upgrade which included a new effluent treatment plant and boiler system, the plant, near Balclutha, is now undergoing a $6 million upgrade of its lamb cutting and beef boning departments.

Another $5 million will be spent on annual site maintenance.

The plant last season recorded a record beef kill of 61,286, surpassing the previous best kill of 60,996 in 2003, and up 11,663 on the 2007 figure.

The plant also processed more than 100,000 extra stock compared with the previous season.

Mr Stanbury said there was no doubt Silver Fern Farms was positioning Finegand to be a key player long into the future.

The investment showed the plant was thriving and was here to stay. At its peak, it employed more than 900 staff.

Alterations had started in the lamb cuts department, increasing the flow of products and creating extra chilling capacity.

After trials at its Silverstream plant, boning robotics technology would be introduced into this area in the coming season.

Developed by Dunedin-based Scott Technology, the system broke down carcasses, making precise cuts.

Two machines would be installed, but the rest of that process would still be carried out manually.

The company was deliberately increasing its chilled lamb cutting and fresh lamb kills as it gradually moved towards extending the killing season, Mr Stanbury said.

"We definitely want to lengthen the season . . . that means more production but also more work for our staff."

In time, it would look into processing the 100,000 bobby calves predicted to be available locally.

This could add up to an extra six weeks to the season.

New machinery, more space and better facilities in the beef boning room were also planned, with a new carton storage facility, extra carcass conveyers and larger staff amenities.

Mr Stanbury said these projects were the first two stages of a three-stage development.

Next season, more improvements to the boning room were likely as the company looked at improved product identification services, which would help make it easier to market the company's product abroad.

Customers wanted to know more about where their meat came from, Mr Stanbury said.

The new beef processing facilities should be ready for an October 28 start to the killing season, while the first sheep and lamb chain kills should be in mid-November.

Snoopy
09-09-2008, 08:37 PM
More robots....I wonder if they get them half price?

---------

$6 million Finegand upgrade as firm looks at expansion
By Glenn Conway
Created 05/09/2008 - 05:00

<snip>

the plant, near Balclutha, is now undergoing a $6 million upgrade of its lamb cutting and beef boning departments.

<snip>

Alterations had started in the lamb cuts department, increasing the flow of products and creating extra chilling capacity.

After trials at its Silverstream plant, boning robotics technology would be introduced into this area in the coming season.

Developed by Dunedin-based Scott Technology, the system broke down carcasses, making precise cuts.

Two machines would be installed, but the rest of that process would still be carried out manually.

------



Yes Silver Fern will get half the profits, because they are 50% shareholders with SCT in the 'Robotic Technologies Ltd.' company that sells the robots. That doesn't equate to Silver Fern getting the robots at half price though.

SNOOPY

Sideshow Bob
09-09-2008, 08:45 PM
It was tongue in cheek........

Hopefully there will be profits to half!!

Sideshow Bob
09-09-2008, 08:48 PM
Looks like their new premises down Kaikorai Valley are nearly ready - well I think it is their premises? Irony is next to the old Burnside Freezing Works.....

Snoopy
18-11-2008, 02:19 PM
Have just been digesting the FY2008 Annual Report that arrived in my mailbox today.

It was good to see SCT move back into profit (albeit modestly) for the last six months of the year. Also we at last got full disclosure of the 'Rocklabs' acquisition. There is a big picture of Rocklabs founder and General Manager, Ian Devereux, on page 7 looking very happy. Devereaux has every reason to look this happy, with his bank account boosted to the tune of $6m in cash! (page 36). This is rather more than I had guessed as a 'top up' in addition to the previously disclosed payment of $4m in SCT shares. Still with that much cash in his bank account, Ian won't be needing to offload any of his newly issued SCT shares in a hurry.

How did SCT pay for all of this? For the first time they have term bank debt on the SCT balance sheet, to the tune of $4.74m +$0.494m = $5.234m. At an interest rate of 9.81% (p41) that means interest payments due of $0.513m to the ANZ bank for FY2009.

We learn from p39 that Rocklabs Limited's banking facilities require EBIT to exceed interest expense by 1.5 times and further require Rocklabs's equity (including shareholder advances) not to fall below 40% of its total assets. If we require that same EBIT test to Scott Technology as a whole, that means SCT EBIT for FY2009 will be at least $770,000. That equates to a net SCT group profit, assuming a 30% tax rate, of $180,000. If SCT did 'achieve' that result in FY2009 it would be their second worst year on record (the worst being FY2008). So the debt position of SCT, while now a consideration, appears sound.

Other things we learned from the report is that once again we expect no net cash from the robotics division (page 6). All earnings are to be ploughed straight back into product development. On a separate note, it was very disappointing to see the Silver Fern/PGW joint venture pulled. A side effect will be a slowdown in the meat works robot roll out program. I suspect the SCT share price has suffered in recent weeks as a result of the Silver Fern/PGW deal collapsing.

Of particular interest in the small print was a note on page 30 , announcing the emergence of Scott Euro Limited, a joint venture with "Industrial Process Solution" of Italy. Could these be the same Italians who were in past years Scott's deadly competitors? If so it would be a major coup to have them 'on board' in Europe.

On page 4 of the Annual report CEO Hopkins states:

"Recent significant orders have enabled the company to see past the global gloom and to position ourselves for future development and growth. In addition we are also in final negotiations with several key customers in relation to potential new projects."

I sure hope Hopkins is right, and with the market the way it is I can afford to wait before I buy more shares to see if he is. In the meantime I would like to draw shareholders attention to item 4 on the upcoming AGM agenda, billed as the retrospective approval of the issue of shares for the Rocklabs acquisition. In fact it is nothing of the kind. It is actually an OK to issue more shares for as yet unnamed potential acquisitions. For this reason I will be voting AGAINST this motion even though I approve of the Rocklabs acquisition.

If motion 4 is lost this will not mean SCT cannot make further acquisitions. It means any such acquisitions will have to be approved by shareholders - a very good thing I think. Giving the board a free reign to issue up to 5 million new shares at today's discounted share price *without* shareholder approval does not seem to be in the interests of existing shareholders. For this reason I hope as many shareholders as possible will join me in voting AGAINST this motion.

SNOOPY

discl: hold SCT

Snoopy
20-11-2008, 09:00 PM
NBR runs a weekly column where they invite leading exporters to write a piece. In the November 14th edition that leading exporter was Chris Hopkins, MD of Scott Technology.

Chris goes through a very interesting description of how they manage quoting for jobs and getting paid by their overseas customers. It pays to read the column, but briefly....

SCT used to be in the powerful position of being able to demand partial payments by cash on delivery of their production line manufacturing systems. This has become harder with the credit crisis as even established companies are having their credit lines reviewed by their banks. To get closer to their customers SCT have always quoted jobs in local currency.

Hopkins uses an NZ government guarantee scheme for exporters to lock in certainty of payment as soon as a firm order is received. This enables SCT to hedge the expected overseas payments from 'project start to overseas site installation', thus providing certainty of NZD cashflow to their NZ manufacturing workshops.

Chris explains it much better than I just have. But as a shareholder the article gave me a lot of confidence that SCT are unlikely to be caught out by a big job (and all of their jobs are big) going bad as a result of an overseas banker pulling the plug on a project.

SNOOPY

Snoopy
24-11-2008, 01:59 PM
But as a shareholder the article gave me a lot of confidence that SCT are unlikely to be caught out by a big job (and all of their jobs are big) going bad as a result of an overseas banker pulling the plug on a project.


Scott Technology made press release on October 7th. The following comments are the closing comments of that news release.

----------

A small profit after a significant loss for the first half of the year and after absorbing the cost of a number of one-offs such as redundancies which were forced on the Company by the global market conditions

Surviving the highest New Zealand dollar/United States dollar exchange rate in over 25 years

Acquisition of the Rocklabs business, with the addition of a very manageable $5 million debt on the balance sheet

The first commercial orders for automated boning room systems for the meat industry through associate company, Robotic Technologies Limited

Continuing expenditure on research and development in several aspects of the business - a key investment in the future

Near completion of the new Kaikorai Valley Road, Dunedin manufacturing facility, with design and administration staff having moved in shortly after balance date and the workshop operations to follow in late October

Maintaining a strong balance sheet and good cash flows

A good forward work position

Prospects in all markets improving

----------

Since those comments the NZD/USD exchange rate has come back substantially. I am not blind to the problems facing this company. The principal risk is the loss of key personnel during the downturn, leaving SCT scrambling for human capital as fortunes improve. However, this risk appears minimal with SCT quoting a 'good forward work position'. SCT may not be making much money on current jobs, although this will surely change as new orders come in at much lower exchange rates.

Have SCT moved to their new expanded premises just at the wrong time in the business cycle? Perhaps the timing could have been better. But long term SCT do need the space to expand and they now have this. Furthermore this kind of move is something that takes years of planning and it cannot be influenced by monthly market conditions.

Debt issues? Not really. The company debt facilities have only just been negotiated and the level of profitability required to service the new debt is minimal. Problems getting paid if a big customer goes bust? That is covered by the NZ governments letter of credit guarantees.

Timing wrong to get into the company? As a production line supplier work at SCT should trend upwards *before* any revival in consumer demand. IOW, SCT should take off first ahead of the recovering market.

Yet the share price is at an all time low! I know there are many other companies in this market that have been 'beaten down'. But really, how much lower can this company go? I put a silly bid into the market last week, not really thinking that I pick up any shares and it was filled at 91c. Thanks very much Mr Market! I think you are wrong, and it is time to take advantage of you.

SNOOPY

discl: hold SCT, and accumulating (having now doubled my holding over the last year).

Snoopy
03-02-2009, 12:54 PM
----------

Maintaining a strong balance sheet and good cash flows

A good forward work position

Prospects in all markets improving

----------

Since those comments the NZD/USD exchange rate has come back substantially. I am not blind to the problems facing this company. The principal risk is the loss of key personnel during the downturn, leaving SCT scrambling for human capital as fortunes improve. However, this risk appears minimal with SCT quoting a 'good forward work position'. SCT may not be making much money on current jobs, although this will surely change as new orders come in at much lower exchange rates.

Debt issues? Not really. The company debt facilities have only just been negotiated and the level of profitability required to service the new debt is minimal. Problems getting paid if a big customer goes bust? That is covered by the NZ governments letter of credit guarantees.

Yet the share price is at an all time low! I know there are many other companies in this market that have been 'beaten down'. But really, how much lower can this company go? I put a silly bid into the market last week, not really thinking that I pick up any shares and it was filled at 91c.


Just finished buying yet another tranche of SCT shares. That makes me sound like a big boy doesn't it? In fact the parcel of shares that I bought was the smallest I could without incurring excess brokerage charges.

I have stated before that I usually take about a month to make any share transaction. In this case it took me two days to make up my mind that I wanted more SCT shares and 30 days for my order in the market to be executed. When I first put in my order at 85c, I was within a couple of days overtrumped at 86c, then again at 87c. From that time the share price moved up to 90c, took an almighty leap up to $1 (on a 'massive' volume of something like 1500 shares) before the share price gradually dripped back to 95c, 90c, 87c until finally my order was filled yesterday. This is the kind of stress you need to go through to purchase even a minimal number of shares in this company. Today the share price has slammed through my self created 'support' level (which had been in the market for a month, and was taken out when I finally bought) and someone today picked up 10000 shares at 75c. Good for them.

So what does all this mean? I would argue absolutely nothing. Even this high (for SCT) volume of shares traded today is only one three thousandths of the total shares on issue. I guess everyone has their own reasons for selling. But it is hard to fathom why someone who I suppose is a seasoned investor (only 317 people hold 10,000 or more SCT shares) would choose *now* to sell at 75c, just as the directors were buying back in at 90c. One reason could be that the world recession looks to be getting deeper and longer. That means the time for SCT to be getting back to a normal level of orders is being pushed out. The longer the recovery takes the longer SCT shareholders will need to hang on for their reward. But with the exchange rate going even more in exporters favour, when the recovery does come we can expect the share price bounce back to be big. Even now I regard my position in SCT as 'underweight'. So I will certainly be in the market for some more SCT shares in the future. In the meantime I will just let the share price bonce up and down a bit and move onto other things.

SNOOPY

discl: hold SCT

Snoopy
19-03-2009, 10:01 PM
Just finished buying yet another tranche of SCT shares. That makes me sound like a big boy doesn't it? In fact the parcel of shares that I bought was the smallest I could without incurring excess brokerage charges.

I have stated before that I usually take about a month to make any share transaction. In this case it took me two days to make up my mind that I wanted more SCT shares and 30 days for my order in the market to be executed.

I will certainly be in the market for some more SCT shares in the future. In the meantime I will just let the share price bonce up and down a bit and move onto other things.

SNOOPY

discl: hold SCT


Déjà vu.

I see that I am back buying more SCT shares today. I have been supporting the share price for the last month. Someone overtrumped me in the bid price, so I hadn't actually bought any shares until last week. The balance of my order at 71c has taken until today to fill.

We are now only two weeks away from the half year profit announcement. No doubt the problems that Fisher and Paykel Appliances still seem to face means that anything connected with the whiteware industry is off the radar for New Zealand investors. Of course SCT have absolutely no debt issues, other than some shareholders thinking they carry too little debt. Also SCT are production line suppliers, which makes them very different to whiteware manufacturers.

The actual numbers in the half year result will be irrelevant. Of much more interest will be the outlook and whether SCT has a sufficient pipeline of work to keep that workforce idling along. If they do, then I will be lining up to buy more SCT shares. Unfortunately that means I will also be competing with the management who up until the results are released are prevented from buying as insiders. Nevertheless if that means I will have to pay more for my shares that purchase will came safe in the knowledge that the shares short term are worth more.

Long term I think SCT shares are worth much much more. But shareholders will need to ride out the industrial appliance cycle to crystallize that value. In the meantime from the value investor standpoint, I would quite like the SCT share price to go lower. Will I get my wish?

SNOOPY

discl: hold SCT

Snoopy
06-04-2009, 01:14 PM
We are now only two weeks away from the half year profit announcement.

The actual numbers in the half year result will be irrelevant. Of much more interest will be the outlook and whether SCT has a sufficient pipeline of work to keep that workforce idling along.

Long term I think SCT shares are worth much much more. But shareholders will need to ride out the industrial appliance cycle to crystallize that value. In the meantime from the value investor standpoint, I would quite like the SCT share price to go lower. Will I get my wish?


The half year result is out and it is poor as expected. The 'as expected' bit accounts for the share price going up slightly now the result information is in the public realm. So I didn't get my wish of a further (short term) share price decline :-( .

Part of the 'excuse' for the $0.5m half year loss is that the period includes significant costs and disruption due to the relocation of the Dunedin facilities. 'Other' expenses are up $1.1m over the corresponding period a year ago. Of course there is no way to know if all of that 'other' expenses increase is due to the move. But IMO it is a fair assumption that in an ongoing operational sense, SCT are not losing money.

The assistance of Scott Euro in winning a major project in Europe means that I would be surprised if SCT are looking at laying people off. That is the best news that shareholders could have hoped for in the current economic climate. I intend to keep hold of all of my shares as a result.

SNOOPY

tobo
07-04-2009, 06:30 AM
I was holding (LT) til Nov last year (I had to sell for personal reasons, ie I was a reluctant seller).
I particularly like the meat industry blue sky.
Not sure about the mining side given current economic conditions.
I am approaching a position when I can consider repurchase, so will have to study that report.

Looking at chart (weak signals because of thin volumes) does show some buy signal last week at 70-71, so well done Snoopy, And struck 20day MA then.
50 day MA is not yet struck, but approaching. OBV is kind of flat...
but TA is all a bit vague at these low volumes. SP rather too sensitive to whims of one individual (buyer or seller)

ToBo

tobo
07-04-2009, 06:35 AM
here's the chart I was looking at

Snoopy
07-04-2009, 12:36 PM
I particularly like the meat industry blue sky.
Not sure about the mining side given current economic conditions.


The main market for the mining technology side of the business is in the gold sector. Apparently that does relatively well in times of recession.

It is hard to judge the progress of the meat industry robots because they are lumped together in the same division as the automated production lines. But I think that realistically it will still be the direction of the automated appliance production line work that will drive the business model of SCT over the next few years.



Looking at chart (weak signals because of thin volumes) does show some buy signal last week at 70-71, so well done Snoopy, And struck 20day MA then. 50 day MA is not yet struck, but approaching. OBV is kind of flat...
But TA is all a bit vague at these low volumes. SP rather too sensitive to whims of one individual (buyer or seller)


That last pagagraph is so true Tobo. There is another 'SCT chart thread' where the T/A of SCT is discussed. Personally I don't think TA is useful with a share that trades as thinly as this. My last SCT share purchase at 71c was very painful. It took ten days and that was a relatively small order to fill. If you had been after those same shares at the same time at the same price Tobo, I may not have had my order filled at all. Yes, I was happy with my purchase price that fortnight.

The problem is over the last year I have also bought SCT shares at $1.20, $1.18, 91c and 85c. And due to previous purchases in other years my average SCT purchase price is now $1.38. So I feel a bit like the guy who won the lottery by purchasing all the tickets. If you keep buying sooner or later you will 'look good', provided your memory is selective.

Nevertheless I am not in SCT for the quick buck. I know that SCT is financially a very strong company and will be able to ride out this current business downturn. So for me it is just a matter of waiting, rather like it is for management I would guess. Still, given any sort of upturn I think even $1.38 will prove to be a cheap entry point for me. IOW I am not at all concerned about my SCT position.

I think you need to consider what some of these market indicators actually mean in real life Tobo. For example, the share price crossing above the 20 day moving average simply means that today's share price is higher than the average paid by everyone else over the last three weeks. 20 days doesn't even cover the time between board meetings. With even the shortest of SCT projects taking something like two years between when an order is received, I would argue the 20 day MA is meaningless. In fact I would go so far as to say it is probably a dangerous indicator because the fact that it even exists gives it credibility that it doesn't deserve. My guess is that in the case of SCT the 20 day MA can only give false signals to traders.

Perhaps the 50 day MA is more useful in this case. At least that indicator covers the gap between board meetings. But IMO a 120day MA would be much better. The problem is though such a 120MA signal would probably fire off buy and sell signals at a rate that is too low to profit from. That leads to my overall conclusion. You are probbaly best off not using any MA - or Trend Analysis in its entirety for that matter - at all when evaluating SCT.

SNOOPY

Phaedrus
07-04-2009, 04:21 PM
With even the shortest of SCT projects taking something like two years between when an order is received, I would argue the 20 day MA is meaningless. My guess is that in the case of SCT the 20 day MA can only give false signals to traders. Good guess Snoopy. Anyone using such a super-fast moving average on SCT over the last 12 years would have had 142 trades signalled comprising 30 wins and 112 losses. An initial investment of $10,000, compounded, would be down to just $258!


IMO a 120day MA would be much better. Right again, Snoopy - a 120 day ma IS much better. Over 12 years it would have triggered 66 trades comprising 6 wins and 60 losses. An initial investment of $10,000, compounded, would be down to $1285. Still lousy performance though eh?


The problem is that such a 120MA signal would probably fire off buy and sell signals at a rate that is too low to profit from. Not so - in fact the problem is quite the reverse. A 120ma is firing off way too many signals - and what's worse, the vast majority are losing trades.


That leads to my overall conclusion. You are probably best off not using any MA - or Trend Analysis in its entirety for that matter - at all when evaluating SCT. You are quite wrong there, Snoopy - and you were doing so well up until you said that!

Stand back and take a dispassionate look at SCT. Anyone "investing" $10,000 in SCT 12 years ago would be down to just 40% of their initial capital. In 12 years, SCT has had just 2 "longterm" uptrends. The first lasted 2 years and the second lasted 3 years. Moving average or indeed any trend analysis pays off handsomely with stocks like this, where, while they have gone absolutely nowhere but down in the long term, still have clearly defined longterm uptrends that last for years at a time. Ideally, you therefore want just 2 trades (totaling 5 years) out of the last 12 years. You need to use a very slow moving average and indicators with long time periods. Now, these are trend indicators and you must understand that when trend indicators are applied to stocks that are NOT trending, they generate a string of useless, meaningless and conflicting signals. In 12 years, SCT has had 2 such periods and the trading ranges they encompass are ringed with dotted blue circles. Any signals generated from trend indicators while SCT was in a trading range should be ignored. There are 4 indicators featured on this chart - A long-term moving average, trendlines and 2 oscillators. As you can see, these very different indicators all trigger Buy or Sell signals reasonably close to each other. A $10,000 initial investment would have compounded into $28,000 over 5 years. Knocks the socks off buying and holding doesn't it!

Snoopy, it should be easy for you to see why I think your statement "You are probably best off not using any MA or Trend Analysis when evaluating SCT". is totally, completely and utterly wrong.

http://h1.ripway.com/78963/SCT47.gif

tobo
08-04-2009, 06:45 AM
Thanks Phaedrus.
More wisdom. More learning.

(Snoopy, I wasn't actually saying 20day MA meant anything - just tried a few to see how many days MA would show as crossing sp. But I see that I should have interogated to relevance before considering worth a mention.)

So it seems we are not even near a buy signal.

Snoopy
08-04-2009, 10:46 PM
A 120ma is firing off way too many signals - and what's worse, the vast majority are losing trades.

Stand back and take a dispassionate look at SCT. Anyone "investing" $10,000 in SCT 12 years ago would be down to just 40% of their initial capital. In 12 years, SCT has had just 2 "longterm" uptrends. The first lasted 2 years and the second lasted 3 years. Moving average or indeed any trend analysis pays off handsomely with stocks like this, where, while they have gone absolutely nowhere but down in the long term, still have clearly defined longterm uptrends that last for years at a time. Ideally, you therefore want just 2 trades (totaling 5 years) out of the last 12 years. You need to use a very slow moving average and indicators with long time periods. Now, these are trend indicators and you must understand that when trend indicators are applied to stocks that are NOT trending, they generate a string of useless, meaningless and conflicting signals. In 12 years, SCT has had 2 such periods and the trading ranges they encompass are ringed with dotted blue circles. Any signals generated from trend indicators while SCT was in a trading range should be ignored. There are 4 indicators featured on this chart - A long-term moving average, trendlines and 2 oscillators. As you can see, these very different indicators all trigger Buy or Sell signals reasonably close to each other. A $10,000 initial investment would have compounded into $28,000 over 5 years. Knocks the socks off buying and holding doesn't it!

Snoopy, it should be easy for you to see why I think your statement "You are probably best off not using any MA or Trend Analysis when evaluating SCT". is totally, completely and utterly wrong.


Interesting to see that very long term 365 day Moving Average in your analysis Phaedrus, and watch how closely it mirrors the trend lines. I guess it isn't surprising when SCT prospects can take a year or so before an order is crystallized.

I took the opportunity to look back five years Phaedrus when you yourself were an SCT shareholder and taking advantage of that most recent uptrend.

http://www.sharetrader.co.nz/showthread.php?p=33565&highlight=worst#post33565

According to the 'SCT Chart' thread you were a shareholder as at 26-11-2004, even as you were making half hearted attempts to reduce your holding, having held since 2001. But you had fully sold out by 6-12-2004. I had a look at the historical data and saw that 55,400 SCT shares were traded over that period. That period covers 7 trading days which gives an average of just under 8,000 shares traded per day. Over that time it looks like the share price varied from $3.20 down to $2.90, or around 10%. Those 8,000 shares average traded per day we have to remember are not just the shares of Phaedrus, but the entire market. Let's say there were half a dozen traders trying to get out at these price levels. That means the average number of shares any one trader can expect to sell would be 1300 per day.

The purpose of the above number rumination is not to try and guess the position of Phaedrus, but to show how difficult it is for *anyone* to extract themselves from a thinly traded share like this. If your trigger exit point is $3.20, the odds are your real exit point will be 5% below that (on average) in this case. For those looking back at the chart and regretting that they 'could have sold' at $3.20, these price charts have even less relevence.
If our theoretical new seller had put a modest parcel of say 3,000 shares up for sale, that would have increased the number of shares on offer by around 40% on any given day. The laws of supply and demand will tell you that if you increase the availability of goods (shares in this case) by 40%, the market price will not stay constant. It will go down.

It is easy to draw a precision pencil thin trend line on a computer screen. Try actually trading using this line though, and you will find in reality you have a 'big thick lumpy line' to work with. That means in general you would have had to buy at a price higher than what the trend line might indicate to you, and -at the other end- sell at a price lower than what the trend line suggested you might get. This remember is talking about sales in quite a bullish market (the end of CY2004). These problems are greatly exasperated and exaggerated in the kind of market we have now.

So perhaps my comment about not using TA was a little broad brush. Perhaps I should have said, don't expect to be able to enter and exit SCT at the prices T/A says you should!
For this reason I have been ignoring TA when buying SCT and simply stocking up at prices I am happy with. Of course this method will only work if you are prepared to ride out the business cycle. But at least you don't have to guess when the upturn will happen. As long as you are 'on board', you will benefit.

SNOOPY

duncan macgregor
09-04-2009, 09:30 AM
The perfect system of buying and selling shares without making a mistake is beyond everybody. When you realize that you must make allowance to limit your mistakes to small mistakes. Stocks like SCT with limited turnover must either be avoided completely or if you have a rush of blood to the head only a limited quantity. To buy and hold with no sell strategy is a huge mistake. To take a small loss to escape a losing position is only a small mistake. When i look at charts of down trending shares and compare them to what people have said about them using whatever analysis they use then with the benefit of hindesight i know which camp i prefer to follow.
The fundamentalists seem blind to the ever changing market reality, which can turn a good investment into a dog overnight making the sell strategy more important than the buy strategy. SCT in a fire sale would have very little to sell making it a high risk investment dependent on the expertease of their skilled work force.
The buy and hold brigade have suffered huge losses in share price with the added handicap of trying to sell an illiquid stock. The market is always right it dictates the price learn to study the market your stock selections follow that. Macdunk

Phaedrus
09-04-2009, 10:29 AM
Snoopy, it took me a full month to get out of SCT. This re-emphasised for me the problems inherent in investing in illiquid stocks. Aren't you just a little bit worried about the difficulties you will face in extricating yourself from SCT when the time comes?


Interesting to see that very long term 365 day Moving Average in your analysis Phaedrus, and watch how closely it mirrors the trend lines. I guess it isn't surprising when SCT prospects can take a year or so before an order is crystallized. It's not surprising because these are both trend indicators, monitoring the same trend.


In general you would have had to buy at a price higher than what the trend line might indicate to you, and - at the other end - sell at a price lower than what the trend line suggested you might get. Right. It's called "slippage". It only becomes of any significance with very lightly traded stocks.


Perhaps I should have said, don't expect to be able to enter and exit SCT at the prices T/A says you should! More precisely, don't expect to be able to buy/sell as many SCT shares as you like at the price that was pertaining when you decided to buy or sell. This of course applies to everybody - not just TA users!


I have been ignoring TA when buying SCT and simply stocking up at prices I am happy with. Of course this method will only work if you are prepared to ride out the business cycle. But at least you don't have to guess when the upturn will happen. As long as you are 'on board', you will benefit. You might be 'on board' Snoopy, but look at the price you have paid for your ticket!

Snoopy
09-04-2009, 12:00 PM
The fundamentalists seem blind to the ever changing market reality, which can turn a good investment into a dog overnight making the sell strategy more important than the buy strategy.


Dead wrong Macdunk. Good investments do not turn into 'dogs' overnight. If that has happened to you that is a reflection on how 'good' those investments of yours really were in the first place. The market is generally right, but not always right.

Look at RBD over the last six weeks. AMP sold their investment in the company at 57c six weeks ago. Yet today those same shares are trading at 88c. In the intervening six weeks there has been no unexpected market news over that time, other than a 0.5c rise in the final dividend from 3.5c to 4.0c. That is surely insufficent to explain a 54% rise in share price. Eliminate all of the possible explanations for the rise in share price and the remaining explanation, however implausible, must be the correct one. That explanation is that 'the market was wrong' - and badly wrong. I would even get more personal about that.

It was AMP that was wrong and badly wrong. I don't imagine that those AMP fund managers boast stupidity as their greatest mental asset. So my guess is that they were forced sellers. AMP managers were needing to cash up an investment to repay a distraught public redeeming money from their poorly performing funds. The fact that these managers offloaded with hindsight, what would have been their best performing share to make these redemption payments is public testament to their skills. In certainly undoes any kudos they earned when they made a lot of money out of the run up in RBD share price a few years ago.



Stocks like SCT with limited turnover must either be avoided completely or if you have a rush of blood to the head only a limited quantity.


Only if your main aim in this game is to 'sell out'. If your main aim is to plug into the upcoming dividend stream there is no need to sell out. So liquidity is removed as an issue.



SCT in a fire sale would have very little to sell making it a high risk investment


You are right that SCT in liquidation would probably not fetch a great price Macdunk. But risk is not only measured by what would happen if a company got into trouble. You have to consider the *likelihood* of that company getting into trouble in the first place. If you had studied the financial structure of SCT, you would see that this is unlikely to happen. But of course you cannot obtain such information by studying your beloved charts, so you remain ignorant of any company debt issues. IMO, SCT would be one of the ten lowest risk companies listed the NZX.

SNOOPY

Snoopy
09-04-2009, 12:20 PM
Snoopy, it took me a full month to get out of SCT. This re-emphasised for me the problems inherent in investing in illiquid stocks. Aren't you just a little bit worried about the difficulties you will face in extricating yourself from SCT when the time comes?


I was for a while worried about my exit strategy Phaedrus. For a while I handled that worry by keeping the number of shares I held in SCT deliberately low. But I have reassessed that position, and that reassessment allowed me to double my shareholding. When the SCT share price recovers I will probably sell down my holding but not sell out. IOW I won't have to sell out what I own in a 'big block' quickly. That seems to me to be a practical way out of the liquidity trap, while still capturing most of the upside.



"slippage" only becomes of any significance with very lightly traded stocks.


...like SCT!



You might be 'on board' Snoopy, but look at the price you have paid for your ticket!


I can't claim that I am happy with my average SCT entry price Phaedrus. But I am future focussed not rear vision mirror focussed. I am fairly sure that I will be able to double my capital in SCT quickly once dividend payments are resumed. My entry price won't look too bad then.

SNOOPY

duncan macgregor
09-04-2009, 03:18 PM
[QUOTE=Snoopy;

This thread starts with 'out to lunch' suggesting SCT was a 'screaming buy' at somewhere near $3 on 30/04/2004. Yet now the share price has retreated to a '$1.82 buy and $1.85 sell' spread, this same share barely gets a mention on this forum. For those who like the FA statistics $1.82 today represents an historic PE of 15. That is greater than the 12.5 PE when SCT was regarded as a 'screaming buy' at $3 two and a half years ago. Consequently I don't think SCT is a 'screaming buy' at close to $2. I am buying more for portfolio rebalancing purposes. But if you believe that exporting from NZ has any future then I think SCT is worth accumulating at around this $2 level.
Kilpatrick selling out of 170,000 odd shares during 2007 has worked well for me because I have been buying SCT shares in trickles all year - boosting my own holding in this company by something like 80% in the process. My average purchase price of these 'new' shares was $2.07. That doesn't look very clever if you consider the current buy price is $1.82. But that is assuming that I could have bought the number of shares I did buy at 'todays price' of $1.82. And that would not have been possible. It also ignores the dividends that I have accumulated during the year, which makes my 'theoretical loss' (it was a 'theoretical profit' two weeks ago) much less painful. I know that I couldn't have bought my shares at $1.82 because it has taken over a month for me to buy my 'November tranche', a very modest number of shares on market at a price around $2.

So when do I expect my profit margin on my latest SCT acquisition to rise into the black again? I have no idea. But I am prepared to wait. And if the market weakens further I am prepared to buy more shares in the interim. I don't know if buying SCT shares at $2ish today will look clever in two and one half years time or not. But I think it is more likely to look clever than buying SCT at $3 looks now, viewed with two and one half years of hindsight.

SNOOPY

discl: hold SCT[/QUOTE] SNOOPY fundamental analysis is as usefull as tits on a bull as you keep proving. Explain where you got it wrong then tell us why you did not react to reduce your substantial losses sooner. Macdunk

Nitaa
09-04-2009, 03:37 PM
I cant believe this is coming from you Duncan. Buying on a downtrend? All this time you been giving Snoop Dog heaps by ignoring the TA. You also said you were going to stay out of the market as the recession is bringing too much uncertainty. Your breaking your rules by buying illiquid stocks. It just keeps getting worse. This is not your wife positing is it?

Duncan my dear friend. Either your telling porkies or someone has hacked your login ID.

Are you now... forget "TA" it doesnt work for me but "FA" is where its at?

Great to have you back posting but you have blown me away by your about turn.

Nita.. keeping it real as always

duncan macgregor
09-04-2009, 04:57 PM
NITA, no downturn from me my friend i have been out the market since jan 2008 and expect to remain out for some considerable period. I look at todays market with great concern. My money is in material assets which will hold its value after the next market shock which will be inflation. Hope to be proved wrong this time but 100% correct to the day last time.

Mick100
09-04-2009, 05:47 PM
macdunk , you run the risk of having your mountain of cash inflated away
What material assets are you going to buy?
I suggest you get yourself some scott tech, telecom and rest brands shares, pronto:D

have an enjoyable easter weeekend

,

Snoopy
10-04-2009, 08:07 AM
SNOOPY fundamental analysis is as usefull as tits on a bull as you keep proving. Explain where you got it wrong then tell us why you did not react to reduce your substantial losses sooner. Macdunk


Got it wrong? Did I not write....

"Consequently I don't think SCT is a 'screaming buy' at close to $2."

That statement was correct, with hindsight. After that I wrote:

"If you believe that exporting from NZ has any future then I think SCT is worth accumulating at around this $2 level."

The just released sixth month report for SCT showed they had lost a couple of big orders thanks to whole projects being cancelled as a result of the credit crunch. SCT is basically 100% export orientated as regards profits. So it follows that if all export sales are really struggling, then SCT is not worth $2. Looks like I was right again.

"So when do I expect my profit margin on my latest SCT acquisition to rise into the black again? I have no idea."

Another accurate comment.

"And if the market weakens further I am prepared to buy more shares in the interim."

....which is exactly what I did.

"I don't know if buying SCT shares at $2ish today will look clever in two and one half years time or not. But I think it is more likely to look clever than buying SCT at $3 looks now, viewed with two and one half years of hindsight."

That post was made right near the end of CY2007. What I said means that mid way through 2010 I don't think it is likely the share price will be below $1.32 (a 1/3 decline from $2, just as $2 is a 1/3 decline from $3). Whether I am right or not remains to be seen.

Macdunk, I can't see anything in that post you quoted that I would take back or apologize for. The only problem you can find is that the SCT share price has not gone relentlessly upwards since I made the original post. Since I had no intention of cashing out of this share at this time the declining share price is not a problem. It is in fact an opportunity I have taken advantage of by buying many more shares

SNOOPY

discl: hold SCT

duncan macgregor
10-04-2009, 12:40 PM
SNOOPY, You want me to tell you where you got it wrong do you.
1, Flawed buy analysis. The share price is lower today than it was ten years ago making your initial buy based on fundamentals a mistake.
2, You bought more every time the share price dropped increasing your exposure to your first mistake.
3, You had no sell policy not even a basic stop loss which has taken a great slice of your stake down the gurgler.
4, You couldnt even see the more than obvious downtrend coming when all the basic fundamental signs were screaming danger.
5,Your biggest mistake of all is being unable to admit that you were mistaken in the first place.
6, It is not only SCT or RBD or even TUA or TEL where you got it wrong its nearly your whole hand making your analysis on this site a complete danger to anyone that listens.
The market dictates the company your mistake is getting the cart in front of the horse.
Macdunk

Steve
11-04-2009, 06:17 PM
The redevelopment of SCT's old Dunedin site is progressing. Did SCT sell this site or was it just leased?

Snoopy
14-04-2009, 04:27 PM
SNOOPY, You want me to tell you where you got it wrong do you.
1, Flawed buy analysis. The share price is lower today than it was ten years ago making your initial buy based on fundamentals a mistake.
2, You bought more every time the share price dropped increasing your exposure to your first mistake.


Macdunk, you have to view my investment in SCT in relation to the part of my portfolio that is plugged in to NZs export base. The first question you need to ask is:

"Do you believe NZ has any future as a manufacturing exporting nation?"

If the answer to that question is yes, you need to look for areas where NZ is at a competitive advantage compared to the rest of the world. One area where NZers do seem to do well is in niche market engineering sectors, where they have sufficient size to be a commanding player in that market. Such a company is Scott Technology and their appliance production line production systems. Globally Scott's are the biggest player in this niche.

OK, so once you are in the exporting sector you can ride the good times (as I did). However, when you are invested in a company with so many orders that it swamps your ability to supply, you have to ask yourself:

"Would I not be better investing in a different company which has the ability to outsource manufacturing, yet retain enough of a "in house" to maintain their production rates in times of lower business activity?"

Then you should ask yourself:

"Would it not be better to invest in a different company where their main asset was actually NZ developed intellectual property, that is much harder for overseas competitors to mimic?"

Thirdly you have to ask yourself:

"The world is in a time of commodity shortages, should China's growth path resume. Perhaps I would be better off investing in a different company that is more attuned to servicing the mining industry?"

Following this you need to act on these potential changes to make sure that your overall NZ export operator strategy is 'up to date'.

Indeed over the last ten years I have modified my NZ exporter investor strategy accordingly.

In real terms this amounted to doing absolutely nothing. That is because all of the 'different companies' that I referred to above are one and the same, the evolving Scott Technology. It has not been necessary to do any buying and selling of shares because management have been changing the company for me. Macdunk, you don't seem to comprehend that the company of ten years ago and the company today are not one and the same.

Your analysis that the price of ten years ago is higher than the price quoted on the market today is flawed for two reasons.

1/ It is not possible for me to accumulate my stake at the 'market price'. There just aren't the number of SCT shares I have now on offer at any one time.
2/ The price of the share ten years ago bares little resemblance to the price I actually paid for my shares, which is substantially below that figure.

Finally you have to ask yourself is there any manufacturing exporter that has done better than SCT over the last ten years? An obvious example might be Fisher and Paykel Healthcare. But what you have to remember is that ten years ago there was only one Fisher and Paykel, and over that time Fisher and Paykel Appliances (the other half of the deal) has been a disaster.

So there is your challenge. Can you name any NZX listed manufacturer that has outperformed SCT over the last ten years, or more correctly *my* investment in SCT which has approximately halved (if you believe the market price)? If you can't find anything better than that, then you would have to conclude that galling as my return is (at the moment) I have put my 'export' money in the right place.

Of course you might argue that no New Zealand investor should ever invest in an NZX listed manufacturing export business. That is another argument entirely.



3, You had no sell policy not even a basic stop loss which has taken a great slice of your stake down the gurgler.


Not so. I was all set to sell out at $4.



4, You couldn't even see the more than obvious downtrend coming when all the basic fundamental signs were screaming danger.


You have a funny idea of danger Macdunk. I was listening and I didn't hear any 'fundamental screaming' as you put it. And neither is SCT in any significant danger now



The market dictates the company your mistake is getting the cart in front of the horse.


The market does dictate the future of any company, yes. But that 'market' is not the sharemarket.

SNOOPY

Snoopy
14-04-2009, 04:38 PM
The redevelopment of SCT's old Dunedin site is progressing. Did SCT sell this site or was it just leased?


Try your own answer to my question of May last year Steve

"Are you based in Dunedin Steve? If so how much do you reckon the old site is worth?"
(SNOOPY)

"Unfortunately, SCT rent the premises from a company associated with Graeme Marsh who was involved with SCT for years." (Steve)

There was certainly nothing in the latest half year annual report relating to any property windfall. Indeed, I think the move cost SCT some big dollars.

SNOOPY

Steve
14-04-2009, 09:10 PM
Try your own answer to my question of May last year Steve

"Are you based in Dunedin Steve? If so how much do you reckon the old site is worth?"
(SNOOPY)

"Unfortunately, SCT rent the premises from a company associated with Graeme Marsh who was involved with SCT for years." (Steve)

There was certainly nothing in the latest half year annual report relating to any property windfall. Indeed, I think the move cost SCT some big dollars.

SNOOPY

I hate it when that happens! :o It's never good when the memory starts slipping...

Snoopy
07-07-2009, 05:58 PM
Snoopy, it took me a full month to get out of SCT. This re-emphasised for me the problems inherent in investing in illiquid stocks. Aren't you just a little bit worried about the difficulties you will face in extricating yourself from SCT when the time comes?


SCT shares have risen over 30% from their lows of the last two months. This isn't a surprise considering.....

Actually the SCT share price rise *is* a surprise because there has been no significant news from the company at all over the last couple of months. Nothing. My theory is that it could be defacto insider buying caused by the company setting up an in house share ownership scheme. But I have no proof.

One thing I do know is that on many days SCT does not trade at all. And often when it does then the number of shares traded are less than a marketable parcel. Certainly it would have been impossible to build up a meaningfully sized parcel of SCT shares for those wanting to catch the share price rise.

This is one of those instances where low liquidity works for you, provided you own the shares already. And of course the remaining way to 'already own' that 'meaningful share parcel' is to have your cheque book ready while the SCT share price is on the way down.

I know some of you don't like buying on the way down because you believe the market is always right. Well the market has told us that over the last two months the 'market value' of SCT shares is between 70c and 93c. The market may be roughly right. But surely it is better to buy your shares at 70c, rather than spend over 30% more to end up owning exactly the same thing?

SNOOPY

discl: hold SCT

Snoopy
25-07-2009, 08:49 PM
Actually the SCT share price rise *is* a surprise because there has been no significant news from the company at all over the last couple of months. Nothing.


SCT closed at 98c on Friday. But buyers were in the market at $1 on the Friday closing bell. So $1 is the real market price -despite what those charts might tell you- up another 6c on a mere 1500 shares (less than a marketable parcel). The share was trading at only 70c on 16th April scarcely three months ago. So a gain of 42.9% in such a short time is not to be sneezed at. I am half surprised that the stock exchange has not come out with a 'please explain', as there has been nothing released to the media that could explain this huge price differential.

Truly massive gains are now being booked by investors backing SCT, provided that is you were able to get your money onto the share at 70c on the date I quoted. Only two to three people did, and I was one of them. So despite being able to gain 'on paper' like we three did, any real investor backtesting systems on charts would have been stone out of luck - despite what their computer charting programs told them was possible.

Of course those of you who have been following this SCT thread for a while will know that I should not yet be celebrating. Despite this huge recent success, I am only partly back from the bath I took by holding onto SCT shares bought at much higher prices. In liquor terms my whine is still red. Yet if the share price rise was 'not real' for most investors, could one not argue that the share price fall that lead the price down to that 70c level was 'not real' either? If you considered the low liquidity which was evident in the trades on the way down, then yes I think you could.

Anyway it is good to be back above the $1 mark, even though the original share price fall to 70c was not real, and using the same logic the gain that I should be celebrating back to $1 was not real either. In reality this 42.9% gain is nothing to celebrate at all! The bottle of wine and glasses will have to go away for today. What strange mind tricks are played when you can't rely on 'the market' to show you how your investments are doing!

SNOOPY

discl: but I do hold plenty of SCT shares - that bit *is* real at least.

Snoopy
27-07-2009, 03:50 PM
SCT closed at 98c on Friday. But buyers were in the market at $1 on the Friday closing bell. So $1 is the real market price -despite what those charts might tell you- up another 6c on a mere 1500 shares (less than a marketable parcel). The share was trading at only 70c on 16th April scarcely three months ago. So a gain of 42.9% in such a short time is not to be sneezed at. I am half surprised that the stock exchange has not come out with a 'please explain', as there has been nothing released to the media that could explain this huge price differential.


Up another 8% today again, on the last 'traded price' with 19,000 shares put through the market at $1.05. That is quite big volume for SCT and I know all of those shares were from one seller. The buyer, however, is still sitting there at $1.05 and the next shares off the rank are listed at $1.15.

I wonder why the shares are being bought up? If it is one of you traders out there doing the buying please fess up as the suspense is killing me! We are now up an even 50% on that April 2009 low. I have ridden a few bulls this year, but this SCT ride is proving the wildest of all.

Perhaps the 'better' Whirlpool result, means that more capital expenditure in the global whiteware industry is coming sooner than anticipated? I guess if I want to benefit from what is happening at SCT , I'll just have to keep hanging on like grim death.

SNOOPY

discl: hold SCT

Jaa
27-07-2009, 05:02 PM
Hate to break Snoopy's excellent steady stream ;)

SFF are raising capital to spend:

"between $25 million and $30 million used for capital investment, such as rolling out its x-ray carcass-imaging and robotic technology developed with joint-venture partner Scott Technology"

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10586782

Might explain part of the recent increase but most is probably the turn in manufacturing sentiment?

Snoopy
27-07-2009, 06:03 PM
Hate to break Snoopy's excellent steady stream ;)

SFF are raising capital to spend:

"between $25 million and $30 million used for capital investment, such as rolling out its x-ray carcass-imaging and robotic technology developed with joint-venture partner Scott Technology"


You might be right on with the Silver Fern technology roll out Jaa. I decided to do a bit of searching myself, at the frustration of no news from SCT.

Here is what I found on the Silver Fern Farm's website. A press release from 'Robitic Technoloies', the joint venture with SCT!

-------

‘VISIONARY’ GRADING SYSTEM LAUNCHED (report 22-06-2009)

Consumers like to see what they are buying. And this is particularly true when it comes to food.

Meat companies, by contrast, don’t have the luxury of seeing what they have bought until after processing. That is, until now. Robotic Technologies Limited (RTL) – a joint venture between Silver Fern Farms and Scott Technology – has developed New Zealand’s first X-ray grading system for lamb processing. The company’s Market Value Traceability System (MVTS), has recently been commissioned at Silver Fern Farms’ Pareora plant near Timaru, to ascertain quality and value. Part of the company’s commitment to traceability, quality and innovation, the MVTS process also identifies cutting points for the commercialised automated carcass cutting machine.

The first stage of MVTS is being used to accurately predict the weights of the three primal cuts (leg, middle and shoulder). Typically, the shoulder has a value of about half of that of the leg or middle, so prediction of the primal yields will allow feedback to suppliers on the carcass conformation and resultant market value. The system will also count the ribs in each lamb. In the second stage, the hardware will be upgraded over the next two years to DEXA to accurately predict the meat/fat/bone ratio for each lamb before it is processed.

Keith Cooper, Silver Fern Farms’ Chief Executive, says information on yields can be used to place value on carcasses and improve decision making on the allocation of carcasses for cutting to best suit customer requirements and the optimal way to process carcasses through our processing rooms.

“Primal weight predictions and rib count information will feed into the Silver Fern Farms production scheduling system to work out the best processing option for each carcass, improving decision making and optimising our production process against customer requirements.”

“Feedback on carcass conformation will allow breeders to identify genetics that deliver the optimal outcome in relation to consumer cut size preferences. This technology will definitively complete the picture in relation to genetic performance.
“Processing efficiencies are an important component of our integrated supply strategy, providing greater value across the supply chain through better yields, and better communication and direction back to our suppliers and breeders.”

Mr Cooper says Silver Fern Farms had experimented with the use of video cameras for objective carcass measurement, but moved away from the technology in favour of MVTS. “While X-ray requires more capital investment, it has the potential to achieve more for suppliers and processors than external carcass image analysis.

“External analysis systems such as ViaScan can only provide estimates of conformation, but the inability to see through the carcass limits the technology to a relatively crude system for supplier feedback. X-ray will provide more information to suppliers and improve product value by improving decisions on the best way to process the carcass to customer’s standards."

Combined with other advances such as radio frequency identification (RFID) traceability and control systems to improve meat quality and extend shelf life, MVTS will see Silver Fern Farms setting a new standard in meat cuts for New Zealand lamb, helping cement relationships with customers and underwriting returns to suppliers as they improve their genetics and farm management systems to capture premium payments.

“We will be using the next 12 months to get a better understanding of the benefits from smarter processing decisions from this technology, but expect that the average benefit per carcass from yield increases and better matching of carcasses to markets to be in the range from $2 to $5 at current price levels,” Mr Cooper says.

Before the end of this year, Silver Fern Farms is planning to roll out the X-ray capability at its two largest lamb processing plants – Takapau in the North Island and Finegand in the South Island – providing access to the technology for the main lamb producing areas of New Zealand. The technology will be rolled out to all Silver Fern Farms lamb plants by the end of 2011.

The capital investment in the X-ray grading system is expected to total $10 million.

-----------

I note a mismatch between the $10m quoted above and the $25m-$30m as quoted in the Herald article. That $10m is for X-ray equipment only. Perhaps another $5m might go into 'other robotics' while $10m is spent in altering the buildings to take the new equipment.

That makes a total of $15m going to 'Robotics Technology'. SCT is a 50% shareholder so they will get $7.5m over two years. That is $3.75m of revenue per year, which might translate to $2m of profit per year (?).

In per share terms that is 7c of eps. Even if the rest of SCT makes nothing over the next two years we are looking at an earnings yield of 6.7% from the automation division alone, based on that closing share price of $1.05.

Given that, it doesn't sound too speculative to hop into the market and buy some shares at $1.05 after all. Well done to that person who ferreted out and read those press releases and looks set to be sitting in a good place.

SNOOPY

discl: hold SCT

Major von Tempsky
27-07-2009, 06:43 PM
I think that economic backwoodsman MacDunk, who can't understand comparative advantage and free trade amongst many other things, is still apologising to people for telling them to sell TEL at $2.15 isn't he? ;-) - currently $2.85.

He also seems unable to understand that every Western democratic country plus Japan, South Korea, Taiwan & & & have independent central banks who will raise interest rates when the inflation rate rises so the possibility that these countries will go into sustained serious high inflation just isn't there. And as Snoopy has noted having your money in cash rolls under the bed or in the bank is not the way to go if MacDunk actually believed his prediction.

Snoopy
27-07-2009, 07:44 PM
I think that economic backwoodsman MacDunk, who can't understand comparative advantage and free trade amongst many other things, is still apologising to people for telling them to sell TEL at $2.15 isn't he? ;-) - currently $2.85.


I couldn't understand what you were doing on this thread Major, until I re-read the Silver Fern Farms press release.

"The company’s Market Value Traceability System (MVTS), has ... blah, blah"

"Market Value Traceability System" my paw.

The real reason for Scott's success is that they are following the secret MVTS system that has been proven many times in the past: the 'Major Von Temsky System'!

The Major is Scott's 'secret weapon' management consultant!

SNOOPY

duncan macgregor
27-07-2009, 07:46 PM
Another little rant about something you know nothing about MVT. Look up my predictions this year with SHREWD CRUDE in our own little contest to get an insight to what i am up to in real life. Anyone holding TEL all the way down the way have raving on about a modest little rise is as dumb as they come. Getting back to SCT read back on what i said in this thread years ago which might have saved a few investors some money. Remember MVT i predicted a down trend leading up to a crash after the olympics and removed my funds from the market. Macdunk

Snoopy
27-07-2009, 10:00 PM
macdunk , you run the risk of having your mountain of cash inflated away
What material assets are you going to buy?
I suggest you get yourself some scott tech, telecom and rest brands shares, pronto:D


Blimey only just noticed. Look how posts can come back to haunt you.

I don't have the 9th April figures available but from 31st March to today, a period just over three months:

SCT: Open 0.70c Dividend 0c Close $1.05: Return +50%
TEL: Open $2.28 Dividend 6c Close $2.86: Return +28%
RBD: Open 81c Dividend 4c Close $1.02: Return +31%

I don't know what tea leaves you were on that 9th April day, Mick. But in investment terms: You are the new daddy!

SNOOPY

duncan macgregor
28-07-2009, 02:09 PM
Blimey only just noticed. Look how posts can come back to haunt you.

I don't have the 9th April figures available but from 31st March to today, a period just over three months:

SCT: Open 0.70c Dividend 0c Close $1.05: Return +50%
TEL: Open $2.28 Dividend 6c Close $2.86: Return +28%
RBD: Open 81c Dividend 4c Close $1.02: Return +31%

I don't know what tea leaves you were on that 9th April day, Mick. But in investment terms: You are the new daddy!

SNOOPY Penny wise pound foolish Snoopy thats all i can say about your methods. I predicted a downtuin leading up to a crash and sold all my shares at the start of 2008 placing my money in the security of a few large banks. I then bought Gold silver and oil at the start of 2009 and a few shares in PPP as stated in my competition with shrewd Crude. Everything was stated in advance of the event.
In Jan 2008 when i sold up this is what you stated as a long term holder averaging down was holding.
SCT was $1-80 in jan 2008 now $1-05.
TEL was $4-40 in jan 2008 now $2-85.
PGW was$2-10 in jan 2008 now 95c
NZS was $1-60 in jan 2008 now 45c
WHOOPEE DOO SNOOPY RBD is 13c higher plus all those dividends.
I wont mention turners
You are a great example of what happens to people that Ignore the market with no stop loss system.
Incidently I am getting out of gold and silver positions and preparing for the next rise in commodies. Macdunk

Zito
28-07-2009, 06:03 PM
I totally fail to see the point of running down other posters on this forum. The purpose of it should be to enlighten others with your wisdom MacDunk, rather than to belittle them and tell tales of your self-proclaimed brilliance.

I for one do not follow Buffetology. However I can see much of virtue in it. After all, who can argue with a man who has Warren Buffett's record of success.

Personally I regard Snoopy as one of the most valued contributors on this forum because his well-thought-out and grammatically correct posts educate me. His investing methods are not my own. But that doesn't mean that he is right, or I am right. It doesn't matter who is right. All that matters is that we are successful in the methods that we choose to use, and learn from our mistakes and from each other. Why else are we here? Hopefully not to tell everybody else that they are idiots.

macduffy
28-07-2009, 08:00 PM
I totally fail to see the point of running down other posters on this forum. The purpose of it should be to enlighten others with your wisdom MacDunk, rather than to belittle them and tell tales of your self-proclaimed brilliance.

I for one do not follow Buffetology. However I can see much of virtue in it. After all, who can argue with a man who has Warren Buffett's record of success.

Personally I regard Snoopy as one of the most valued contributors on this forum because his well-thought-out and grammatically correct posts educate me. His investing methods are not my own. But that doesn't mean that he is right, or I am right. It doesn't matter who is right. All that matters is that we are successful in the methods that we choose to use, and learn from our mistakes and from each other. Why else are we here? Hopefully not to tell everybody else that they are idiots.



Thanks, Zito.

That would win my Quote of the Month award for July, if not for 2009, so far.

I hope that we're all learning that there is more than one way to skin the proverbial cat.

;)

Snoopy
28-07-2009, 09:19 PM
Penny wise pound foolish Snoopy thats all i can say about your methods.

In Jan 2008 when i sold up this is what you stated as a long term holder averaging down was holding.
SCT was $1-80 in jan 2008 now $1-05.
TEL was $4-40 in jan 2008 now $2-85.
PGW was$2-10 in jan 2008 now 95c
NZS was $1-60 in jan 2008 now 45c
WHOOPEE DOO SNOOPY RBD is 13c higher plus all those dividends.


I won't go over the dismal record of your minerals shares Macdunk that you 'sold' (except that you didn't sell when you moved half of them into your 'investment' portfolio in a desperate attempt to ring fence your trading profits), in January 2008.

Macdunk, you know all about Norgate's debt fuelled expansion foray with PGW, and now it seems NZS (where they are borrowing money to finish off the farms). The market has marked down these shares because of their doubtful ability to generate sufficient free cash flow. While I am down on both of these investments -right now-, I am not down nearly as much as your figures imply. That's because I paid nowhere near those prices you quote for the shares. Also the business plan for NZS at least appears intact. So I will continue to do what I originally planned to do. And that is wait until those Uruguayan farms are in full production before I evaluate the success of that investment.

You price comparison with TEL is dishonest because you have ignored the dividends of 40cps over that time. Of course a fall from $4.40 to $3.25 doesn't sound so dramatic.

And SCT has buyers in the market today at $1.07, up again from the last quoted price of $1.05. So you aren't up with today's valuation there.



You are a great example of what happens to people that Ignore the market with no stop loss system.


I may have ignored the market Macdunk, but I haven't ignored the opportunity the market has presented to me.

I have boosted my shareholdings in TEL by 25%, RBD by 56% and my shareholding in SCT by 157% since 1st January 2008. And now I am sitting there ready to take advantage of the upcoming cashflows (particularly with TEL at an 8.4% gross yield, and RBD on a 10.2% gross yield) while you sit on the sidelines earning your measly 4.5% at the bank.

The problem with your 'timing of the market' Macdunk is that you have ended up with a 'disinvestment strategy', not an 'investment' strategy. And I don't think you know how to get back in.

SNOOPY

elZorro
29-07-2009, 10:02 AM
Incidently I am getting out of gold and silver positions and preparing for the next rise in commodies. Macdunk

I've been investing in shares for just over 5 years, and I'd class myself as a novice with a lot of learning to do. So I've been highly amused at (and informed by) the postings on this blog site over the years, and MacDunk is one of the standout entertainers. Without him posting, they'd be less reply posts and little interest I'd suspect.

I've followed the entertaining NZOG etc threads for a while, but lost interest, perhaps like Macdunk. In retrospect, his investment strategy was a very safe one, and showed he didn't let the sharemarket promises override the need to preserve capital in the event of a strong downturn. And he probably didn't invest in finance companies either.

What's going to be interesting, is figuring out which commodities (sp) are going to provide the higher returns we're all after, to offset the risks we'll need to take.

-elZorro-

duncan macgregor
29-07-2009, 01:35 PM
I have pulled a non charting 'Scott Technology' thread out of the archives. That is really because I don't think Scott Technology is a good trading share because of poor liquidity. Last Friday only 95 (not a misprint) shares were traded! I dare not think how much less than a marketable parcel 95 shares is.

This thread starts with 'out to lunch' suggesting SCT was a 'screaming buy' at somewhere near $3 on 30/04/2004. Yet now the share price has retreated to a '$1.82 buy and $1.85 sell' spread, this same share barely gets a mention on this forum. For those who like the FA statistics $1.82 today represents an historic PE of 15. That is greater than the 12.5 PE when SCT was regarded as a 'screaming buy' at $3 two and a half years ago. Consequently I don't think SCT is a 'screaming buy' at close to $2. I am buying more for portfolio rebalancing purposes. But if you believe that exporting from NZ has any future then I think SCT is worth accumulating at around this $2 level.

I notice the engineering director, Kevin Kilpatrick, sold all of his shares late last month. Ordinarily an insider 'selling out' like that is not good news. However, Kilpatrick has already signalled his retirement from the company to go 'grape growing' in Marlborough in August 2008. Given he is still a director of Scotts, Kilpatrick had a limited window of opportunity to 'sell out' while the company annual results are fresh. If he had waited he could have been accused of insider trading. So I don't think Kilpatrick selling out to fund his new grape growing activities in Marlborough should necessarily be seen as a loss in confidence in Scott Technology itself.

Kilpatrick selling out of 170,000 odd shares during 2007 has worked well for me because I have been buying SCT shares in trickles all year - boosting my own holding in this company by something like 80% in the process. My average purchase price of these 'new' shares was $2.07. That doesn't look very clever if you consider the current buy price is $1.82. But that is assuming that I could have bought the number of shares I did buy at 'todays price' of $1.82. And that would not have been possible. It also ignores the dividends that I have accumulated during the year, which makes my 'theoretical loss' (it was a 'theoretical profit' two weeks ago) much less painful. I know that I couldn't have bought my shares at $1.82 because it has taken over a month for me to buy my 'November tranche', a very modest number of shares on market at a price around $2.

So when do I expect my profit margin on my latest SCT acquisition to rise into the black again? I have no idea. But I am prepared to wait. And if the market weakens further I am prepared to buy more shares in the interim. I don't know if buying SCT shares at $2ish today will look clever in two and one half years time or not. But I think it is more likely to look clever than buying SCT at $3 looks now, viewed with two and one half years of hindsight.

SNOOPY

discl: hold SCT SNOOPY look at the money you might have saved your self with a modest stop loss. Fundamental analysis is as usefool as tits on a bull as you are proving. SCT is a disaster with its illiquidity in the market. With patent rights being non existant in china judging from the copy cat duplicates in our market makes SCT is a high risk share. Macdunk

Snoopy
29-07-2009, 03:32 PM
SNOOPY look at the money you might have saved your self with a modest stop loss. Fundamental analysis is as usefool as tits on a bull as you are proving. SCT is a disaster with its illiquidity in the market. With patent rights being non existant in china judging from the copy cat duplicates in our market makes SCT is a high risk share. Macdunk


You quoted my post with former director Kilpatrick selling in 2007 Macdunk and my prediction 2.5 years hence. It is now 2009. So we have another 6 months or so before we can judge if that is egg on my face. It is interesting to see that my average purchase price of shares around that time was $2.07. Since the start of CY2008 the new SCT shares I have purchased have cost me an average of $1.07. That means my overall entry price is considerably lower now than it was in 2007. Ironically even if my 2007 share price hopes go AWOL, and nothing happens to the share price from here, I will still be in better shape than then.

My improved position is all due to what you term 'averaging down' Macdunk, but is in fact what I term is buying shares at bargain prices. Buy low and sell (if you have to) high is my system Macdunk. You should try it sometime.

Poor liquidity is only a problem if you need to sell Macdunk. If you don't need to sell, like I don't, it can work to your advantage. Of course a trader like you, who's main aim in investment life is to simply to 'sell out' would not understand.

Risk Macdunk, is all about knowing what you've got. The more you know, the lower the risk for you. Your quote:

"With patent rights being non existant in china judging from the copy cat duplicates in our market makes SCT is a high risk share."

doesn't have much context to me.

I think SCT have worked on a Haier production line in China. What do you think Haier in China will do? Steal their own production line 'secrets' that they already own? The ultimate 'inside job'? I agree that product re-engineeering in China is a threat to NZ manufacturers. But 'product' is not what Scott Technology do. Scott Technology are fundamentally process engineers. IMO that means they are probably the manufacturer in NZ that is *least* under threat from China.

SNOOPY

Snoopy
10-08-2009, 01:25 PM
SCT in the news ... http://www.nzherald.co.nz/technology/news/article.cfm?c_id=5&objectid=10589244&pnum=0 ... nice positive spin stuff too.


No real news in that story for those that follow SCT closely Belg. Still the market seems to like the news as buyers are in the market at $1.10, with quite a gap to the willing sellers at $1.20. And I guess the more people that know the story, the more people will realise how potentially undervalued SCT is.

As is normal for SCT though, liquidity is low with under 5,000 shares traded. So no real chance to establish a position in this company. If you wanted to do that, you should have been buying your shares when the price was on the way down, like I did. One comment that did catch my attention in the article was this:

"About $14 million later, the joint venture, Robotic Technologies, has created a "lamb primal breakdown system" "

Robotic Technologies is SCT's 50% partner with Silver Fern Farms.

I hadn't seen any 'admission' by SCT as to how much they had invested into robotic technology over the years. And SCT have got away with not telling we shareholders by simply writing off all development expenses as they have been incurred. However, writing off all that money that has been invested in robotics does not mean the investment has been fruitless, as we are just starting to see now.

Scott's share of that investment, $7m, might not sound a lot in corporate terms. But $7m is more than Scott's total profits summed up over the last five years. If future development of the robotics program can be funded out of robotics division profits, rather than being paid for from the appliance production line profits, then I think we are looking at a step change in the profitability of SCT into the future.

SNOOPY

discl: hold SCT

elZorro
10-08-2009, 07:51 PM
Belgarion-"Robotics for Farming" is really something that Kiwis could excel at. I.e. we have the engineers, software engineers and farmers.

I agree. When you see some of the awesome industrial robots that are around, you can't help thinking about one or two putting cups on, in a rotary milking platform. Surely it's possible. But apparently the patent rights are well covered by Lely and DeLaval, and fiercely protected.

Snoopy
11-08-2009, 06:55 PM
I posted the above because share prices go up due to demand. I thought I'd help you out by adding a bit more demand. :)

... And raising the profile of SCT whose management I respect enormously for sticking to their knitting and being Kiwi pioneers of the first order.


It worked Belg. Buyers are now in the market at $1.20! SCT are up 71% from their 70c lows of recent months. I admit to still being underwater on my overall investment in SCT. But do I see Mr Market standing near the edge of the pool with a towel for me? It took around 10,000 shares to lift the market share price 10c from $1.10 to $1.20. By that 'measure' there is no way I could accumulate the holding I have now at the average price I paid.

There are still no announcements from the company that would explain a share price rise of 71%. Whatever happened to the NZX 'please explain ' watchdog? Has it gone to sleep?

SNOOPY

sharer
11-08-2009, 07:16 PM
Snoopy:"...There are still no announcements from the company that would explain a share price rise of 71%. Whatever happened to the NZX 'please explain ' watchdog? Has it gone to sleep? "

Was it ever awake, really?
After decades of disappointment with NZ market regulation, I can't wait to get out of my NZX listed holdings. So far got $60% over to ASX stocks, but slow work waiting for chances to escape without having to swallow too many dead rat losses.

Snoopy
12-08-2009, 11:42 AM
Snoopy:"...There are still no announcements from the company that would explain a share price rise of 71%. Whatever happened to the NZX 'please explain ' watchdog? Has it gone to sleep? "

Was it ever awake, really?
After decades of disappointment with NZ market regulation, I can't wait to get out of my NZX listed holdings. So far got $60% over to ASX stocks, but slow work waiting for chances to escape without having to swallow too many dead rat losses.

No wake up call yet. SCT up another 10c at $1.25 as I write this on - wait for it - a measly 516 shares! Way below a marketable parcel. This share is performing so well I am getting worried now....

SNOOPY

Snoopy
14-08-2009, 06:19 PM
No wake up call yet. SCT up another 10c at $1.25 as I write this on - wait for it - a measly 516 shares! Way below a marketable parcel. This share is performing so well I am getting worried now....


Yesterday the correction came. The share price declined from $1.25 to $1.24.

Today the SCT share price climbed another 16c to $1.40. The day closed with bidders for SCT still there at $1.40 and sellers at $1.45. Four months have past and the share price gain has been 100% from that 70c low. Good stuff, yet no significant announcements from the company over that time!

I can now report that, at last, I am back in the black with my SCT investment. Some would suggest that I should now 'sell out'. However, I am definitely in for the long haul. I won't be thinking about reducing my holding until those robotics profits start to flow through. If anyone wants SCT shares, they won't be buying mine.

SNOOPY

discl: have held SCT, albeit in a small way when I started, since 1997!

PointyHat
15-08-2009, 10:48 AM
Hi Snoopy, that was me messing about yesterday, I have an order in for 10,000, (averaging) and I managed to get only 115 then later 2500 at 1.25

I then saw a 3000 buy come on at 1.40 and I got ASB to sell the 2500 at 140. Couldn't help myself. Made $345 - in about an hour ? I then ameneded my original buy to12,500 and dropped my price to 1.21

I am sure the price will come back to the 1.20s next week and I'll pick some up then.

Like you I am a long term holder and find that these small quanities change the price so drastically, it means you just cannot deal in sufficient amounts and the price is easily manipulated.

I am quite excited about the Rocklabs addition and hope the co can show some bottom line improvement in Oct. Certainly the directors have a lot of share interest as an incentive. New leadership and premises etcetera ... hopefully optomistic

Keep up your imput into Sharetrader, I dont post very often but am always reading, and agree with most of your posts and sentiments ...

Phaedrus
15-08-2009, 01:38 PM
I can now report that, at last, I am back in the black with my SCT investment. (I) have held SCT, albeit in a small way...since 1997.Snoopy, at a personal level you are a really good man. One of the best. Over all our years of arguing the relative merits of TA vs FA you have never once stooped to personal attacks, focussing solely on the topic under discussion. That is all too rare on these boards. Your fundamental analysis is invariably meticulous and the points you make are well supported and well argued. You have applied your fundamental analysis with precision and dedication for literally decades and your faith has never wavered. How you can maintain this level of commitment and optimism in the face of debacles like this one is totally beyond my comprehension.

Here you are, invested in a stock that you have held for 11 years, one that has recently doubled in price, and you report that you are "at last" in profit"! To me, this is a spectacularly damning indictment of the methods you have been using. Eleven years of "investment", most of that time during the biggest Bull run we have ever had, for........nothing! (it's about here you start talking about dividends, right?) I can but continue to marvel at your fortitude and dogged perseverance. Don't you have any doubts? Have you ever wondered if your approach might perhaps be improved upon? Ever entertained a sneaking suspicion that market sentiment just might be worth taking into account?

I'm not knocking SCT as a stock. You had in fact tripled your capital at one point, but in the absence of any discernable exit strategy, coupled with a dogged refusal to sell at any price, you gave all your profits back to the market. It seems to be a point of honour for you to ignore prevailing market sentiment - indeed you take a perverse pride in acting contrary to it. This approach has cost you very, very dearly. A quick easy example of this is where you were buying "value", adding to your SCT holdings when it was in a very clear downtrend. Brave - but foolish. You made exactly the same mistake with TEL and other stocks, but let's not talk about that!


Some would suggest that I should now 'sell out'. Not me Snoopy. The time to sell was when I did - when SCT ended that magnificent 3 year uptrend. (The "SCT Chart" thread gives blow by blow documentation of this.) Now SCT is in a new uptrend, making it again a good stock to hold. It will eventually peak and downtrend again - and you will doubtless hold on through yet another cycle.

What price "buy and hold" eh?

http://h1.ripway.com/78963/SCT815.gif

Snoopy
15-08-2009, 02:35 PM
Hi Snoopy, that was me messing about yesterday, 10,000 (averaging), and I managed to get only 115 then later 2500 at 1.25.

I then saw a 3000 buy come on at 1.40 and I got ASB to sell the 2500 at 140. Couldn't help myself. Made $345 - in about an hour ? I then ameneded my original buy to12,500 and dropped my price to 1.21

I am sure the price will come back to the 1.20s next week and I'll pick some up then.

Like you I am a long term holder and find that these small quanities change the price so drastically, it means you just cannot deal in sufficient amounts and the price is easily manipulated.


Nevertheless PointyHat, there is/was a buyer in the market that is/was willing to pay $1.40. Good on you for booking your $345 profit in an hour. But it is very hard to figure out what is a good price to pay for SCT without a bit more disclosure from the company. And once that disclosure comes then it will almost certainly be too late to buy.

During 2007, a total 9cps was paid as a dividend. Based on a share price of $1.40, that is a gross yield of around 6.4%. That sounds about right in this market. But so much has changed since. Rocklabs has been acquired. The automated meat room project at last looks to be on the cusp of generating a real return. Yet the exchange rate vs Europe is not particularly favourable and building a whiteware line for the USA would be barely profitable with the $NZ/$US exchange rate approaching 70c. So can we get back to that core earnings level of 9cps just by building whiteware production lines? If we can, $1.40 might seems a real bargain in a few months. If not, I wouldn't bet against you filling your order in the $1.20s Pointyhat

Nevertheless Pointyhat, I can't help noting that your strategy looks to me to be all over the place. I am not familiar with what a 10,000 (averaging) order is. Perhaps someone will enlighten me? But given your acknowledgement that SCT shares are notoriously hard to come by, why sell when you had only bought shares at around one quarter the level you had targeted? And then having sold the very next day you raise your target to 12,500 shares (to make up for the shares you sold?). That almost looks like an admission that you didn't really want to sell in the first place. Of course I never asked you what your strategy was. If it was to buy in the $1.20s and sell in the $1.40s, perhaps what you did was fair enough. But IMO trading a price range of 20c is too low for a share with the liquidity and variance of prospects that SCT has.

Without any news update, I would be happy to see the SCT share price consolidating in the $1.20s this week.

SNOOPY

Snoopy
15-08-2009, 04:20 PM
Your fundamental analysis is invariably meticulous and the points you make are well supported and well argued. You have applied your fundamental analysis with precision and dedication for literally decades and your faith has never wavered.

How you can maintain this level of commitment and optimism in the face of debacles like this one is totally beyond my comprehension.

Here you are, invested in a stock that you have held for 11 years, one that has recently doubled in price, and you report that you are "at last" in profit"! To me, this is a spectacularly damning indictment of the methods you have been using. Eleven years of "investment", most of that time during the biggest Bull run we have ever had, for........nothing! (it's about here you start talking about dividends, right?)


Since you mentioned dividends Phaedrus I should point out that since July 1997 when I first invested in SCT (12 years ago) dividends paid have amounted to 80cps. That is a not insignificant amount. After taking into account brokerage I am probably as near to breaking even on capital as it is possible to be. If indeed I have made no capital gain at all then one simplified way of looking at my compounding returns is this:

$1.40(1+i)^12=($1.40 + 0.8)

That comes out to a 3.83%pa compounding after tax, or about 5.7%pa compounding before tax. So even taking into account dividends, my returns on SCT have not been fantastic. But you have to remember the circumstances in which we are measuring this performance. This is supposedly the worst financial crisis since the 1930s, and a housing downturn globally was what started it. And if housing starts are down, that means whiteware worldwide has been torpedoed. So I don't think now in isolation is a fair time to judge the success or otherwise of this investment. Given what has happened, I am not displeased with where I sit.



I can but continue to marvel at your fortitude and dogged perseverance. Don't you have any doubts? Have you ever wondered if your approach might perhaps be improved upon?


You are speaking as though the SCT management are themselves oblivious to their problems Phaedrus. They have made progress on better organising their work shifts. The automated robotics project is a long term project which up until the last few months anyway has not been reflected in the share price. And of course there has been the diversification into Rocklabs.



Ever entertained a sneaking suspicion that market sentiment just might be worth taking into account?


I told you the reason the share price was heading down in the most recent downtrend Phaedrus. It was a failed fund manager being forced to liquidate his portfolio. So I *was* indeed taking into account (actually taking advantage) of market sentiment even as I purchased my SCT shares all the way down.



I'm not knocking SCT as a stock. You had in fact tripled your capital at one point,


No I hadn't Phaedrus. I may have been up something like 100% at one stage. But I didn't have an average entry price as low as $1.38 in those days. And although I was up 100% the overall number of SCT shares I held were modest. 100% of a modest amount of money is still a modest amount of money. And I kept the holding small because I was more focussed on 'selling out' in those days. These days I have realised that I will probably never *need* to completely sell out, so I am more comfortable with having a more substantial holding.



It seems to be a point of honour for you to ignore prevailing market sentiment - indeed you take a perverse pride in acting contrary to it. This approach has cost you very, very dearly. A quick easy example of this is where you were buying "value", adding to your SCT holdings when it was in a very clear downtrend. Brave - but foolish.


My entry points have not been 'optimal' into SCT Phaedrus with the benefit of hindsight, I admit that. However, considering SCT 'listed' at the equivalent of $1.74 (taking into account two 1:8 bonus issues along the way), the fact that I have only paid $1.38 for my shares is not exactly a disaster either. The question is are the possible entry points as shown on your long term chart, with the benefit of hindsight, real? I notice that you have carefully left any volume indicators off your SCT chart. You might be able to pick up 2 to 3 thousand shares at the entry points your chart indicates. That level of volume is of little interest to me. So I would argue that those chart entry points are not real.

Buying in a downtrend is only 'risky' if you believe that 'volatility' = 'risk'. I don't believe that which is why I am able to pay so little heed to the market. A low risk company as far as I am concerned is one which has a low level of debt and a competitive advantage for their product or service. And generally risk can be further reduced by reading up as much as you can about your investment. By these measures SCT was an extremely low risk investment for me, when I was buying in at around $1.20. Even though I realise such a view is an anathema to 'market followers' who give a zero rating to such concepts because they are not represented on their charts. Still if those chartists don't wish to consider all of the information in the public domain, then more fool them.

My approach Phaedrus now means that I have a significant (for me) holding in a company at a price I am happy with. Meanwhile I await the returns from the meat processing industry robotics and mining company support industry, which it looks like I have largely acquired 'for free' so far.

SNOOPY

P.S. You asked whether my approach to my SCT holding could be improved upon. Well when I first bought those first SCT shares I was only barely aware of Warren Buffett. I was very keen on buying into export industries as a way of supporting the country. These days my investment portfolio is much more balanced spread among different sectors. One thing I have pondered is whether I should have put any money into export industries at all.

Perhaps what I should have learned is:

Do not invest in any export industries (directly) at all!

But then again if you are a long term investor, and you do believe you should have at least some of your money in our export industries, can you name an exporter that has outperformed SCT over the last twelve years?

warthog
16-08-2009, 10:57 AM
Perhaps what I should have learned is:

Do not invest in any export industries (directly) at all!

Well Snoops, if you keep an eye on the technical side of things then buying into the right exporter will see you looked after very nicely indeed!

Snoopy
16-08-2009, 01:03 PM
Well Snoops, if you keep an eye on the technical side of things then buying into the right exporter will see you looked after very nicely indeed!

Care to name some names Mr Hog? How many years do you think it will be until Rakon recovers to their listing price? What about FPA and their enormous destruction of shareholder wealth by being caught out when moving their production lines offshore? FPH are doing OK but with a PE of 27 or something, that doesn't look a very good place to put my export money. Wellington Drive Technologies has an endless history of losses. Windflow Technologies have likewise never returned their shareholders any profits (because they are loss making).

Of course SCT itself made a loss in FY2008. Yet in a historical basis, even if SCT gets back to half steam from the historic peak on the appliance production line side of things, $1.40 will not mean the share is trading on a demanding PE ratio.

SNOOPY

Snoopy
16-08-2009, 01:21 PM
Snoop,

I had assumed you were accumulating so you could vote yourself onto the Board and use your expertise to assist SCT is becoming what they continuously promise to be (but seem to take just a little too long to get there.) And no - this is not a tongue in cheek comment as I know of at least two other member of this forum who are doing the same.


You know Ian Urquhart Belg? Looking at the 12th September 2008 shareholder register he seems about the only small (if I can use that word) shareholder with enough shares to get a board seat. In fact with 15% of the company, why isn't Ian on the board? The rest of the individual shareholders on the top twenty list look to be 2 to 3 million shares shy of demanding board representation.

I suspect the reason that Ian isn't on the board is that he is happy with the composition of the board already. If the board are already doing what you would do, there is no reason to demand a seat on the board yourself. If this is Ian's view then I for one would have to agree with him. A new generation of management has taken over at both company and board level. Time to give them some breathing space and let them get on with the job I think

As for those 'few million' shares you reckon I am after Belg, suffice to say I am still a 'few million' short.

SNOOPY

warthog
16-08-2009, 03:38 PM
Care to name some names Mr Hog? How many years do you think it will be until Rakon recovers to their listing price? What about FPA and their enormous destruction of shareholder wealth by being caught out when moving their production lines offshore? FPH are doing OK but with a PE of 27 or something, that doesn't look a very good place to put my export money. Wellington Drive Technologies has an endless history of losses. Windflow Technologies have likewise never returned their shareholders any profits (because they are loss making).

Of course SCT itself made a loss in FY2008. Yet in a historical basis, even if SCT gets back to half steam from the historic peak on the appliance production line side of things, $1.40 will not mean the share is trading on a demanding PE ratio.

SNOOPY

The hog was maybe a bit quick off the mark. How about "Keeping an eye on the technical side of things for your chosen exporters would be a consideration worthy of your time." ?

But yes, RAK and FPH have potential - in the right circumstances - to provide good capital growth.

Snoopy
17-08-2009, 10:46 AM
Snoopy wrote:
"Care to name some names Mr Hog? How many years do you think it will be until Rakon recovers to their listing price? What about FPA and their enormous destruction of shareholder wealth by being caught out when moving their production lines offshore? FPH are doing OK but with a PE of 27 or something, that doesn't look a very good place to put my export money. Wellington Drive Technologies has an endless history of losses. Windflow Technologies have likewise never returned their shareholders any profits (because they are loss making)."

The hog was maybe a bit quick off the mark. How about "Keeping an eye on the technical side of things for your chosen exporters would be a consideration worthy of your time." ?

But yes, RAK and FPH have potential - in the right circumstances - to provide good capital growth.


The problem is Mr Hog, these are the same kind of thoughts that I was thinking about Scott Technology and Fisher and Paykel (as it was then, a combined group) in 1997.

I don't want to leave the wrong impression on this thread. I went into SCT for the purpose of receiving ever increasing dividend income through company growth and this objective has not been achieved. Am I content with this situation? No. Do I know of any listed exporter that has done significantly better over the past twelve years ? No

So what does this tell me? Do we have an 'exporter' problem? Is there something 'company specific' wrong with the way SCT has been managed over the last twelve years? Perhaps, although Chairman Marsh's low to no debt policy was a big help during the credit crunch. The direction of management has changed in the last couple of years so it is not as if the company is doing nothing. Whether it is doing enough remains to be seen.

I heard a representative of Rakon on the radio this morning bleating about the high exchange rate and how they are having to make more and more of their chips overseas. He didn't have any answers for what he wanted the government to do. But he admitted that as long as Rakon is just an 'input cost' on the the manufacturing sheets of large cellphone manufacturers, margins will remain under pressure. Needless to say I am not tempted to invest in Rakon.

SNOOPY

discl: hold SCT

warthog
17-08-2009, 06:47 PM
Do we have an 'exporter' problem? Is there something 'company specific' wrong with the way SCT has been managed over the last twelve years?

Good questions, to be sure. However, you need not be too bothered with them if you follow the chart closely. The combination of a little contextual/local knowledge of these businesses and a solid technical approach to your entry/exit points will in the hog's opinion preserve your capital and give you a good chance at capital growth.


I heard a representative of Rakon on the radio this morning bleating about the high exchange rate and how they are having to make more and more of their chips overseas. He didn't have any answers for what he wanted the government to do.

Well the government doesn't have any ideas either so between the NZ business community and the government (something of an overlap there) there are basically no clues going forward other than hoping for an export-led recovery and having nightmares about having to use the OCR to dampen down any enthusiasm in the property market. The National government are stuck between a rock and a hard place, as not only do they not have any original thoughts about how NZ could get out of this mess, they are faced with some possible answers that are heresy to their supporters, such as capital gains taxes, heavier regulation and foregoing tax cuts.

Bill English recently appealed for any and all ideas and thoughts about what the country should do. The hog says if he has run out of ideas then maybe he should give somebody else a go?

Back to the issue, you need not worry much about these issues if you simply watch - for example - the RAK chart. The price action will tell you - more or less - when to get into this stock i.e. when its fortunes change. Until then, it's anybody's guess, which is why TA is the safer approach.

Snoopy
20-08-2009, 04:48 PM
I am sure the price will come back to the 1.20s next week and I'll pick some up then.


Well you got your wish Pointyhat. I guess that is you sitting there at $1.21. I am pretty relieved there has been a correction though as this one had gone too far too hard on no news. The only question that remains now is, will you get your shares? Good luck!

SNOOPY

Snoopy
22-09-2009, 07:01 PM
Well you got your wish Pointyhat. I guess that is you sitting there at $1.21. I am pretty relieved there has been a correction though as this one had gone too far too hard on no news. The only question that remains now is, will you get your shares?

Big pull back in SCT from the recent peak of $1.40, all the way down to the dollar mark, even if the volume of shares traded has been modest. Influencing that fall will be the somewhat lethargic response to the Silver Fern Farms shareholder cash raising. Without that cash on hand SFF will not be spending up big on SCT boning room robotics soon.

However ultimately the demand will not be going away. Those meat industry robots will be bought, it is just a matter of timing. SCT is strong enough to wait. In the meantime the market hands us an opportunity to pick up those SCT shares at a good price. I'll be waiting for the share price to head a little lower before I boost my own SCT holding. But I wouldn't blame others, like Pointy Hat, for having scooped up their own share of SCT, on the way down, so far.

SNOOPY

discl: hold SCT

PointyHat
09-10-2009, 10:32 AM
Results out:
A profit and a dividend - although both very modest ($390,000 before tax and 1 cent)
It will be interseting to see how Rocklabs contributed !

Better than a loss however.
Time to buy Snoopy ?

Snoopy
09-10-2009, 11:15 AM
Ultimately the demand will not be going away. Those meat industry robots will be bought, it is just a matter of timing. SCT is strong enough to wait. In the meantime the market hands us an opportunity to pick up those SCT shares at a good price. I'll be waiting for the share price to head a little lower before I boost my own SCT holding.


SCT full year result out today. And the result is ..(drum roll).. - a profit!

However, I am not too impressed with the tone of the announcement:

"The Directors of Scott Technology Ltd are pleased to report that the company
produced a profit before tax of $390,000...."

Companies that make a profit have to pay tax, as do shareholders as they receive dividends. So why not announce the after tax profit? That is:

$390,000 x 0.7= $273,000

or

$0.273m / 28.277m = 1c per share

"....on operating revenues of $31.3m million for the year ended 31 August 2009."

That revenue is, on the surface, quite creditable as last years company turnover was only $25m. However Rocklabs was only acquired on 1st April 2008. That means only five months earnings and revenues from Rocklabs was booked in the comparative FY2008 year. In FY2008 $9.2m in 'mining industry' revenue and $15.8m of 'Other Automation' revenue was booked. On an annualised basis that represents $22.1m in 'mining industry' revenue. That means on a 'like with like' comparative basis we might have expected FY2009 revenue of:

$22.1m + $15.8m = $37.9m

So only $31.3m worth of revenue, a drop of some 20%, indicates that SCT is hurting.

"The company is supported by a strong balance sheet with total assets of $35.4 million, cash on hand at balance date of $1.5 million and total bank loans of a modest $4.5 million."

Maybe, but with profits of only $0.273m per year, that debt would take:

$4.5m/$0.273m = 16.5 years to repay!

"A nominal dividend of 1.0 cent per share has been declared by the Directors in respect of the year ended 31 August 2009. This reflects the Directors' confidence in the growth and trading ability of the company, supported by the underlying strength of the company's balance sheet."

OK, but then look at the comments that follow:

"Recently the Australian Government has introduced fiscal incentives for Australian companies to invest in capital equipment. New Zealand is in need of such inducements that aid productivity increases."

Does that mean SCT is confident they will do well, *provided* the government comes to the party with subsidies?

"No commentary would be complete without mentioning the currency. As a manufacturing exporter the company is finding it increasingly difficult to contend with the volatility of the New Zealand dollar. Swings in the value of the New Zealand dollar relative to the US dollar have approached 45% in the last 12 months."

"Despite volatile trading conditions and uncertain economic times, management and staff continue to be successful in developing strategic relationships with customers in our niche markets."

That means they are still talking, but no significant new orders have been received, despite the huge fiscal stimulus that has taken place in the USA?

All in all, I rate the profit announcement as disappointing. Even so, the result is not out of line with problems being experienced by other NZ based exporters. Patience it seems is still a requirement for those on the SCT share register.

SNOOPY

discl: hold SCT

Snoopy
09-10-2009, 12:01 PM
Results out:
A profit and a dividend - although both very modest ($390,000 before tax and 1 cent)
It will be interseting to see how Rocklabs contributed !

Better than a loss however.

Time to buy Snoopy ?


I guess to buy or not is a decision that depends on your time horizon Pointy Hat. I can't tell you when the moons will align in just the right way to make SCT the place to put your money. I can tell you that when that happens it will almost certainly be too late to invest, as SCT shares are so hard to prise from the existing shareholders.

I see that last year in November I bought some SCT shares at 91c. I am quite happy with that purchase and subsequently I was able to buy more SCT shares even more cheaply. Looking back to February 2007 I bought some SCT at $2.15. With hindsight that looks silly although I had reasonable cause to think it was a good idea at the time.

Through 'not trying to time the market' I have ended up holding SCT shares at an average price of $1.33. I am comfortable with that because if I tried to get the number of shares I hold now on the market today, I think that I would end up paying more than $1.33.

But am I buying any more? No, although I will buy more if the share price drops. Hopefully my 'downramping of the annual result' post will mean more weak shareholders will 'sell out' and allow that to happen.

SNOOPY

discl: hold SCT

Snoopy
20-10-2009, 06:20 PM
But am I buying any more? No, although I will buy more if the share price drops. Hopefully my 'downramping of the annual result' post will mean more weak shareholders will 'sell out' and allow that to happen.


Nothing in the media, but did happen to notice a -h-u-g-e- day for Scott Technology on the market. In fact with nearly one million shares traded (around 3.5% of the company) , this could very well be the biggest single days trading in SCT shares since the company was listed.

Looking at last years 2008 share register, it looks like ING (NZ) nominees may have sold out. ING look to be the only institution on the register with a top twenty holding too. So if I am right, SCT looks like it has just become a virtual private company. I say that because the three largest shareholders on the register are effectively insiders. Where does that leave the small shareholders? Phaedrus would say the 'smart' money has just sold out, so by the 'definition of remainders' does that make we small shareholders the 'suckers'?

What I do know is that last time an institution sold out like this, it provided an excellent buying opportunity for the small investor. So SCT you have my attention. I am watching you closely.

SNOOPY

P.S. I notice that ING were not listed on the top twenty share register in 2007. So these smart guys at ING look pretty flighty to me. Personally I think the ING exit, if that is what it turns out to be, may be something to do with ANZ bringing former joint superannuation venture partner ING in house. Perhaps a new money manager is sweeping through the portfolio getting rid of stuff he doesn't like? I wonder who the buyer was? Perhaps that man James Ian Urquhart again?

Arthur
04-12-2009, 01:07 PM
I went to the AGM (best food and wine of any I have attended, a bad sign?)
Aside from slamming the exchange rate the Directors were all positive. They have bought shares and have topped up further since the annual report. Boning is gaining traction, Alliance has bought and they have plenty of inquiry. Saw a couple of robots in "action".
They are currently so busy that the Christmas holidays are being restricted.

Snoopy
04-12-2009, 01:59 PM
They are currently so busy that the Christmas holidays are being restricted.


This is the bit that I liked from Chris Hopkin's annual address Arthur:

"To provide you with some feel for the level of enquiry, we are currently bidding on or in early discussion with customers for four mining industry projects, five appliance systems and multiple meat processing systems. These total in excess of $40m and in addition there are at least another fifteen prospects that are in early stages."

I looked in "the Press" the next day for the reporters write up and saw absolutely nothing. Just as well the ODT was there to provide some coverage then!

The ODT, after chatting to Hopkins afterwards, went on to say that not all of that $40m of business under discussion would be put through the books during FY2010. For comparative purposes, revenue for FY2009 was $31.3m. Given the current exchange rates I would be looking for a small improvement in profit for FY2010. Given SCT sat on a PE of over 100 before the AGM, I was therefore somewhat surprised, although pleased, the SCT share price has moved up by 15% to $1.15 since the AGM.

Don't get me wrong, I am very pleased the workshop is busy. That means layoffs and any consequent loss of skilled engineers will be avoided. Scotts is a company that relies heavily on its 'human capital' which is something that can never be reflected in those bare accounting figures. But unlike some people, I do not believe that any major step change in profitability has been signalled by SCT management. Keeping turnover up and actually booking improved profits are two different things.

SNOOPY

discl: hold SCT

Snoopy
10-12-2009, 11:31 PM
I went to the AGM (best food and wine of any I have attended, a bad sign?)


Perhaps the 'grub upgrade' was because SCT were not putting money into renting an AGM venue? That meant they could put that AGM budget towards food and drink?

I am not in a position to compare myself. Despite being an SCT shareholder since July 1997, this year was the first time that I have made the long trek down to Dunedin to attend an Otago based AGM in person. I made the trip because I wanted to take the first opportunity for shareholders to inspect the brand new Dunedin premises. That and to try and get a handle on how the 'automation division', which is headquartered there, really operates.

The new Dunedin HQ, I found to be spacious, modern and clinical in construction. On a present day profit basis you would have to class the 'automation division' as the underperformer of the three business units (the other two being 'Appliance Manufacturing Lines' and 'Rocklabs'). We learned that since 2001 SCT and what is now Silver Fern Farms have invested and written off around $14m in joint venture meat industry robotics, via joint venture company 'Robotic Technologies Limited'. SCT have a 50% share in that joint venture. So that means around $7m of SCT shareholders funds have been spent here and are now gone. $7m is over twice the sum of the net profits of SCT from 2004 to 2009 inclusive. So we are not talking about an insignificant sum of money here.

Is it fair to judge the 'automation division' like this? Probably not. But CEO Chris Hopkins did answer a question on how this 'joint venture business structure' works in practice. According to Hopkins, development money is always written off unless there are tangible cashflows available in the future. In the case of the X-ray grading machine, SCT gets 5c per carcass out of the 'super profits' that result from optimally processing carcasses robotically. This greater yield improves further in relative terms as human workers tire during their shift. 5c per carcass may not sound like much. In terms of the $3 per carcass value gain that has been independently verified in Australia it isn't. But taken over thousands, indeed millions, of carcasses, then what SCT have is a reliable ongoing income stream. This ongoing income stream is represented as a capitalized 'intangible asset' of the kind described under note 11(i) on page 30 of the 2009 SCT annual report. In addition to this SCT gets a fixed margin on the engineering work they carry out for the joint venture RTL. In this way SCT get two bites at the technology cherry.

By contrast another joint venture 'Scott Milktech' (61% owned) has been set up to look at automated solutions in the dairy industry. With nothing close to commercialization as yet, all of the expenses incurred by Scott Milktech have been written off to date.

These joint venture structures are of obvious benefit in the initial commercialization phase of robotic industry technology. The ability to have meat industry players alongside you as marketers is what has allowed Silver Fern's rival Alliance Group to become sold as a customer on a concept that might have once been regarded as something from an engineer's fantasy playground. And now the third step on the way to the automated boning lamb room, the 'Knuckle Tipper', is well underway.

I am not 100% convinced that as the commercialization of the technology progresses, that these joint venture companies will prove the best structures going forwards. Hopkins made it very clear to those who heard his AGM presentation that the board is very aware of getting a return on shareholders funds. And that doesn't rule out the possibility of selling out of a joint venture like 'Robotic Technologies Limited' in the future if it is in the interests of SCT shareholders to do so. Of course 'selling out' does not mean abandoning robotic technology development in the meat industry. I think we are talking here more of streamlining the way this technology is marketed, and carrying on the technological development on a contract basis.

We were told that $10m of Automation Technology is on the order books as we work through FY2010. How much of that translates to net profits for FY2010, it will be interesting to see.

SNOOPY

discl: hold SCT

Snoopy
11-12-2009, 03:46 PM
The Directors of Scott Technology Limited advise that the company is to reduce staff numbers by approximately twenty across its Dunedin and Christchurch sites. Three quarters of these redundancies are voluntary.

Following the completion of this process, Scott Technology Limited's staff numbers will be approximately 60 in Dunedin, 70 in Christchurch and 35 at newly acquired subsidiary, Rocklabs, in Auckland; a total of approximately 165 staff.

Yours faithfully

Chris Hopkins
Managing Director
Time:2008-06-27:16:05:50


That was a quote from 18 months ago, and my how things have changed in the outlook! The reason I have brought up this old quote is because there has been a lot of emphasis on company turnover by SCT when quoting jobs in the pipeline. $40m of orders going through each year for SCT does look doable going forwards, even if they don't quite make $40m for FY2010. If we look back to the last time turnover was that high, in FY2003 and FY2004, $40m turnover equated to profits of some $4.7m (around 20cps in those days).

But there have been significant changes to the cost structure since Rocklabs became part of the SCT group. An extra 35 skilled staff will not come cheaply. If we say that each of those workers costs $100,000 to house, equip and pay on average that means an extra $3.5m is now built into the SCT cost structure. And that means for equivalent turnover our long term net profit achievable may be only:

$4.7m-$3.5m=$1.2m

Based on the now 28.5m SCT shares on issue, that means earnings per share could be around 4.2c. At up to $1.40, where SCT has been trading over the last few days, that equates to a PE of 33. That is pretty rich, even for a company with the potential of SCT, I would have to say. I would want to see some more SCT profit results on the table before I was prepared to buy a whole lot more SCT shares at these levels.

SNOOPY

discl: hold SCT

Snoopy
15-03-2010, 07:27 PM
There has been a lot of emphasis on company turnover by SCT when quoting jobs in the pipeline. $40m of orders going through each year for SCT does look doable going forwards, even if they don't quite make $40m for FY2010. If we look back to the last time turnover was that high, in FY2003 and FY2004, $40m turnover equated to profits of some $4.7m (around 20cps in those days).

But there have been significant changes to the cost structure since Rocklabs became part of the SCT group. An extra 35 skilled staff will not come cheaply. If we say that each of those workers costs $100,000 to house, equip and pay on average that means an extra $3.5m is now built into the SCT cost structure. And that means for equivalent turnover our long term net profit achievable may be only:

$4.7m-$3.5m=$1.2m

Based on the now 28.5m SCT shares on issue, that means earnings per share could be around 4.2c. At up to $1.40, where SCT has been trading over the last few days, that equates to a PE of 33. That is pretty rich, even for a company with the potential of SCT, I would have to say. I would want to see some more SCT profit results on the table before I was prepared to buy a whole lot more SCT shares at these levels.


A 'pre interim result' announcement made to the market today gives us a cryptic preview of the first half year. The 1:10 tax free bonus issue, ex March 26th is kind of quaint. But the kiwi punters seem to like this kind of thing, so I guess the directors know what they are doing. And more shares on issue should help liquidity in the long term.

SCT don't normally pay out more than they earn as dividends. But in down cycles, they tend to pay out all that they have earned to keep faith with the long suffering shareholders. The 1.25c interim dividend on the increased share capital equates to a half year profit of around $400,000. That is nearly a $1m turnaround from the $470,000 loss incurred in HY2009. So given the second half year for FY2009 realised a profit of $735,000, it looks like we could see an FY2010 profit of:

$400,000 + $735,000 = $1.14m

That figure is in the ballpark of what I forecast in my 11th December 2009 post. On that basis, I wouldn't expect much of a reaction in the share price once the market digests the interim result. Looks like 'steady as she goes' for SCT.

SNOOPY

Snoopy
31-03-2010, 05:11 PM
SCT don't normally pay out more than they earn as dividends. But in down cycles, they tend to pay out all that they have earned to keep faith with the long suffering shareholders. The 1.25c interim dividend on the increased share capital equates to a half year profit of around $400,000. That is nearly a $1m turnaround from the $470,000 loss incurred in HY2009. So given the second half year for FY2009 realised a profit of $735,000, it looks like we could see an FY2010 profit of:

"$400,000 + $735,000 = $1.14m

That figure is in the ballpark of what I forecast in my 11th December 2009 post. On that basis, I wouldn't expect much of a reaction in the share price once the market digests the interim result. Looks like 'steady as she goes' for SCT.


The actual half year 2010 profit announcement was out today.

"The Group's unaudited result for the six months ended 28 February 2010 was a net profit before tax of $1.4 million,"

That is rather better than I was expecting, but has been tempered by the following

"During this period we have been successful in securing significant system sales within the Appliance, Precious Metals and Meat Processing markets. Contracts for new projects destined for Australia, Brazil, China, Chile and the USA *have stretched our capacity to a point where we have a requirement
for additional resources*.

Translated, this means either subcontractinng or hiring and training new workers. This is bad news for the second half profit, as it means that the company is already operating at short term 'profit capacity'. In turn that means that even if turnover goes up in the second half, company profits have probably plateaued. Past experience with skilled contractors would indicate that SCT will probably only break even on that part of the work.

I am now projecting a full year SCT profit of $2.8m. With the 28.5m shares now on issue, this equates to earnings of 9.8c per share. With a share price of $1.20 this equates to a PE ratio of 12.2. Does any one want to argue that this isn't about right?

SNOOPY

discl: hold SCT

Arthur
31-03-2010, 05:22 PM
Thanks for the analysis Snoopy. It would be nice to think that they can increase their margins if they have this much work on. They did say that they were stretched at the AGM, so they have had time to be more selective looking for work. They have sold another boning machine which will be paying a royalty, not much but in the right direction. Cheers Arthur

Snoopy
01-04-2010, 07:25 PM
Thanks for the analysis Snoopy. It would be nice to think that they can increase their margins if they have this much work on. They did say that they were stretched at the AGM, so they have had time to be more selective looking for work.


Did you see that welding robot they were building for some outfit in Wellington (IIRC) as a working display at the AGM? I am sure it will be very successful. But the thought did cross my mind that welding robots are really at the 'commodity' end of the robotic work they are doing. I would have thought they might be better accelerating the development of the next stage of the automated boning room. Or the automated milking shed concept they were working on? I did think afterwards: "Why did they take that Wellington job on?"

Meanwhile "back on the market" the SCT share price rose 5c to $1.25 today, but buyers were there at $1.27 at the end (equivalent to $1.40 pre bonus issue) which means a real rise of 5.8% today. That is still only a projected PE of 12.9. Perhaps I was a little too downbeat on my assessment of the result yesterday?

SNOOPY

Lizard
12-05-2010, 04:27 PM
That looks great! Having spent one university summer standing on the "catch and pack" side of one of those bandsaws, I'd be happy to leave it to the robots! (Oh and they probably won't mind spending their summer at 10oC either!).

Sideshow Bob
12-05-2010, 08:49 PM
Liz, I think this sort of them is what you are talking about:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10642474

Snoopy
17-07-2010, 11:02 AM
A disgraceful announcement was made on 'Sharechat' yesterday. Notice was given that Stuart James McLaughlan (Director), Kevin Francis Kearney (Manager) and Christopher John Hopkins (Managing Director) had filed changes in their shareholdings. But no mention was made as to whether they had increased or decreased their holdings, which is the critical information the market needs!

Nothing on SCT's own website, but by going to the NZX I found SJM bought 5560 shares at $1.12, KFK bought 3038 shares at $1.18 and CJH bought 4000 shares at $1.11. Insider buying is generally a good thing, but why send us on a complicated web chase to retrieve the information? Sharechat, you should be ashamed of yourselves.

SNOOPY

Phaedrus
18-07-2010, 07:49 AM
http://i602.photobucket.com/albums/tt102/PhaedrusPB/SCT718.gif

Snoopy
25-09-2010, 03:42 PM
On 13th September2010, Ian Urquhart second largest shareholder in SCT with 15.1% of shares on issue (source 2009 Annual Report) passed away. He was 76. The death notice in the Press named no living family, but Ian seemed to have been a bit of a mentor to younger investors in his last few years according to the article in Saturday 25ths Press. Looks like he will be sadly missed. Perhaps this represents the start of a real passing of the baton to a younger generation of investor at SCT? In any event I will be watching with interest to see what happens to Ian's strategic stake.

SNOOPY

percy
25-09-2010, 04:29 PM
On 13th September2010, Ian Urquhart second largest shareholder in SCT with 15.1% of shares on issue (source 2009 Annual Report) passed away. He was 76. The death notice in the Press named no living family, but Ian seemed to have been a bit of a mentor to younger investors in his last few years according to the article in Saturday 25ths Press. Looks like he will be sadly missed. Perhaps this represents the start of a real passing of the baton to a younger generation of investor at SCT? In any event I will be watching with interest to see what happens to Ian's strategic stake.

SNOOPY
I first met Ian at Ebos AGM in approx 1991.About 10 shareholders present.The Chairman Jamie maddren past round the afternoon tea.Mark Waller and forget his name {was canty cricket captain and went to manage EBO in aussie ] were having Ian on.Wanted to know where he got his shoes from?.Were taking bets either Salvation Army or Methodis Misson,as they had not seen him wear shoes before,and both knowing Ian well knew he would not have paid full price at a shop.!!!! EBO at the time had a market cap of just over $2 mil.I had cause to ring him over something I was unsure of about EBO.He was very easy to speak to,and made sure I understood what he was telling me. At that time Ian had a lot of EBO shares.Maurice Ryan was the cricket guy,just remembered.Ian worked for the National Bank,made a lot of money on Brierly investments,NZ Cement company,and Nuplex.I last saw him a couple of years ago at a Postie Plus AGM.A character,who was always interesting to speak to.Yes Snoopy it will be interesting to see what happens to Ian's SCT holding,and I am pleased you posted Ian's vale.He was single and looked after his parents for a number of years.He had good advice from Geoff Wilkinson at Hamilton Hinden and Green before Geoff retired a few years ago.

Snoopy
08-10-2010, 01:18 PM
Meanwhile "back on the market" the SCT share price rose 5c to $1.25 today, but buyers were there at $1.27 at the end (equivalent to $1.40 pre bonus issue) which means a real rise of 5.8% today.


Been a long time at $1.25. But todays result $5m NPAT or 17.6cps (one off depreciation tax adjustment on buildings taken out) - the third best since listing in 1996 in eps terms- makes SCT look conservative after being so long 'apparently overvalued'. At $1.25 the PE is now only 7.1 (if you can get any shares)! Even at the 1.30 sell side, the PE is only 7.4. Once the market digests that result, I think it might be enough to get some of those fundamentalists Scott hunting, I mean Stock Hunting again.

SNOOPY

discl: hold SCT

Snoopy
11-10-2010, 10:03 AM
Even at the 1.30 sell side, the PE is only 7.4. Once the market digests that result, I think it might be enough to get some of those fundamentalists Scott hunting, I mean Stock Hunting again.


SCT the fast mover on market opening today. Buy siders prepared to pay $1.37, a PE of 7.8 (excluding building depreciation tax effect). Even those sell siders at a PE of 8.5 ($1.50) look like they are giving their shares away cheaply. More details of the result will be fascinating as previously high exchange rates have spelt difficulty for SCT. How have they overcome that? If SCT were trading on the same PE as FPA, the share price would now be $1.94. No surprise from me if the SCT share price gets there by dividend payout time. Meanwhile the announced dividend reinvestment plan signals SCT are keen on banking capital. Since their bank debt is minimal, I wonder why?

SNOOPY

Snoopy
18-10-2010, 08:40 PM
Buy siders prepared to pay $1.37, a PE of 7.8 (excluding building depreciation tax effect). Even those sell siders at a PE of 8.5 ($1.50) look like they are giving their shares away cheaply.

Down the roller coaster to $1.31 (higher low) and back up again to a $1.42 close today (higher high). I guess that means the 'uptrend' for SCT has offically started. Minimal volume though (as per usual) so not much of a traders share this SCT. However for those of us who were allowed to accumulate on the downtrend and in the trading range (the investors), this one is starting to look promising. Promising for the global economy too perhaps. Because as a production line supplier to other manufacturers, SCT is often the first light at the end of the downturn tunnel.

SNOOPY

Snoopy
22-10-2010, 10:32 AM
Meanwhile the announced dividend reinvestment plan signals SCT are keen on banking capital. Since their bank debt is minimal, I wonder why?

One possibility. SCT have a very full order book and a lot of capital is tied up "in the workshop" on jobs that take over a year to complete. Those jobs require significant working capital that cannot be fully invoiced. But if that is true, why does 'Daily Sharechat' today think that SCT profit will plunge from a normailised underlying $3.9m+$1.1m=$5m in FY2010:
"Our underlying net profit after tax on operating results for the year was $3.9 million compared to $0.3 million in 2009. The underlying profit in 2010 was reduced by a tax adjustment of $1.1 million for a tax change on building depreciation that accumulates over the next 50 or more years but is required to be adjusted in the current year." down to only $3.6m in FY2011, a massive 38% fall?

SNOOPY

Snoopy
29-10-2010, 09:52 AM
In any event I will be watching with interest to see what happens to Ian's strategic stake.


Answer: On 28th October the late Ian's shares were transferred to the J I Urquhart Trust. So that takes away any overhang of SCT shares in the market. Or does it? Perhaps the trustees of the J I Urquhart Trust will be compelled by law to sell down some SCT shares as part of their duties of being 'prudent' (not having too many of their eggs in one basket). Anyone know the legal requirements of this situation?

SNOOPY

percy
29-10-2010, 06:41 PM
Answer: On 28th October the late Ian's shares were transferred to the J I Urquhart Trust. So that takes away any overhang of SCT shares in the market. Or does it? Perhaps the trustees of the J I Urquhart Trust will be compelled by law to sell down some SCT shares as part of their duties of being 'prudent' (not having too many of their eggs in one basket). Anyone know the legal requirements of this situation?

SNOOPY

Do not Know.Athough the shares have gone into a trust we do not know if Ian left "special" instructions in his will.If not a trustee would have to be very careful.As well as his "overweight" SCT holding there were some rather large holdings in illiquid shares. I think a trustee would be more worried about them thanSCT which is proving to be a very good investment. I feel sure a trustee would want to have more"balanced" potfolio.I know Ian cashed up a lot of shares a few years ago and put a lot of money with SBS,.so there may not be any hurry to sell or reposition the portfolio.

Snoopy
29-10-2010, 07:24 PM
Do not Know.Athough the shares have gone into a trust we do not know if Ian left "special" instructions in his will. If not a trustee would have to be very careful.

Perhaps Ian did leave 'special instructions'. But the trustees would have their own legal requirements to follow. I remember a legal case a few years ago when the trustees were severely criticised by the judicial system for having too many assets in 'safe' fixed interest investments, I think because an interim beneficiary wanted income, which eroded the inflation adjusted value of the portfolio over a decade or so. I remember some discussion in the media at the time about how future trustees could not just ignore the composition of a portfolio in relation to understood prudent investment practice. Can trustees really be directed from beyond the grave? I would love to know!

SNOOPY

percy
29-10-2010, 07:36 PM
Perhaps Ian did leave 'special instructions'. But the trustees would have their own legal requirements to follow. I remember a legal case a few years ago when the trustees were severely criticised by the judicial system for having too many assets in 'safe' fixed interest investments, I think because an interim beneficiary wanted income, which eroded the inflation adjusted value of the portfolio over a decade or so. I remember some discussion in the media at the time about how future trustees could not just ignore the composition of a portfolio in relation to understood prudent investment practice. Can trustees really be directed from beyond the grave? I would love to know!

SNOOPY
Yes I remember that case well.You can do anything from the other side.ie leave all your money to cats protection society.You could put in your will your SCT shares can not be sold for 10yearsThat is what a will is.However if no provision is in the will you would have to do as you point out 'prudent investment practice",Ian's portfolio would cause any trustee headaches.{Big large ones!!!}I note Patrick Lee @Craigs mentioned on shareholder notices.Patrick is a very experienced "prudent" broker,so trustees should get good advice.

Marilyn Munroe
29-10-2010, 10:29 PM
Snoopy said;

"I remember a legal case a few years ago when the trustees were severely criticised by the judicial system for having too many assets in 'safe' fixed interest investments,"

Mulligan (deceased) v Pyne Gould Guinness Trust Ltd & Anor [1998] 1 NZLR 481, is the case you were probably referring to.

Boop boop de do

Marilyn

Snoopy
05-11-2010, 04:37 PM
Meanwhile the announced dividend reinvestment plan signals SCT are keen on banking capital. Since their bank debt is minimal, I wonder why?

Answers from SCT today. Management want more liquidity, which they think the extra shares bought via the DRP and the latest bonus issue will give them. They are also on the look out for acquistions which they would prefer to pay for without borrowings. If you have the capital, that is a preferable route to discounting the value of your existing businesses by paying for acquisitions with cheap shares. The discount offered on the DRP is generous at 10%. However, given the SCT dividend drought of the last few years I am leaning towards taking the cash myself.

SNOOPY

Under Surveillance
06-11-2010, 11:48 AM
I'll be all in on the DRP. However, can't decide whether the extent of the discount, 10%, indicates naivety or desperation. Also, given the light trading of the share (frequently nil trades per day) and that the weighted average price for the DRP will be calculated over just 3 trading days, it would not cost the wide boys much to manipulate the average.

Snoopy
06-11-2010, 12:03 PM
"Our underlying net profit after tax on operating results for the year was $3.9 million compared to $0.3 million in 2009. The underlying profit in 2010 was reduced by a tax adjustment of $1.1 million for a tax change on building depreciation that accumulates over the next 50 or more years but is required to be adjusted in the current year."


Just a correction here, after study of the Annual Report for 2010 that arrived today. The $3.9m figure quoted already includes the $1.1m one off tax adjustment. So $3.9m is the after adjustment underlying profit, not the $5.0m that I previously assumed. Also I neglected to take into account the recent 1:10 bonus issue when calculating underlying earnings per share (31.322m shares are now on issue). So actual eps for FY2010 was $3.890m/31.322m = 12.4cps. At $1.38 that means SCT is now trading on a PE of 11.1. For believers in the company that still looks modest. For the doubters that this level of profitability can be sustained I guess you could call that $1.38 share price fair.

I think that given SCT's history, the company probably must now 'earn some stripes' before the wider investing public is willing to consider promotion ( a rerate those shares). I still think a share price of $1.94 is achievable, but SCT may need another year of outperformance 'runs on the board' to get there.

Snoopy
06-11-2010, 12:11 PM
I'll be all in on the DRP. However, can't decide whether the extent of the discount, 10%, indicates naivety or desperation. Also, given the light trading of the share (frequently nil trades per day) and that the weighted average price for the DRP will be calculated over just 3 trading days, it would not cost the wide boys much to manipulate the average.

I had assumed the 10% discount was to allow shareholders to depress the share price ( -7% to 10%) by selling out, without effectively losing that dividend cash. The discount probably has to be big because of the low liquidity of the shares, and to give some encouragement for shareholders to retain those shares. You make a very good point about the potential for share price manipulation in this proposed DRP scheme, "Under Surveillance". If the shares are manipulated down, perhaps I will put my hand up for the shares after all to avoid future earnings dilution of my holding.

SNOOPY

Snoopy
06-11-2010, 12:32 PM
So actual eps for FY2010 was $3.890m/31.322m = 12.4cps. At $1.38 that means SCT is now trading on a PE of 11.1. For believers in the company that still looks modest. For the doubters that this level of profitability can be sustained I guess you could call that $1.38 share price fair.

More comments on the result from AR2010. p43 shows that revenues are now nearly equally shared between the up and down appliance supply line business ($21.5m) and mining industry equipment ($19.1m for the old Rocklabs). The meat processing industry revenue is a smaller and additional $4.9m, but if you believe managment is poised to 'breakout' this year.

Some of the soft share price action of last week might be because of our exchange rate firming. I don't believe the firming exchange rate will make any difference to SCT over the next 12 months. SCT have a history of fully hedging their Appliance Line profits once a contract is won and there is more than 12 months work in the pipeline from what I can see. In mining supplies SCT have what looks to be a superior product line. I like the portable Container Labs and the automated system option (leveraging SCT's automation technology) for analysing large numbers of samples.

As long as high commodity prices boost mining industry customer profits, I think Rocklab sales should remain buoyant

SNOOPY

Snoopy
20-11-2010, 12:23 PM
given that the weighted average price for the DRP will be calculated over just 3 trading days, it would not cost the wide boys much to manipulate the average.

Last sale $1.40 => ex-dividend price of $1.36. Using N=PSxR/P and plan SP discount of 10%, maximum number of shares issued will be:

(31,322,369x 0.04)/(1.36 x 0.9)=1.02m shares

=> Current diluted PE (SP is $1.40) is 11.3x(31.3+1.0)/31.3 = 11.7. Also PE of new shares issued at a discounted $1.22 would be 10.2. A bargain or not? The answer to that question determines if the SCT DRP is for you!

SNOOPY

Snoopy
20-11-2010, 12:27 PM
Last sale $1.40 => ex-dividend price of $1.36.

I should note here that I am assuming the SCT share price does not move until it goes ex-dividend, and then trades at the theoretical ex-dividend price for three days. The PE figures quoted will change if the share price moves.

SNOOPY

Snoopy
01-12-2010, 07:54 AM
I should note here that I am assuming the SCT share price does not move until it goes ex-dividend, and then trades at the theoretical ex-dividend price for three days. The PE figures quoted will change if the share price moves.


60,000 (about one month's normal trading) shares sold at $1.20 yesterday, c.f. $1.36 being the theoretical ex-dividend price!

Using N=PSxR/P and plan SP discount of 10%, maximum number of shares issued will now be:

(31,322,369x 0.04)/(1.20 x 0.9)=1.16m shares

Very disappointing to see market manipulation like this. But I guess 'Under Surveillance' did warn us.

SNOOPY

Voltaire
01-12-2010, 10:06 AM
60,000 (about one month's normal trading) shares sold at $1.20 yesterday, c.f. $1.36 being the theoretical ex-dividend price!

Using N=PSxR/P and plan SP discount of 10%, maximum number of shares issued will now be:

(31,322,369x 0.04)/(1.20 x 0.9)=1.16m shares

Very disappointing to see market manipulation like this. But I guess 'Under Surveillance' did warn us.

SNOOPY

Snoopy, from memory there is an express provision in the DRP statement from SCT that enables them to set aside the discount formula if there is clear evidence of manipulation of the share price over the determining period.

Given the volume of shares traded, if there is manipulation afoot it points to someone with a very substantial holding pulling the strings (in order for the associated gain in the number of issued shares to cover the loss on sale at $1.20).

Under Surveillance
01-12-2010, 12:54 PM
Snoopy, from memory there is an express provision in the DRP statement from SCT that enables them to set aside the discount formula if there is clear evidence of manipulation of the share price over the determining period.

Given the volume of shares traded, if there is manipulation afoot it points to someone with a very substantial holding pulling the strings (in order for the associated gain in the number of issued shares to cover the loss on sale at $1.20).

Agreed, Voltaire, the putative loss on sale of 60,000 at $1.20 would exceed the benefit of the ensuing increase in the number of discounted shares under the DRP for all but the 3 largest shareholders (as of 17 September 2010). In theory a syndicate of less large players could obtain a net benefit.

Disclosure: I placed a buy order at $1.20 today (part-filled when last I checked) not to abet manipulation but to steal a bargain.

Snoopy
03-12-2010, 08:49 PM
60,000 (about one month's normal trading) shares sold at $1.20 yesterday, c.f. $1.36 being the theoretical ex-dividend price!


Another couple of days of 60,000 share traded. Looks like the DRP share issue price will be $1.08. Now that the determination of price period has finished, trading volumes drop by 95% the very next day! What a quiet chap that Mark Wheldon is!

Good on you "Under Surveillance", for being awake and astute enough to take advantage of the situation. Chalk up one to the Mum and Dad investor at least.


SNOOPY

Snoopy
09-12-2010, 03:08 PM
Snoopy, from memory there is an express provision in the DRP statement from SCT that enables them to set aside the discount formula if there is clear evidence of manipulation of the share price over the determining period.

Given the volume of shares traded, if there is manipulation afoot it points to someone with a very substantial holding pulling the strings (in order for the associated gain in the number of issued shares to cover the loss on sale at $1.20).

Hindsight now provides the answer, and nothing was done. 263,092 shares were issued as a result of the DRP at $1.09. Chatting after the AGM I was told that the board had identified that it was largely a substantial holder doing the selling and playing an arbitrage game. Selling at $1.20 and picking up new shares at $1.09 to replace them was a good little cash generating exercise by the looks of things. The seller was a "new" large shareholder, acting on advice of their financial advisor. The board are looking at changing the DRP parameters next time to make this sort of thing less attractive. As a general policy this new large shareholder apparently assured the board it is a net buyer not a seller of shares. The board was apparently genuinely surprised that their DRP scheme had been manipulated like this. I thought the board were probably a little naieve....

SNOOPY

Snoopy
09-12-2010, 03:16 PM
A good turnout of shareholders made their way to Scott Technologies Mace's Road headquarters for the AGM presentations and a post AGM tour of the facilities, with senior staff assisting.

Much was made of the connection between economic productivity and the need for ongoing investment. SCT significantly made $NZ7m of research and development investment over the year, which represents around 15% of sales. If that sounds high it is because some of the one off project work done for customers is classified as Research and Development under our laws. This wasn't just cash lost to the company either. Government R&D tax breaks on both sides of the Tasman made this investment less cash negative than it other wise would have been.

An open day at the Finegand Meat Works near Dunedin was held for Australasian industry players in June 2010. MD Chris Hopkins was uncharacteristically enthusiastic at the reception they got from showing that dream on paper 7 years ago was now a working reality. The robotic beef processing line has been squarely aimed at the NZ and Australian markets so far. But there are now potential customers in England and Brazil that are showing interest. Hopkins envisages selling lots and lots of these systems now. Processing of lamb would require some robot reengineering, but remains another growth avenue for the future.

We were told that the automated milking shed joint venture is a largely seasonal rather than a year round development project. Nevertheless within a timeframe of 6 months to a year shareholders should prepare themselves for some positive developments with this joint venture. If it is anything like the meat robotics joint venture though, don't hold your breath for any significant profits from this for quite a few years!

The automated production line systems have a very full order book, with lines on the point of being commissioned in Brazil and Spain. This latter success it was pointed out is particularly meritorious as one of Scott's only true global competitors operates from Spain, so this sale was a bit of a coals to Newcastle event. The customer was Bosch Siemanns, manufacturer of high line appliances. BS have been very impressed by the way Scotts have conducted themselves and have a couple more production line projects on the go in Europe, in association with Scotts, the next being Turkey. Quality is apparently superiour to any work they have had done from german engineering companies and Scotts are a significantly cheaper supplier as well.

Helping keeping contract pricing competitive are 4x Euro 10m foreign exchange contract taken out at the rate of 1NZD = 0.4 Euro (!) This exchange rate will apply to all of these BS projects, and that more or less guarantees strong profitability in Europe for at least two years to come. Now we know how SCT have been able to do so well when the day to day exchange rate (1NZD =0.55 euro) is not nearly so favourable! One doubt I still have is the ability to keep costs on the workforce over periods when many outside contractors must be hired to complete tasks on time and on budget.

Nevertheless I left the meeting probably happier than I have ever been to be an SCT shareholder.

SNOOPY

Marilyn Munroe
09-12-2010, 08:50 PM
Processing of lamb would require some robot re-engineering, but remains another growth avenue for the future.

SNOOPY

Your recollection of the above point differs from mine. I recall that the automated boning system was currently only capable of processing sheep meat. It would require some redesign to handle beef but was thought to be mainly a matter of scale and not seen as an difficult hurdle. The potential market for beef machines was said to greater than that for sheep.

I found the outlook from the top table to be quite positive and enjoyed the factory tour.

The refreshments afterwards were nice. There cannot have been many Sharechaters there, as was no danger of the supply of pies being under threat.

Boop boop de do

Marilyn

percy
10-12-2010, 07:33 AM
Your recollection of the above point differs from mine. I recall that the automated boning system was currently only capable of processing sheep meat. It would require some redesign to handle beef but was thought to be mainly a matter of scale and not seen as an difficult hurdle. The potential market for beef machines was said to greater than that for sheep.

I found the outlook from the top table to be quite positive and enjoyed the factory tour.

The refreshments afterwards were nice. There cannot have been many Sharechaters there, as was no danger of the supply of pies being under threat.

Boop boop de do

Marilyn

MM.
I expect you know your boners!!!

Marilyn Munroe
10-12-2010, 09:46 AM
MM.
I expect you know your boners!!!

You are probably making a snide remark about the amorous history of my alter-ego Marilyn.

But the real person behind the mask has worked in the freezing works in the past, so yes I used to know some boners.

Which brings me to band saws. They are nasty dangerous things, just as likely to cut the meat worker as the meat.

My opinion is that if these machines from Scott Technology eliminate band saws from boning rooms then they are doing Gods work.

Boop boop de do

Marilyn

percy
10-12-2010, 10:16 AM
Yes I agree the boner machines will be welcome in freezing works,as you point out eliminating the dangerous band saws,and think it fitting you chose a fellow boner expert as your alter ego.I felt the comment was more factual than snide.!!!!???? I can just imagen MM in a meat works with Tony Curtis and Jack Lennon.

Under Surveillance
10-12-2010, 01:31 PM
Hindsight now provides the answer, and nothing was done. 263,092 shares were issued as a result of the DRP at $1.09. Chatting after the AGM I was told that the board had identified that it was largely a substantial holder doing the selling and playing an arbitrage game. Selling at $1.20 and picking up new shares at $1.09 to replace them was a good little cash generating exercise by the looks of things. The seller was a "new" large shareholder, acting on advice of their financial advisor. The board are looking at changing the DRP parameters next time to make this sort of thing less attractive. As a general policy this new large shareholder apparently assured the board it is a net buyer not a seller of shares. The board was apparently genuinely surprised that their DRP scheme had been manipulated like this. I thought the board were probably a little naieve....

SNOOPY

If the NZX website is to be believed, the only new large shareholding advised by SCT to NZX since the list in the annual report is that of the trustees of the estate of Ian Urquhart. The notice to NZX gave CraigsIP as the email contact; presumably they are the advisors to the trustees? The trustees could have foregone all or part of a total cash dividend of $197,533 [4,938,327 shares x $0.04] in favour of up to 181,223 shares @ a nominal $1.09.

The total uptake of new shares under the DRP was just 263,092 of the possible 1,149,445 [31,322,369 shares x $0.04 dividend/$1.09]. Holders of 77.1% of the dividend-bearing shares took the cash. Holders of just 22.9% took shares, even with the 10% discount, and the arbitrage player. An unsuccessful exercise all round for the credibility of the directors.

Snoopy
10-12-2010, 04:54 PM
Your recollection of the above point differs from mine. I recall that the automated boning system was currently only capable of processing sheep meat. It would require some redesign to handle beef but was thought to be mainly a matter of scale and not seen as an difficult hurdle. The potential market for beef machines was said to greater than that for sheep.


Quite right Marilyn, I stand corrected. But you have to admit those carcase shots in the Annual Report look like very large animals! I was seduced by the imagery.



The refreshments afterwards were nice. There cannot have been many Sharechaters there, as was no danger of the supply of pies being under threat.


Well I tried to hold the end up by eating more than my share!

SNOOPY

Snoopy
10-12-2010, 05:02 PM
GENERAL: SCT: SCT ATTRACTS MAJOR GOVERNMENT SUPPORT FOR R&D

10 December 2010

SCOTT TECHNOLOGY LTD ATTRACTS MAJOR GOVERNMENT SUPPORT FOR R&D

The company is pleased to advise that we have been successful in our application for the Governments Technology Development Grant. This has been awarded to Scott to a maximum of $3.7 million over 3 years and is payable at the rate of 20% of eligible spend on research and development (R&D).

-------

That's another nice little cashflow bonus for SCT shareholders. $3.7m represents 11.7cps! Note quite cash in the bank as SCT will have to spend $18.5m over three years to get the $3.7m rebate. But having such a vote of confidence in the company by the government will not do SCT any harm.

SNOOPY

Snoopy
13-12-2010, 06:29 PM
That's another nice little cashflow bonus for SCT shareholders. $3.7m represents 11.7cps! Note quite cash in the bank as SCT will have to spend $18.5m over three years to get the $3.7m rebate.


A good day for SCT today with the share price rising 15c to $1.36. Looks like that near cash in the bank got recognised by the market.

I ended up taking the cash dividend like most shareholders. As it turned out I would have been better to take the DRP shares like our arbitrage player. But I'm not sure I wanted to risk my cash payout by trying to be clever with some arbitrage deal! The problem with SCT from my perspective is that the potential has been there for a long time. Realising that potential in cash has been a harder task, as dividends have been very thin in the five years up until the most recent payout. I am guessing many shareholders were in this position, and that accounts for the relative failure of the DRP. I am not sure I join the chorus of blaming directors for relatively few shares being issued under the DRP. I am more of the opinion that long term historical company performance is to blame. When shareholders are starved of cash for a long time, cash on the table, in the form of a dividend cheque, is hard to resist.

SNOOPY

Snoopy
05-01-2011, 04:25 PM
The problem with SCT from my perspective is that the potential has been there for a long time. Realising that potential in cash has been a harder task, as dividends have been very thin in the five years up until the most recent payout. When shareholders are starved of cash for a long time, cash on the table, in the form of a dividend cheque, is hard to resist.


I took the opportunity to unload a few SCT shares over the last few trading days. This will come as a shock I guess to some reading this thread where I have sometimes seemed like a single handed SCT tout! However don't be too concerned as SCT remains my second largest NZX shareholding, and I certainly won't be selling out of the company overall.

The reason for my selldown is to reduce what has become quite an overweight position for me in a somewhat illiquid company. The $1.40 price I sold at represents a ten year average gross yield of 5.6% based on a 30% tax rate. As a strictly yield based investment, I think that is a fair price albeit at the bottom end of the range that I would consider 'fair'. My retrospective analysis also assumes that management will be unable to improve their 10 year dividend performance, a suggestion that I suspect management would hotly dispute!

What swung me to sell down was management's comment at the AGM about the SCT price being restored to more appropriate levels, whereas before that comment I had considered SCT to be dirt cheap! I also noted that after the latest release of results there was no top up buying from management, as had been evident after the last result release when the share price was around $1.20. So reluctantly I sold down a few shares reducing my average purchase price from a dizzying $1.23 to $1.22.

Also negative I thought was the comments about looking to raise more capital, albeit in the context of the dividend reinvestment plan. When SCT made their last acquisition of Rocklabs, part of the purchase price was paid in shares. Rocklabs has since turned out to be an excellent acquisition. But to buy Rocklabs SCT effectively devalued their existing businesses by giving away shares at $1.20 or so IIRC. I think there is potential for the same thing to happen again should SCT find another acquisition they fancy.

So will I sell down more SCT shares? Certainly I don't need to, and long term I think my recent sell down decision will be seen as stupid. However, there is a possibility that following the expiry of their European hedging in a couple of years time, profits from the appliance production line division will not flow so easily. Given the unproven nature of the meat handing robot divisions profits and the possibility of a medium term capital dilution - mimicing the Rocklabs acquisition - it was an easy decision to take to reduce my holding just a little. There are the negatives on the table lest anyone think that I have fallen in love with SCT.

Hopefully other shareholders will post their thoughts as to why I was wrong to sell down. I need to you to convince me of my foolishness so that I can feel happier about the 90% of my SCT shares that I still hold! In the meantime I will stick to my old adage of 'selling into market strength' after a fairly good couple immediate past couple of years for SCT sharehoilders.

SNOOPY

percy
05-01-2011, 07:24 PM
I think you are correct to sell down.Long led times,difficult to retain staff in down turns,and doubt over future dividends makes this thinly traded share an at risk investment.You would never know what the future holds with them.A cheap share,a dear share,just when you think you understand it managemebt come up with a contrary view.You may be more comfortable with RYM which I am sure you fully understand after your's and sauce's discusions,[which led me to buy more].What ever I look forward to seeing where you invest.

Snoopy
05-01-2011, 08:27 PM
I think you are correct to sell down. Long lead times, difficult to retain staff in down turns,..


Both points are known to the market Percy, and to some extent reflected with the low PE ratio the share now trades at (around 10). Matching staff to the ongoing workload I acknowledge is an ongoing issue. But my impression is the staff are treated well, and retaining staff is not an issue, provided the work keeps coming. I think there is some duty sharing between Christchurch (Appliances) and Dunedin (Robotics). Perhaps Rocklabs in Auckland is not so well integrated yet?

SNOOPY

Snoopy
05-01-2011, 08:34 PM
I think you are correct to sell down. Doubt over future dividends makes this thinly traded share an at risk investment.You would never know what the future holds with them.A cheap share,a dear share,just when you think you understand it management come up with a contrary view.

To invest in SCT, you need the long term view Percy. If you ask me where they will be in any given year, I couldn't tell you. But ask me where they will be in ten years and I think the answer is much more certain. SCT have world class intellectual capital. When they can harness that into sales and at how high a margin is where the uncertainty exists.

SNOOPY

percy
05-01-2011, 08:41 PM
If they are still in business in 10 years time you could be right,but why take the risk.?

Phaedrus
05-01-2011, 09:32 PM
I will stick to my old adage of 'selling into market strength' You certainly are consistent in your dogged refusal to recognise the importance of keeping on the right side of market trends, Snoopy. "Selling into market strength" is just as foolish as the "buying into market weakness" that you were doing all the way down! I have plotted a few of your comments on the chart below and it is painfully obvious that you would have done far better keeping your money in your pocket, rather than averaging down as you did. Buying an obviously downtrending stock is not a good idea - and you provide a perfect example of what happens to anyone foolish enough to do this. Certainly you were able to reduce your average entry price, but all the time you were doing this, your capital was being eroded as you were adding to your SCT shareholding taking positions that, years later, are still under water.

You are selling a few now? The time to sell was when I did - way back in 2005 when SCT stopped rising and started falling. Currently, SCT is in an uptrend but hitting consistent resistance at around $1.42.

Snoopy, you made a huge gain on SCT - and gave nearly all of it back to the market. Having tripled your money in just 3 years, you have ended up with a 10 year average gross yield of just 5.6%. How? By holding on to (and buying more of) a downtrending stock.

You say that "you have to be prepared to hold shares across the ups and downs of the business cycle" and here we see a graphic illustration of the folly of doing just that.

http://i602.photobucket.com/albums/tt102/PhaedrusPB/SCT15.gif

Snoopy
06-01-2011, 03:07 PM
If they are still in business in 10 years time you could be right,but why take the risk.?

SCT are probably the most conservatively managed company on the NZX Percy. Debt is kept to a minimum and currency hedging is only carried out when a contact is signed. If SCT goes down in the next ten years, I don't think there will be an NZX to invest in.

SNOOPY

Snoopy
06-01-2011, 03:22 PM
You certainly are consistent in your dogged refusal to recognise the importance of keeping on the right side of market trends, Snoopy. "Selling into market strength" is just as foolish as the "buying into market weakness"


It all depends on the liquidity Phaedrus. Selling out at any price would be foolish if there were no buyers. This is the dilemma of thinly traded small cap shares. In theory buying small cap shares will allow you to outperform the index. In practice if you try to sell those shares at the 'market' price generally you can't. That's because your potential share sale will distort whatever market was there before. I well recall your 2005 sell off of SCT, even though I was out of the country at the time. IIRC you had trouble exiting, and gave back many of those theoretical profits to the market yourself! Far from just reacting to the market as usual, I think you were the one that started the very downtrend that you have just illustrated.

My solution to this dilemma is to treat my small caps as 'value investments' which can be traded against market sentiment. When everyone else wants to selll I will be in there buying, like I did in 2009 down as low as 70c. When everyone thinks SCT is a sure thing then I will sell, creating the market those buyers desperately want. Long term I am not worried as I think SCT will be worth $1.80 within the next couple of years. But I can't be 100% sure of that, which is why I took the prudent option of selling down at about your $1.42 resistance level. It might take some more good news to push SCT beyond $1.40, and that may be 4 months away.

SNOOPY

Snoopy
06-01-2011, 03:39 PM
I have plotted a few of your comments on the chart below and it is painfully obvious that you would have done far better keeping your money in your pocket, rather than averaging down as you did. Buying an obviously downtrending stock is not a good idea - and you provide a perfect example of what happens to anyone foolish enough to do this. Certainly you were able to reduce your average entry price, but all the time you were doing this, your capital was being eroded as you were adding to your SCT shareholding taking positions that, years later, are still under water.


Some of my SCT purchases are underwater Phaedrus, that I concede. But there is no tag on those shares on the register, which would allow me to 'keep' the good SCT shares and sell the bad ones. In fact the only thing that matters long term is the average entry price and I am certainly not underwater on that! The unenviable position I find myself in is because 'averaging down' (your term) has been very successful for me over the last couple of years. It is because the investment has gone from 70c to $1.40 or so that caused my problem, which many would say is not a problem at all.

Taking the ten year perspective, I have made 5.6% per year of gross income, plus about another 1.2% p.a. grossed up worth of capital gain, making a total ten year return of 6.8% before tax every year for ten years. That isn't a great result, but it isn't a failure either. In fact if you compare my SCT return immediately before the GFC compared to now, I have turned what was a breakeven investment at best around substantially.



Snoopy, you made a huge gain on SCT - and gave nearly all of it back to the market.

You say that "you have to be prepared to hold shares across the ups and downs of the business cycle" and here we see a graphic illustration of the folly of doing just that.


I made a good gain in percentage terms Phaedrus, but I didn't hold that many shares back then. So the actual dollar gain was not so flash. But there has been no 'folly' here. Contrary to your explanation, this is a good example of how 'averaging down' (your words again) can dig you out of a precarious position.

SNOOPY

Under Surveillance
06-01-2011, 03:42 PM
Having been in SCT since just August 2009, I've not lived the nightmare shown by Phaedrus' chart. This might advantage or handicap me in trying to give Snoopy confidence to hold the rump of his SCT shares.

There seems no evident reason why the pattern of improvement in SCT's net surpluses should not continue, at a more subdued rate, through 2011. Over the last 4 half years the net surpluses have been ($000): H1 2009 (474); H2 2009 739; H1 2010 973; H2 2010 $1,819. For the purposes of looking to 2011, the H2 2010 $1,819 could be read as $2,911, the difference reflecting the non-recurring tax change on building depreciation in H2 2010.

The company started 2011 with capacity fully committed for the first half year [annual report, page 9]. The AGM was told of $10 million of new orders, and another $4.5 million in advanced negotiation. Snoopy's intelligence from the aftermatch at the AGM told of 20 new staff to be added.

The above suggests to me that the net surplus for FY 2011 would disappoint if it were not within sight of being 2 times the adjusted $2,911 of H2 2010, i.e. $5.8 million. I have a higher figure in mind, but abstain from offering it, given the history of SCT turning silk purses into sows ears. Surely it would take multiple setbacks for the FY 2011 net surplus to be just $5 million [EPS 15.8c, dividends 9.5 cents/share @ the current payout rate of 60% EPS]?

Turning to a couple of Snoopy's particular anxieties....

The comment at the AGM about the SCT price was made by the chairman. The relevant paragraph from the chairman's address was:

Finally, to our shareholders, I am please [sic] the Directors are repaying the confidence you have shown with dividend payments and a share price that more truly reflects the intrinsic value of the company's world class reputation.

This reads to me like something scribbled down on the way to the meeting, and the product of a jaded mind. I took "more truly" to suggest that the 120 as of the AGM - which had then-recently been manipulated down from 140 - was closer to realistic than the 70 odd of early 2009. By the way, how about the chairman's valuation metric, the intrinsic value of the company's world class reputation? And this from a beancounter!

Snoopy suggested that the directors had not topped up their holdings after the release of the annual results. They topped up on 9 December 2010, the day after the AGM. Each of the 5 purchased 1,165 shares at 121. The Secretary/CFO purchased 1,163 @ 121. All these purchases were made off market, which is intriguing.
Incidentally, none of the directors seems to have taken shares under the DRP, rather than cash.

Snoopy
06-01-2011, 03:55 PM
Snoopy suggested that the directors had not topped up their holdings after the release of the annual results. They topped up on 9 December 2010, the day after the AGM. Each of the 5 purchased 1,165 shares at 121. The Secretary/CFO purchased 1,163 @ 121. All these purchases were made off market, which is intriguing.
Incidentally, none of the directors seems to have taken shares under the DRP, rather than cash.


Thanks for your comforting words Under Surveillence! I feel a lot better about remaining a long term shareholder, and I would challenge others to make me feel even better!

Perhaps I was a little vague when I said the directors hadn't topped up. What I meant was the directors hadn't topped up by buying 'on market', as they had after previous results. In fact the way I read things all of the directors took part in the DRP. That explains why they acquired such strange numbers of shares. But why wouldn't you take part in the DRP when you found those shares were given away at such a substantial discount!

SNOOPY

Snoopy
06-01-2011, 05:54 PM
If you have a big parcel to sell in a hurry, this is where brokers can in fact be quite useful as they have access to buyers with big purchasing requirement due to constant cash inflows and a good broker could unload a few % of the total SCT shares in a couple of days at a pretty good rate, albeit at some discount to the current sp.


'Discount' doesn't feature in my sales strategy Belg! Problem is there is a dearth of institutional investors on the SCT share register, so few 'big buyers'. My 'big sale' was close to a minimum parcel in brokerage terms, and it took a month to sell - albeit at 'my price'.

SNOOPY

Under Surveillance
06-01-2011, 09:00 PM
Thanks for your comforting words Under Surveillence! I feel a lot better about remaining a long term shareholder, and I would challenge others to make me feel even better!

Perhaps I was a little vague when I said the directors hadn't topped up. What I meant was the directors hadn't topped up by buying 'on market', as they had after previous results. In fact the way I read things all of the directors took part in the DRP. That explains why they acquired such strange numbers of shares. But why wouldn't you take part in the DRP when you found those shares were given away at such a substantial discount!

SNOOPY

You've lost me, Snoopy. The off market purchases at 121 on 9 December don't seem to tie in with the allocation of shares under the DRP at an issue price of 109 on 3 December.

Further, elections to take part in the DRP had to be lodged by 29 November, and the sales on the NZX which mattered in arriving at the 109 took place 30 November to 2 December. The directors could not properly know upon electing what the weighted average sale price, to which was applied the 10% discount, would be.

The number of beneficially-owned shares held by the directors at 31 August 2010 ranged from 49K to 275K. It seems far fetched that they would put their heads together and decide to take differing percentages of dividend entitlements in shares so each would receive 1,165 DRP shares.

Snoopy
07-01-2011, 02:16 PM
Perhaps more interesting is that contrary to what I said before the directors look like they took their cash dividend rather than reinvest in new shares via the DRP.


No, I was right the first time (even if my reasoning was wrong). Most of the directors did in fact acquire shares under the DRP. Slothfully, they only notified this fact to the market today, nearly eight weeks after the event!. Perhaps unsurprisingly, the market took this well with SCT shares up again today.

SNOOPY

Snoopy
07-01-2011, 06:59 PM
Snoopy, I too am very confused as to why you'd be selling now.

If I was holding any I'd not be selling. The 1.42 resistance level is sure to be breached. (I think I have this right, some sort of wedge formation with higher lows and all that.) And we have another 18-48 months until the midpoint of the current economic cycle.


I see now someone is trying to offload some SCT shares at $1.35! Now that really is puzzling, even to me. Someone playing the (late) arbitrage game? If not I suggest that shareholder checks themselves into Rocklabs in Auckland. I am sure that Rocklabs would oblige with a 'free analysis', of the rocks in that shareholders head!

SNOOPY

percy
07-01-2011, 08:25 PM
I see now someone is trying to offload some SCT shares at $1.35! Now that really is puzzling, even to me. Someone playing the (late) arbitrage game? If not I suggest that shareholder checks themselves into Rocklabs in Auckland. I am sure that Rocklabs would oblige with a 'free analysis', of the rocks in that shareholders head!

SNOOPY

Only 2000 shares for sale at $1.35.

Under Surveillance
19-01-2011, 08:36 PM
No, I was right the first time (even if my reasoning was wrong). Most of the directors did in fact acquire shares under the DRP. Slothfully, they only notified this fact to the market today, nearly eight weeks after the event!. Perhaps unsurprisingly, the market took this well with SCT shares up again today.

SNOOPY
Well done, Snoopy. You were well ahead of an (un)informed market with that one! NZX today posted SCT's announcements, dated 19 January, that 4 of the 5 directors took shares under the DRP on 3 December @ 109. NZX should have received notice of these acquisitions within 5 trading days. But hey, 29 trading days isn't too bad; holiday season and all that, even a tut tut would be over the top.

Snoopy
04-04-2011, 09:31 PM
SCT have world class intellectual capital. When they can harness that into sales and at how high a margin is where the uncertainty exists.


Interesting diversification into superconducting magnets for SCT. Angel investors selling down to make way for a company with a bit of business nous (SCT) to move in. But SCT will have control. A much riskier diversification that Rocklabs I think. Earnings positive from day one sounds good. But will the new acquisition be 'eps' positive after the upcoming cash issue? No one is answering that question!

SNOOPY

Snoopy
04-05-2011, 03:18 PM
But will the new acquisition be 'eps' positive after the upcoming cash issue?


Don't know the terms of the cash issue yet. But given the discount offered on the DRP of 10%, it would have to be greater than that. With the share price nudging $1.50, I am predicting the 1:3 offer will be pitched at $1.20.

For this reason I have been a seller of SCT of late. Let some of my shares go in a rising market at $1.40. That topped up the capital I needed to fully fund the cash issue from my perspective. Then stuck some more in the market at $1.49 and I think the last of those were gobbled up today. Some would regard this as impetuous, as with the benefit of hindsight it looks like I could have sold all of my shares at $1.49. Perhaps but it was important to me to bank that cash issue money and there was certainly no guarantee a week ago that I could have sold any shares at $1.49. The sales at $1.49 were for me a bonus, and enabled me to reduce my average entry price down to $1.16.

In a thinly traded share like SCT, trading rules won't help you much. Those students of market depth would have been caught off guard when I suddenly entered the market and took out all of the buyers at $1.40 with absolutely no warning. I then put my 'maybe' sale into the market at $1.49. Sold a few that day and had to wait nearly a week before the reainder of my meagre offering of shares was snapped up. I would say over half of the shares traded in the seven days before today were mine. Would it have made any difference to the market if I hadn't been there? Obviously yes. The market for SCT shares would have been very different if I hadn't been largely controlling it over the last week. This is why with low liquidity you cannot rely on charts to dictate support and resistance points as the whole thing can be manipulated very easily by as few as one active market player.

SNOOPY

percy
05-05-2011, 10:46 AM
Don't know the terms of the cash issue yet. But given the discount offered on the DRP of 10%, it would have to be greater than that. With the share price nudging $1.50, I am predicting the 1:3 offer will be pitched at $1.20.

For this reason I have been a seller of SCT of late. Let some of my shares go in a rising market at $1.40. That topped up the capital I needed to fully fund the cash issue from my perspective. Then stuck some more in the market at $1.49 and I think the last of those were gobbled up today. Some would regard this as impetuous, as with the benefit of hindsight it looks like I could have sold all of my shares at $1.49. Perhaps but it was important to me to bank that cash issue money and there was certainly no guarantee a week ago that I could have sold any shares at $1.49. The sales at $1.49 were for me a bonus, and enabled me to reduce my average entry price down to $1.16.

In a thinly traded share like SCT, trading rules won't help you much. Those students of market depth would have been caught off guard when I suddenly entered the market and took out all of the buyers at $1.40 with absolutely no warning. I then put my 'maybe' sale into the market at $1.49. Sold a few that day and had to wait nearly a week before the reainder of my meagre offering of shares was snapped up. I would say over half of the shares traded in the seven days before today were mine. Would it have made any difference to the market if I hadn't been there? Obviously yes. The market for SCT shares would have been very different if I hadn't been largely controlling it over the last week. This is why with low liquidity you cannot rely on charts to dictate support and resistance points as the whole thing can be manipulated very easily by as few as one active market player.

SNOOPY

Will be interesting to see whether Ian Urquhart's estate take up their full entitlement?

Snoopy
17-05-2011, 04:37 PM
Will be interesting to see whether Ian Urquhart's estate take up their full entitlement?


Well the whisper I got at the last AGM was that the broker advising the trustees had been suitably chastised for manipulating the share price down to take advantage of the first DRP and in future they were more likely to be a net buyer than a net seller. Of course with a very significant cash issue signalled, they may not be able to afford to take up all their rights. It will be interesting to see.

My own recent selling has meant that I will be in a position to take up anything offered to me in a 1:3 rights issue. SCT has been surprisingly strong of late. Trades today at $1.55, albeit on tiny volume (about one marketable parcel). The buyer is still there at $1.55 too! Sorry my friend, you aren't going to be buying any of my SCT shares at that price.

SNOOPY

percy
17-05-2011, 05:36 PM
Nice to see the broker acting in the estate's best interest.Also pleasing to see he is not just churning the portfolio for fees.[although I expect the estate is overweighted in SCT.] Also the estate is looking good on AWF holding.just a pity nether went for a run before Ian's death.[although I expect him to be looking up and having the last laugh !!]

sharer
18-05-2011, 03:55 PM
I was appalled to hear on RadioNZ a senior SCT person saying that they too are considering shifting their manufacturing plant overseas, probably to China.

Under Surveillance
18-05-2011, 07:33 PM
I was appalled to hear on RadioNZ a senior SCT person saying that they too are considering shifting their manufacturing plant overseas, probably to China.
Thanks, sharer. Can you help by giving the station, date and approximate time when you heard this broadcast? I would like to listen to it on replay to get the context. No doubt (yeah, right) the theme will be fully-explored in the prospectus for the rights issue, but there's no knowing when that will materialise.

Not directly relevant, but I see that SCT are now advertising for 2 General Managers. The blurb, on the SCT website, contains the gem that revenue this year is expected to be $55 million. This compares with $46.6 million in FY 2010, +17%.

sharer
19-05-2011, 02:03 PM
Thanks, sharer. Can you help by giving the station, date and approximate time when you heard this broadcast? I would like to listen to it on replay to get the context....
I didn't make a note, but it must have been NatRadio, probably in their regular "business" section after midday, yesterday, i'm guessing.
Anything on their website?

Under Surveillance
19-05-2011, 06:36 PM
I've drawn a blank on both of those avenues, sharer. Never mind. Might just have been the chairman thinking aloud, in his vacuous style.

percy
19-05-2011, 06:54 PM
I've drawn a blank on both of those avenues, sharer. Never mind. Might just have been the chairman thinking aloud, in his vacuous style.

Phone the company secretary,Greg Chiles ,[03]4788110 and ask him to post a link on the company's web site.Any problems, ask him to get Chris Hopkins to give you a ring.!!!

Snoopy
16-06-2011, 04:15 PM
Phone the company secretary,Greg Chiles ,[03]4788110 and ask him to post a link on the company's web site.Any problems, ask him to get Chris Hopkins to give you a ring.!!!

I may have to do this myself next week. Unlike with the February quake when an all clear report was posted to the NZX the next day, there has been no update on what happened to the SCT Christchurch plant as a result of Monday's quake four days later. This is a bit of a worry as anecdotally those eastern suburbs were hit hard.

SNOOPY

Snoopy
16-06-2011, 04:19 PM
I was appalled to hear on RadioNZ a senior SCT person saying that they too are considering shifting their manufacturing plant overseas, probably to China.


That wouldn't make sense with either their robotics or appliance line businesses. SCT is a skill dependent business and it would take years, even decades to train up a Chinese workforce to replace what they have in Christchurch and Dunedin.

However, with the newly acquired electromagnet business and some of the more more 'standard product' coming out of Rocklabs in Auckland, perhaps moving some production to China might make sense.

SNOOPY

Snoopy
16-06-2011, 04:35 PM
Anyone pick up in the news recently on a new group, the 'Ovine Automation Consortium' ready to go to market with robots automizing the process of taking pelts and internal organs off sheep.

http://www.odt.co.nz/news/business/57920/dunedin-firm-joins-tech-group

The Ovine Automation Ltd (OAL) consortium has attracted $8.36 million over three years from the Foundation for Research Science and Technology, with the balance coming from the Meat Industry Association and nine meat companies: Silver Fern Farms, Alliance Group, ANZCO, Taylor Preston, Progressive Meats, Bernard Matthews, Crusader Meats, Auckland Meat Processors and Blue Sky Meats.

'Realcold Millers Mechanical' in Dunedin has been engaged to do the engineering work. Notable by its absence in being involved is the Dunedin based Scott Technology!

SNOOPY

percy
16-06-2011, 08:56 PM
It may be a rather long phone call.
Would think it may pay to speak to Chris Hopkins.

zigzag
20-06-2011, 03:52 PM
What's happened with the rights issue? I was expecting the prospestus in late May, to be concluded in June. Not a peep, unless I have missed something.

Under Surveillance
20-06-2011, 06:58 PM
I saw something in passing in a news article to the effect that the rights offer would be done and dusted before the end of their financial year (31 August).

zigzag
20-06-2011, 09:38 PM
I saw something in passing in a news article to the effect that the rights offer would be done and dusted before the end of their financial year (31 August).
You would have thought they would've updated the market, since their last announcement said the rights issue would be completed by the end of June.

Under Surveillance
21-06-2011, 01:36 PM
You would have thought they would've updated the market, since their last announcement said the rights issue would be completed by the end of June.

Indeed. The quality of this company is in it's products, not in it's governance and relationships with (minor) shareholders. NZX Regulatory seems not to monitor and act in response to SCT omissions. The payment dates for the last interim dividend were changed to comply with the terms of the SCT dividend reinvestment plan (and NZX rules) only after a shareholder complained to NZX. The board secretary seems to perform woefully, insofar at least as notifications to NZX are concerned; percy's post # 172 suggests another failing. Oh that SCT had a topline board chairman, say a Sir John Anderson, who would insist upon professionalism.

Snoopy
04-07-2011, 03:25 PM
I was appalled to hear on RadioNZ a senior SCT person saying that they too are considering shifting their manufacturing plant overseas, probably to China.

This must be what they were referring to. From the July 2011 Investor Presentation p15 talking about their 'new' industrial automation division.

New division focused on robotic and automation solutions for industry
- predominantly NZ and Australia based across multiple industries – non specialised
- development and application of SCT’s intellectual property
Current developments underway include

<snip>
- on 29 June 2011 SCT announced the signing by SCT of a conditional agreement for SCT (or its nominee) to
purchase a 75% share in a Chinese-based manufacturing company

SNOOPY

Snoopy
04-07-2011, 03:29 PM
Don't know the terms of the cash issue yet. But given the discount offered on the DRP of 10%, it would have to be greater than that. With the share price nudging $1.50, I am predicting the 1:3 offer will be pitched at $1.20.

For this reason I have been a seller of SCT of late. Let some of my shares go in a rising market at $1.40. That topped up the capital I needed to fully fund the cash issue from my perspective. Then stuck some more in the market at $1.49 and I think the last of those were gobbled up today. Some would regard this as impetuous, as with the benefit of hindsight it looks like I could have sold all of my shares at $1.49. Perhaps but it was important to me to bank that cash issue money and there was certainly no guarantee a week ago that I could have sold any shares at $1.49. The sales at $1.49 were for me a bonus, and enabled me to reduce my average entry price down to $1.16.


I got the rights issue price correct, but the issue was 1:4 and not 1:3 as management originally suggested. That means I may have to put some of my rights money into the over-subscription facility we have been promised. At least management has been good enough to give us one. It is nice to see existing shareholders looked after.

SNOOPY

Under Surveillance
05-07-2011, 04:43 PM
I got the rights issue price correct, but the issue was 1:4 and not 1:3 as management originally suggested. That means I may have to put some of my rights money into the over-subscription facility we have been promised. At least management has been good enough to give us one. It is nice to see existing shareholders looked after.

SNOOPY
Would anyone hazard a guess as to the size of the oversubscription pool? Might those mad keen to oversubscribe, and flush, land: (a) 120%, (b) 150%, (c) 200%, or (d) 1,000% of their base entitlements?

Snoopy
06-07-2011, 01:49 PM
- on 29 June 2011 SCT announced the signing by SCT of a conditional agreement for SCT (or its nominee) to
purchase a 75% share in a Chinese-based manufacturing company


More information here:

http://www.odt.co.nz/news/business/167028/scott-buys-75-china-manufacturer

"Scott is buying into Teknatool International Ltd's Qingdao-based subsidiary and manufacturing company, Qingdao Teknatool Machinery Manufacturing Co Ltd, which specialises in lathe technology and energy-efficient motor manufacturing, for $975,000."

"Mr Hopkins said there may be uses for the motors in Scott's other divisions, in new "local projects" yet to be unveiled, and may possibly have applications in its superconductor division."

It is quite annoying when this sort of information isn't released to the Stock Exchange. Perhaps it was because the purchase price was less than $1m, so not significant?

SNOOPY

P.S. Was in the area on other business , so called into SCT on Maces Road to see how they went in the June quake. The women behind the reception desk said everything was OK. Even though there were port-a-loos on the street, they didn't need them and the workshop was 100%.

Snoopy
06-07-2011, 01:58 PM
Would anyone hazard a guess as to the size of the over-subscription pool? Might those mad keen to oversubscribe, and flush, land: (a) 120%, (b) 150%, (c) 200%, or (d) 1,000% of their base entitlements?

I would say it depends on what the two largest shareholders Silveracres (associated with former chairman Marsh) and Ian Uruquert's Estate decide to do. I haven't seen any evidence that the latter is selling down in anticipation of some arbitrage deal, as they did once brfore. But then again the wrap up tender to institutions for all unsold rights would suggest management do not expect everyone to take up their rights. My guess is that unless you are a top twenty shareholder, you stand a very good chance of getting as many shares as you like!

SNOOPY

Under Surveillance
06-07-2011, 06:37 PM
My guess is that unless you are a top twenty shareholder, you stand a very good chance of getting as many shares as you like!

SNOOPY
Seems too easy, sell XR (today) at 140, exercise rights and oversubscribe at 120.

Snoopy
07-07-2011, 02:04 PM
Seems too easy, sell XR (today) at 140, exercise rights and oversubscribe at 120.

Well there is an old saying that if something seems too good to be true, then it probably is. There were two trades today at $1.40, yet under 4,000 shares went through in total. Those sellers would have been paying through the nose for brokerage (in percentage terms). Try selling any decent sized parcel of shares and 'the market' could instantaneously collapse.

SNOOPY

percy
07-07-2011, 03:21 PM
well some one woke up and took all the buyers out at $1.40.
Hope it was you Snoopy.!

Snoopy
09-07-2011, 11:30 AM
well some one woke up and took all the buyers out at $1.40.
Hope it was you Snoopy.!

Wow a whole 3000 shares traded! A marketable parcel for one - yes. Not a real arbitrage opportunity. No it wasn't me Percy. I have already sold what a needed to at an average of $1.45 some weeks ago. Sell into strength, buy into weakness is my motto with these thinly traded shares.

SNOOPY

percy
10-07-2011, 08:55 AM
Wow a whole 3000 shares traded! A marketable parcel for one - yes. Not a real arbitrage opportunity. No it wasn't me Percy. I have already sold what a needed to at an average of $1.45 some weeks ago. Sell into strength, buy into weakness is my motto with these thinly traded shares.

SNOOPY

Good on you SNOOPY.I notice there is still a buyer of 4,000 shares at $1.40. !! Next buyer is 4,000 at $1.20.

zigzag
10-07-2011, 10:48 AM
Good on you SNOOPY.I notice there is still a buyer of 4,000 shares at $1.40. !! Next buyer is 4,000 at $1.20.

Notice that the rights are trading at the moment. Yesterday, 279000 traded at .13 which is the equivilent of 279000 shares at 1.33. So really trading in the heads is kind of irrelevant at the moment.

zigzag
10-07-2011, 10:59 AM
Seems too easy, sell XR (today) at 140, exercise rights and oversubscribe at 120.

And also, with the offer being renounceable, it will result in less shares being available for those (including yours truly) who intend to apply for extra shares.

Snoopy
11-07-2011, 02:41 PM
Notice that the rights are trading at the moment. Yesterday, 279000 traded at .13 which is the equivalent of 279000 shares at 1.33. So really trading in the heads is kind of irrelevant at the moment.

Quite right Zigzag. I got my rights entitlement in the mail today and sent away my cheque for what I was asked for, plus a few dollars more hoping to pick up a few more shares. If I don't get the extras, then I don't get 'em. That's life.

Many other people must have got their rights too because the price has dropped to 11c today (equivalent to $1.31 for a head share) as I write this.
The buyer for those 4,000 shares that Percy told us about has been taken out too. So the only buyer is sitting there at $1.20. It looks like the rights price is the real indicator at the moment.

I expect the rights price to dive further and that should provide less of an incentive for marginal rights holders to take them up, and make them uneconomic to sell on market for most. It will also mean the traders well start selling. This is of course great news for the likes of Zigzag and myself who are after a few extra shares in this capital raising.

SNOOPY

percy
11-07-2011, 07:27 PM
Positve article by Nevil Gibson in NBR 8/7/2011 headed Scott Tech boosts China footprint.page 20.

Snoopy
02-08-2011, 03:21 PM
Quite right Zigzag. I got my rights entitlement in the mail today and sent away my cheque for what I was asked for, plus a few dollars more hoping to pick up a few more shares. If I don't get the extras, then I don't get 'em. That's life.


Results of the rights issue posted to the market today.


-----

- Entitlements not taken up: 854,108 ordinary shares totalling NZ$1.0 million, representing a shortfall in take-up of entitlements of 11%;

- Applications for additional shares under the oversubscription facility: 2,079,367 ordinary shares totalling NZ$2.5 million;

------

I was one of those applying for extra shares. It looks like I will only get:

854,108/2,079,367 = 41% of the extra shares I asked for, albeit at $1.20 :-).

Nevertheless this represents a good short term result from a 'today market' perspective. SCT looking quite firm as the market moves backwards. As of now if you want more SCT shares you have to pay $1.49.

SNOOPY

percy
02-08-2011, 03:49 PM
A very positive capital raising.As you point out if you want SCT you have to pay $1.49.Seller at $1.49 has 5,000 for sale.
Main buying strength is at $1.42 for 24,480 ,as the buyer at $1.45 only wants 55 shares.

zigzag
02-08-2011, 06:19 PM
I don't know that you will get 41% of shares you apply for. My reading of the prospectus is that any shares not taken up are allocated in proportion to your holding at the record date. Hence someone with 100,000 shares will get more than someone with 10,000 shares, even if they apply for the same amount. And proportionality is maintained.

Snoopy
03-08-2011, 09:51 AM
I don't know that you will get 41% of shares you apply for. My reading of the prospectus is that any shares not taken up are allocated in proportion to your holding at the record date. Hence someone with 100,000 shares will get more than someone with 10,000 shares, even if they apply for the same amount. And proportionality is maintained.


Thanks for pulling me up on my over simplistic interpretation of the scaling Zigzag. I did have a vague recollection that the allocation of extra shares was rather more complicated than I portrayed, but had put those details out of my mind. It will be interesting to see how many extra shares we oversubscribers do get!

If 11% of the new shares were not taken up by existing holders, perhaps if as an existing shareholder you were not to greedy on the oversubscription and only requested about 11% more than you were entitled to, then you might get the lot you asked for?

In another way the institutional book build being cancelled is bad because it makes it more difficult for institutions to build up a meaningful company stake. Their only option now will be to buy SCT on market (shock, horror)!

SNOOPY

Under Surveillance
04-08-2011, 07:15 PM
Results of the rights issue posted to the market today.


-----

- Entitlements not taken up: 854,108 ordinary shares totalling NZ$1.0 million, representing a shortfall in take-up of entitlements of 11%;

- Applications for additional shares under the oversubscription facility: 2,079,367 ordinary shares totalling NZ$2.5 million;

------

I was one of those applying for extra shares. It looks like I will only get:

854,108/2,079,367 = 41% of the extra shares I asked for, albeit at $1.20 :-).

Nevertheless this represents a good short term result from a 'today market' perspective. SCT looking quite firm as the market moves backwards. As of now if you want more SCT shares you have to pay $1.49.

SNOOPY

How have you ended up, Snoopy?

I got all the extra shares I sought from the pool, amounting to 64.2% of the base entitlement, so surely you must have hoovered up all of the "few more shares" you were after?

zigzag
04-08-2011, 09:17 PM
I only got one quarter of the shares I applied for. Must have been too greedy. Upside is I get a refund cheque in the mail.

Snoopy
05-08-2011, 01:57 PM
How have you ended up, Snoopy?

I got all the extra shares I sought from the pool, amounting to 64.2% of the base entitlement, so surely you must have hoovered up all of the "few more shares" you were after?


Currently away from my physical mailbox for a few days Under Surveillence, so I will let you know! I note from today's announcement to the stock exchange that interests associated with former chairman Marsh, and Rocklabs founder Devreaux have only taken up some of their rights resulting in a dilution of their respective holdings in percentage terms.

SCT seems to be wearing today's stockmarket market drop relatively well. Trading at $1.40, down about 3%. The associated drop in the NZD/USD exchange rate will IMO be a useful benefit for SCT going forwards.

SNOOPY

zigzag
10-08-2011, 10:45 AM
Over 2mill. shares traded. A bit more than your average day for sct. Wonder who's selling, and who's buying? Does the estate of Ian Urquart still have a large holding?

Snoopy
11-08-2011, 04:46 PM
Over 2mill. shares traded. A bit more than your average day for sct. Wonder who's selling, and who's buying? Does the estate of Ian Urquart still have a large holding?


Substantial security notice filed today. Tower Asset Management have disclosed a stake amounting to 7.11% of the company: 2,825,397 shares to be precise.

SNOOPY

Snoopy
18-08-2011, 03:16 PM
How have you ended up, Snoopy?

I got all the extra shares I sought from the pool, amounting to 64.2% of the base entitlement, so surely you must have hoovered up all of the "few more shares" you were after?


Under Surveillence, I have made it out of my Christchurch snow cave and can report that I did indeed get all of the extra SCT shares that I applied for at $1.20. My ‘restrained greed’ paid off! Fortunately I managed to reduce my average entry price from $1.23 to $1.16 by selling shares before the shares SCT rights issue.

If I had not done this (sold into strength), then I would not have had the money with which to take up my rights. But worse than that, taking up my rights would have been a question ‘averaging down’ not ‘averaging up’! And that would have cast a cloud of doom over the entire SCT capital raising process ;-P.

I am not too perturbed about the founder of Rocklab’s (Dr Devreaux’s) ‘smart money’ sell down. He is in semi retirement and it would make sense for him to ‘spread his investment capital’ a bit. His intent to retain a million-dollar plus investment in SCT heartens me.

SNOOPY

Snoopy
07-12-2011, 02:01 PM
Wonder who's selling, and who's buying?


There has been a bit more SCT trading of late, with a bit of weakness in the share price since SCT went ex-dividend. The shares in lieu of dividend scheme dished out shares at $1.45. So my guess is that some of this trading is bigger shareholders arbitraging their newly issued shares for cash.

SNOOPY

Snoopy
14-12-2011, 03:23 PM
One of the last AGMs of the reporting season was held at Scott Technology’s own Kaikouri Valley headquarters in Dunedin on 8th December 2011. The best report on this may be found in the Otago Daily Times.

http://www.odt.co.nz/news/business/190080/scott-reports-strong-performance

It does not appear any other reporters were at the meeting. This meant other reports I have seen are little more than reprints of Scott Technoloy’s own press releases.

Scott’s vision is to be ‘the global innovator in automation’. Type that phrase into Google and the company that comes out first is FANUC, formed in 1956. FANUC is listed on the Japanese stock exchange. FANUC is an acronym for Factory Automatic Numerical Control.

Judged as world leader by analyzing patent data and related metrics in a proprietary methodology (for comparison Scott’s have 17 patents), FANUC Corporation, is the world's most diversified manufacturer of CNC Systems, Robots, and Machine Tools,

The criteria used to evaluate innovation performance of companies that invent on a significant scale are:

1/ Work on developments that are acknowledged as innovative by others around the world (patent approval success rate, patent influence in literature citations and overall patent volume).
2/ Inventions that are globally protected due to their importance (global reach of patent portfolio).

Thomson Reuters, judge of the 2011 Top 100 Global Innovator methodology, used these criteria to reach their conclusion rating FANUC as number one.

FANUC's innovative technology has contributed to a worldwide manufacturing revolution, which evolved from the automation of a single machine to the automation of entire production lines. Today, FANUC has more than 600 engineers working in R&D to provide the most reliable, efficient and innovative CNC systems available - ensuring the very lowest Total Cost of Ownership.

With 50 years of experience and more than 2,200,000 CNCs and 220,000 robots installed worldwide, FANUC is the undeniable global leader in CNC and robotics.

OK, so despite the bold statement, I think Scott Technology still has a way to go to fulfill their own vision. A differentiating point of Scotts from FANUC is that their headline robotics projects (meat industry and milking) have an ‘animal tissue interface’. That means the Scott robotics must develop a ‘feel’ and ‘room for dimensional tolerance’ that is not just a transplant of established industrial robotic technology available in Japan. The page 3 Scott AR2011 remark ‘we lead the world in our chosen markets’ is perhaps the more believable quote.

SNOOPY

Snoopy
14-12-2011, 03:26 PM
OK, so despite the bold statement, I think Scott Technology still has a way to go to fulfill their own vision. The page 3 Scott AR2011 remark ‘we lead the world in our chosen markets’ is perhaps the more believable quote.


Judging comparative performance of Scott Technology from year to year is not straightforward due to the large number of new shares issued in substantial tranches over the last three years.

1/ During FY2011 a 1:4 rights issue at $1.20 raised $9.534m of new capital. As a result, 7.945m new SCT shares were issued. These new shares mean for comparative purposes, earnings per share in all previous financial years should be divided by 4/5. This accounts for the fact that historic earnings viewed in retrospect have to be shared over an increased number of ‘today equivalent’ shares.

2/ During FY2010 a 1:10 bonus issue of shares occurred. These new bonus shares mean earnings per share in all previous financial years should be divided by a factor of 10/11, to enable a fair eps comparison with earnings post this date,

3/ During FY2008 significant new equity (1.656m shares) were issued to the former owner of Rocklabs for the acquisition of that business. However, because the new shares were consideration for bringing ‘in house’ an immediately profitable business - Rocklabs-, I do not consider that any retrospective adjustment of comparable earnings in prior years is warranted.

To get the best view of the operational performance of SCT, I believe in removing one off gains from the company accounts. This results in the following adjustments that I have made to the published results.

1/ Remove the FY2011 after tax effect of a realized gain in foreign currency derivatives ($3.626m, p27 AR2011). Not reported in most papers was that this foreign currency repatriation was as a result of three significant jobs being lost. When questioned, the board used the argument that these currency gains were about the same as the profits that would have flowed had these projects gone to completion. However, I do not share the view that one off currency gains should in any way be normalized.
2/ Add back in the after tax effect of $1.098m lost because of deferred tax adjustment of buildings due to government legislative changes (p17 AR2011).

SNOOPY

Snoopy
14-12-2011, 03:32 PM
The adjusted earnings per share over the last six years are graphed below, together with the margin (NPAT/revenue) over those same years. These two metrics correlate closely as might be expected. But there is some divergence over FY2011. This might be partly explained by the new businesses acquired during FY2011 (High Temperature Semiconductors) still developing their profitability, yet contributing significantly and immediately to company revenues.

The traditional ‘manufacturer image’ is of a high fixed cost base lumbering giant. In the case of Scotts I see a much more nimble batch manufacturing culture. The challenge to managing Scotts as a business is that the workers are skilled and comparatively highly paid. So a constant challenge for Scotts is to have a core of skilled staff large enough so that profitability does not disappear. That could happen if peak workloads require the hiring of supplementary contract workers at even higher wage rates. Yet the workforce wage bill must not be so large that the costs cripple Scotts during downturns. Scotts do have a strong correlation between margins and earnings. But the reason for it may not be attributable to ‘typical manufacturing’ reasons

(to be continued)

SNOOPY

Snoopy
14-12-2011, 03:45 PM
(to be continued)


This graph represents actual ‘Return on Shareholder Equity’ from the last few years compared to a 15% yardstick. A 15% yardstick is high but is reputedly similar to the yardstick that Warren Buffett considers as one factor in evaluating business efficiency. The graph does not appear favourable. The orange zone area (capital efficiency below 15%) is of significantly greater area than the above 15% green zone.

Based on this five years of past performance, Scott Technology does not look like a particularly attractive investment candidate. So why am I still invested in it? (A rhetorical question that i intend to answer)

SNOOPY

Snoopy
14-12-2011, 03:51 PM
Based on this five years of past performance, Scott Technology does not look like a particularly attractive investment candidate. So why am I still invested in it? (A rhetorical question that i intend to answer)


From a profitability perspective almost all profits that are reported have come from ‘Appliance Manufacturing Systems’ and ‘Laboratory Sample Preparation’. The most advanced of the new pipeline businesses, the joint venture lamb automated lamb boning room with Silver Fern Farms (Robotic Technologies Limited) contributed a mere $124k to net profit in FY2011 (AR2011 p36). And that joint venture business was founded eight long years ago!

There are two lessons we can draw from this:

1/ Genuinely new and innovative technology takes a long time to commercialize.
2/ There is little market value attributed to Robotic Technologies Limited, NS Innovations (the Australian market beef chain joint venture), HTS-110 (High Temperature Superconductors), and the Dairy Sector Automation project that is reflected in a Scott Technology share price at $1.55.

The existing profitable businesses have in effect entirely subsidized the new ventures thus far. In accounting terms almost all research and development costs have simply been written off as they were incurred.

If you think this sounds distortionary then take a minute to think about the alternative: that shareholders should continually front up development cash on new ventures until they become profitable. This funding method for new ventures is the essence of why I like Scott Technology.

Here is an established business that over the business cycle generates dividend returns that compare favourably with bank term deposits. Yet underlying everything, we are in effect being given ‘lottery tickets for free’ in some very exciting new business ventures. If even one of these new ventures comes off, there is potential for a significant market revaluation of the prospects of Scott Technology. At board level, the capable hand of EBOS boss Mark Waller is there to ensure that these new innovative ventures do not steer too far from the company’s core competancies. That is exactly the same careful growth strategy that Mark has used to build EBOS into what that company is today.

An additional risk mitigation factor is that Scott Technology have a policy of carrying no term debt on their balance sheet. Of course Scott’s do have debt facilities. But these are needed to provide credit during the long construction lead times that occur between a customer ordering one of their production line systems and its successful delivery and installation.

No investment is cast iron safe. But in my opinion the conservative funding position makes SCT a good target for your savings even in times of high economic climate uncertainty. And it gives investors a good launching pad to be well poised for the recovery of international markets.

SNOOPY

Under Surveillance
14-12-2011, 04:56 PM
Well FANUC me, Snoopy, you have been busy, and have offered a bit to be thought about.
There's a minor glitch in your figures relating to the 1:4 issue in post #203, item 1/. Note 19 in the annual report has the rights issued as 7,945,151, raising $9.534 million.

Snoopy
15-12-2011, 04:45 PM
Well FANUC me, Snoopy, you have been busy, and have offered a bit to be thought about.
There's a minor glitch in your figures relating to the 1:4 issue in post #203, item 1/. Note 19 in the annual report has the rights issued as 7,945,151, raising $9.534 million.

UR quite right US. I read the figure as dollars when instead it referred to the number of shares! Fortunately my little mistake does not affect any of the consequent analysis that flows from it.

SNOOPY

Snoopy
15-12-2011, 04:51 PM
Well FANUC me, Snoopy, you have been busy, and have offered a bit to be thought about.


Hope I haven't blown the faith US. Here is another angle on valuing SCT, based on dividend payments alone.

It is not an easy job to value a share with a patchy earnings history. As a long-term investor I am always interested in the dividend yield over the business cycle as a return that is very tangible. In mom and pop investor terms, this is the cash in bank account received by the long-term investor.

I favour looking at ten years of operating result history. This is a compromise between averaging out over the business cycle and dropping payments from so long ago that they are no longer indicative of today.

For Scott Technology, I have added together all of the dividends paid in each current financial year ended 31st August. In annual terms from FY2011 looking backwards the dividends paid out were as follows:

6.0, 1.8, 0, 4.4, 4.4, 0, 9.5, 10.2, 8.5, 2.9

That comes out to a grand total of 47.7cps over ten years. I should note that the per-share earnings have been retrospectively adjusted to reflect the number of shares on issue today. Significant changes in the number of shares without the addition of any cash earning business unit were as follows:

1/ A 1:4 rights issue on 4th August 2011
2/ A 1:10 bonus issue on 26th March 2010
3/ A 1:8 bonus issue on 4th December 2003
4/ A 1:8 bonus issue on 8th December 2002

Assume a Scott Technology share price of $1.65, and an average annual over the business cycle cash payout of 4.77cps

4.77c/$1.65= 2.89% net = 4.1% gross

That compares favourably with term deposit rates in this current low interest rate environment. Therefore I can’t see the sense in selling your SCT shares and decoupling yourself from the potential of the long term investment pipeline for any less than $1.65, for no improvement in cash return. For me $1.65 has become the bottom line indicative price that I would consider selling at.

SNOOPY

Lizard
01-01-2012, 04:25 PM
Hi Snoopy,

Thanks for the analysis. Your comments re the foreign exchange gain are particularly helpful - I was wondering the extent to which these could be considered part of "maintainable earnings" and tend to agree that they are mostly not...

I like SCT's business, but it looks to me as though earnings could retreat this year, so would prefer to stay as an observer for now (not quite sharing your ultra-long-term investment philosophy :) ).

Snoopy
02-01-2012, 09:36 AM
I like SCT's business, but it looks to me as though earnings could retreat this year, so would prefer to stay as an observer for now (not quite sharing your ultra-long-term investment philosophy.


It pays to drop in on the Otago Daily Times website occasionally to keep up with what is going on at Scott Technology. They have chosed Scott's MD Hopkins as Otago Business leader of the year, with quite a long spiel in a December 24th article.

http://www.odt.co.nz/news/business/192158/key-attributes-keep-scotts-star-rising

Of particular interest to me is the mention of R&D:

"While research and development has cost Scott tens of millions of dollars over the past decade, Mr Hopkins was quick to point out both the New Zealand and Australian governments had contributed to that cost and joint venture partners also had borne some costs."

"He maintains research and development is the "lifeblood" of the company, with $8 million spent during 2010-11 alone."

I think about $1m-$2m of that 2011 R&D expenditure was from government grants. That leaves $6m of R&D expenditure from the pockets of SCT shareholders. Why do I highlight that? Because almost all of Scott's R&D is expensed in the year that it is incurred.

That means the underlying cash generating ability of Scotts, now with 40m shares on issue, is $6m/$40m= 15cps higher than the underlying result would lead you to believe. The cynic would say that until some of these new ventures start contributing to the bottom line that this expenditure is poorly disciplined and wasteful. Indeed the article reveals that the board has been wrestling with the long path to profitability of meat industry robotics.

"Mr Hopkins said the research and development involved in the joint venture with Silver Fern Farms took longer than anticipated and the board and shareholders started to become concerned over the pace of progress."

However, the fact that this year there have been customer enquiries from Europe leads me to believe that perhaps this really will be the breakthough year for meat industry robotics.

However I do recognise that many investors such as you Lizard want to see more results. With the patchy history of SCT results, I can understand your stand offish position.

My visit to the ODT website brought up yet another off the radar gem that I haven't seen reported outside Dunedin

http://www.odt.co.nz/news/dunedin/185156/150000-boost-helps-solar-power-project

To quote from that article.


"Scott Technology chief executive Chris Hopkins said (a) study would investigate establishing a pilot plant for converting sand into silica, for use on solar panels."

"Making solar panels was usually an "energy-intensive" process, but the University of Arizona, in the United States, had created a way to make them using chemicals which was "much more cost-effective". "

"If we can get the right sort of purity [of sand], they have a chemical process which eliminates some of the energy input," Mr Hopkins said.

OK this last one is pie in the sky stuff. But it does show the immense depth of future possibilities and opportunities that an investment in Scott Technology allows you to access.

SNOOPY

Under Surveillance
02-01-2012, 01:09 PM
After reflection, Snoopy, I think your evaluation of SCT is very cautious.

Tower Investment's comments of 18 October 2011 offer a bit of contrast, and are more in tune with my feel for things:
We assess the value of the company as if we were buying 100% of the business. A good example of this in practice is our recent purchase of shares in NZX-listed Scott Technology.
Our bias to value makes us reasonably sceptical when approached with investment opportunities with blue sky potential.
A “lotto ticket” mentality often surrounds the pricing of high growth, with investors willing to lose on average for the chance of hitting it big once.
It was therefore a surprise when the equity team came back universally positive regarding the review of Scott Technology.
There is no broking analyst coverage of this small company.
At one point we had two analysts and two portfolio managers researching different divisions of the business and calling industry participants in different parts of the world to gain insights on the company, its products and its markets.
Scott Technology ticks all the boxes of what we would characterise as a mid-cap grower.
Such companies are small to medium sized businesses that are suitably well placed in favourable industries to achieve exceptional levels of growth over the medium to long term.
While Scott Technology has always been a well-managed and innovative company, it has been previously unable to extract full commercial value due to its exposure to one very competitive sector: appliances.
Over the past eight years it has invested heavily to broaden its market in its core competency (global innovator in automation) and in our opinion appears poised to benefit substantially from this period of investment.
Scott Technology’s attainable market now includes meat and dairy processing, mineral testing, and industrial processes.
Its recent acquisition of HTL-110 adds blue-sky potential with products aimed at the high temperature semiconductor industry.

By the by, eight years ago, 2003, SCT had revenue of $47.5 million [2011 $53.6 million], NPAT $5.6 million [2011 $5.2 million], and EPS of 25.2 cents on 22,195,155 shares [2011 EPS 16.6 cents non 39,721,658 million]. [and paid an interim dividend of 6 cents, made a bonus issue of 1:8, and paid a final dividend of 8 cents for the year].

Under Surveillance
02-01-2012, 01:14 PM
Hope I haven't blown the faith US. Here is another angle on valuing SCT, based on dividend payments alone.

It is not an easy job to value a share with a patchy earnings history. As a long-term investor I am always interested in the dividend yield over the business cycle as a return that is very tangible. In mom and pop investor terms, this is the cash in bank account received by the long-term investor.

I favour looking at ten years of operating result history. This is a compromise between averaging out over the business cycle and dropping payments from so long ago that they are no longer indicative of today.

For Scott Technology, I have added together all of the dividends paid in each current financial year ended 31st August. In annual terms from FY2011 looking backwards the dividends paid out were as follows:

6.0, 1.8, 0, 4.4, 4.4, 0, 9.5, 10.2, 8.5, 2.9

That comes out to a grand total of 47.7cps over ten years. I should note that the per-share earnings have been retrospectively adjusted to reflect the number of shares on issue today. Significant changes in the number of shares without the addition of any cash earning business unit were as follows:

1/ A 1:4 rights issue on 4th August 2011
2/ A 1:10 bonus issue on 26th March 2010
3/ A 1:8 bonus issue on 4th December 2003
4/ A 1:8 bonus issue on 8th December 2002

Assume a Scott Technology share price of $1.65, and an average annual over the business cycle cash payout of 4.77cps

4.77c/$1.65= 2.89% net = 4.1% gross

That compares favourably with term deposit rates in this current low interest rate environment. Therefore I can’t see the sense in selling your SCT shares and decoupling yourself from the potential of the long term investment pipeline for any less than $1.65, for no improvement in cash return. For me $1.65 has become the bottom line indicative price that I would consider selling at.

SNOOPY

I wouldn't sell at 165 based on a 10 year average gross dividend yeild of 4.1% when the current gross yeild at 165 is 6%, and when the payout rate currently is around 50%, but the payout rate over most of the 10 years was around 80%

Under Surveillance
02-01-2012, 01:15 PM
Thanks for the ODT references, Snoopy.
The SCT website has itself been updated.

Snoopy
03-01-2012, 10:01 PM
I wouldn't sell at 165 based on a 10 year average gross dividend yeild of 4.1% when the current gross yeild at 165 is 6%, and when the payout rate currently is around 50%, but the payout rate over most of the 10 years was around 80%


I quite understand your logic in thinking selling SCT at $1.65 is letting go too cheaply US. My own plan to 'sell down' at $1.65 was based on me having slightly more money in SCT than I should from a balanced portfolio perspective. I believe that in time $1.65 may even be seen as a cheap entry price.

My slight caution in your implied expectation(?) is that SCT may pay out more of their earnings in dividends, because historically they have done so, is probably wishful thinking. Management seem to have identified bolt on acquisitions that will need more money spent on them before they become profitable. And the extra cash will continue to be spent in this way rather than boosting dividends. A lot of this I think can be classified as R&D spend. The theory is that money spent on R&D will boost long term profitability. But what is the actual record of SCT when it comes to developing new arms of business?

Technologically the robotized meat chain has been a success. But as things enter their nineth year profitability is still marginal. Separately the automated milking system is taking longer to prove than envisaged. To my way of thinking despite setting themselves up as long term developers of innovative knowledge, SCT has yet to deliver on these new technologies in a commercial sense. I believe that they will eventually succeed. But the doubters have a convincing contrary argument that can be put!

Lizard reckons the share price could come back if profits fall. You think SCT is under fair value now. Both of you could be right. In the meantime I feel comfortable with the balance I have struck sticking in the middle of your respective opinions.

SNOOPY

Snoopy
03-01-2012, 10:17 PM
After reflection, Snoopy, I think your evaluation of SCT is very cautious.

Tower Investment's comments of 18 October 2011 offer a bit of contrast, and are more in tune with my feel for things:


I couldn't be more pleased if you and Tower were right and I was wrong US. I am probably a bit more cynical based on past managmement performance whereas new boys on the register Tower are believers in the new company direction. I found it quite heartening to read about Towers research into SCT as I hadn't seen that information before. Thanks for pointing it out.

SNOOPY

Snoopy
02-02-2012, 06:09 PM
6.0, 1.8, 0, 4.4, 4.4, 0, 9.5, 10.2, 8.5, 2.9

That comes out to a grand total of 47.7cps over ten years. I should note that the per-share earnings have been retrospectively adjusted to reflect the number of shares on issue today. Significant changes in the number of shares without the addition of any cash earning business unit were as follows:

1/ A 1:4 rights issue on 4th August 2011
2/ A 1:10 bonus issue on 26th March 2010
3/ A 1:8 bonus issue on 4th December 2003
4/ A 1:8 bonus issue on 8th December 2002

Assume a Scott Technology share price of $1.65, and an average annual over the business cycle cash payout of 4.77cps

4.77c/$1.65= 2.89% net = 4.1% gross

That compares favourably with term deposit rates in this current low interest rate environment. Therefore I can’t see the sense in selling your SCT shares and decoupling yourself from the potential of the long term investment pipeline for any less than $1.65, for no improvement in cash return. For me $1.65 has become the bottom line indicative price that I would consider selling at.


Time to expose an investment traitor on this website. None other than yours truly!

I managed to get a few of my SCT shares away on market at $1.60 today, despite stating that $1.65 was my bottom line. What changed my mind? All of those new shares that are being created at dividend time via the DRP. I think that makes the 'eps' outlook slightly lower in coming years, even as profits are not affected. So to bring my overweight holding into line, I decided to shed a portion of my shares at $1.60. My average buy in price reduced from $1.20 to $1.15 as a result. In portfolio terms that improves my at cost dividend yield at SCT to something respectable, while I continue to build cash to meet the market's most signalled cash issue ever, coming up at NZS.

Letting you all know that the 'Snoopy overhang' has now been removed from the market is sure to boost the SCT share price further ;-P. I am 90% sure I will soon be looking foolish for taking the cream off my SCT share pile at only $1.60. Nevertheless I have learned that not keeping liquidity under control in thinly traded shares can be costly when a market announcement unexpectedly goes bad. My solution to this problem is always leave something on the table for the buyer - sell into strength if you want to continue to be a winner in investment musical chairs.

Meanwhile I wish all those who remain on the SCT register the very best with their investment, and that includes me of course since I retain the vast majority of my SCT shares.

SNOOPY

Lizard
02-02-2012, 07:15 PM
I am 90% sure I will soon be looking foolish for taking the cream off my SCT share pile at only $1.60. Nevertheless I have learned that not keeping liquidity under control in thinly traded shares can be costly when a market announcement unexpectedly goes bad. My solution to this problem is always leave something on the table for the buyer - sell into strength if you want to continue to be a winner in investment musical chairs.

Good on you for stating your position. This market, we all look foolish when we sell (my BGR, SKL). Other markets, we've looked foolish when we buy. That's why I figure I'm a better longer-term investor than trader, as "too soon" becomes less important over time. Achieving outperformance in illiquid stocks is often worth the cost of erring on the side of "too soon".

Snoopy
07-02-2012, 01:02 PM
Letting you all know that the 'Snoopy overhang' has now been removed from the market is sure to boost the SCT share price further ;-P. I am 90% sure I will soon be looking foolish for taking the cream off my SCT share pile at only $1.60. Nevertheless I have learned that not keeping liquidity under control in thinly traded shares can be costly when a market announcement unexpectedly goes bad. My solution to this problem is always leave something on the table for the buyer - sell into strength if you want to continue to be a winner in investment musical chairs.


My prediction has proved correct. With the Snoopy overhang gone, a buyer has appeared in the market at $1.65. As I write this under 2000 shares have been sold at this price. So the brokerage charges will make the net price rather less than $1.65 as received by the seller than if the parcel were larger. Next seller is at $1.85 so perhaps a quantum jump in share price is on the cards from here

Results for the half year are due to be announced in six weeks if last years announcement timetable is anything to go by. I predict a good announcement. However it will be all historical. What is announced about work in the pipeline will drive the share price from here. The high exchange rate against well, everyone, may cast a shadow over the short term future.

SNOOPY

Snoopy
20-02-2012, 02:43 PM
A slightly cheeky offer in the mail has arrived for some SCT shareholders.

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

UNSOLICITED OFFER BY ZERO COMMISSION NZ LIMITED
It has been brought to our attention that a company called Zero Commission NZ Ltd has written to
Scott Technology Limited (“Scott”) shareholders who hold less than approximately 1,300 shares in
Scott with a conditional offer to buy their Scott shares for $1.50 per share.
The Scott Board does not endorse this offer.
Zero Commission NZ Ltd made a request to be provided with a copy of Scott’s share register in
accordance with the Companies Act 1993 and this was provided to them, as we are required to do by
law.
The last share trade on 17 February 2012 was at a price of $1.66 per share.
We recommend that shareholders seek independent financial or legal advice if they are uncertain
about this matter or are contemplating selling their Scott shares. Shareholders are under no
obligation to accept the offer or to take any action in respect of it.
Scott is listed on the NZSX (code SCT) and shareholders are able to trade their shares through this.

-----------

"Zero Commission NZ" is a vehicle owned by long time sharemarket investor Phil Briggs. You would have to think that Briggs has done his homework. If he thinks it is a good idea to buy SCT shares, then why would it be a good idea for you to sell to him? Be careful out there fellow shareholders.

SNOOPY

Under Surveillance
20-02-2012, 03:24 PM
The Zero/Briggs offer will be made to around a third of SCT shareholders, I infer from the sizes of holdings shown in the last annual report (28% of holders then held less than 1,000 shares, collectively just over 1% of the total number of shares).
Having warned small holders off transactions with Zero/Briggs, SCT would do well to construct a scheme whereby it will buy back holdings of the size targeted by Z/B at a fair price, free of brokerage. Say 165, as of this moment.

Snoopy
20-02-2012, 04:04 PM
The Zero/Briggs offer will be made to around a third of SCT shareholders, I infer from the sizes of holdings shown in the last annual report (28% of holders then held less than 1,000 shares, collectively just over 1% of the total number of shares).
Having warned small holders off transactions with Zero/Briggs, SCT would do well to construct a scheme whereby it will buy back holdings of the size targeted by Z/B at a fair price, free of brokerage. Say 165, as of this moment


I would argue that smaller SCT shareholders should enroll in the dividend reinvestment plan. That would be a way of building up their holding to a more significant level. Management has already done the best thing for them by putting this plan in place.

SNOOPY

Under Surveillance
04-03-2012, 09:45 PM
That wouldn't make sense with either their robotics or appliance line businesses. SCT is a skill dependent business and it would take years, even decades to train up a Chinese workforce to replace what they have in Christchurch and Dunedin.

However, with the newly acquired electromagnet business and some of the more more 'standard product' coming out of Rocklabs in Auckland, perhaps moving some production to China might make sense.


SNOOPY

Snoopy, here is an item which gives insight into the nature of SCT's activities in China.

http://www.asianz.org.nz/our-work/action-asia-business/action-asia-insights/scott-technology

Lizard
23-03-2012, 11:54 AM
Half year result out. First glance looks fair enough. Increased div, although would like to see more free cashflow behind it.

I finally bought a few the other day, despite meaning to put it off until closer to FY result, (due to the unusual forex gains in last years result that probably won't be repeated). It's one of the small pool of NZX shares I've never owned before. Mostly I just think they are in an interesting sector and still looking reasonably priced, with a history of divs.

Snoopy
23-03-2012, 11:01 PM
Half year result out. First glance looks fair enough. Increased div, although would like to see more free cashflow behind it.

I finally bought a few the other day, despite meaning to put it off until closer to FY result, (due to the unusual forex gains in last years result that probably won't be repeated). It's one of the small pool of NZX shares I've never owned before. Mostly I just think they are in an interesting sector and still looking reasonably priced, with a history of divs.

Welcome aboard Liz. Cashflow with SCT is usually lumpy because of the big block nature of their projects. There is a significant chunk of 'other income' in this half year result which I can't quite pin down, but it seems this was in the last half year result as well.

Didn't like that comment about demand for appliance lines being non existant in Europe. SCT usually a leading indicator so the fall out from Europe in general could yet be far worse than we all fear.

SNOOPY

Lizard
24-03-2012, 08:03 AM
Thanks Snoopy. Yes, it is the lumpy nature of this type of business that usually keeps me away. However, have often thought that automation/robotics would eventually have to replace the "outsourced slavery" of a third-world Asia. There are increasing triggers in place to make that happen, although the pace of change is unpredictable and could be very slow.

A rise in automation has many consequences in terms of market winners and losers - and, as with all structural shifts or "game changers", there will probably be more money made in those companies able to achieve greater competitiveness of operations as a result rather than from those companies who carry the investment load of developing the technology. However, in SCT's case, they have established a niche and a range of core technologies, so I am hoping they are a fairly low risk entry to what could become a buoyant sector.

Of course it could still be that betting on high sector margins and growth in automation and robotics is as pointless as betting on a rise in green-energy has been. A love of science seems often a hindrance to sensible investment!

Snoopy
12-04-2012, 03:01 PM
Yes, it is the lumpy nature of this type of business that usually keeps me away.


I have read through the eagerly awaited detail in my half-year report. There were a couple of surprises in there in the ‘segment information’ (p11).

Scott Technology splits their operations into ‘standard equipment’ and ‘automated equipment’ for accounting reporting purposes. This slightly annoys me because ‘standard equipment’ covers mining sampling equipment, meat processing robotics and now super-conductive electromagnets. I don't see the same market synergies in these that management do. Lumping them all together, in my view, does not give a good view of how SCT is doing on an operating divisional basis. Nevertheless reading between the lines one can get a reasonable insight as to what is happening.

On superconductors we learn (p2)
“A small positive contribution before reinvestment research and development was recorded by HTS-110 in this half year.”
This almost certainly means the superconductor division is losing money. However I am not too worried by this given:

1/ the relatively early stage of product development,
2/ the need to keep ahead of potential global competitors and
3/ other commercial applications that can be developed from the technology that exists already.

The other ‘standard equipment’ sales are largely delivered through joint ventures.

Robotics Technologies, the meat processing robotics venture with Silver Fern Farms, contributed a Scott Technology six-month share of profit of just $124,000. There was a nil contribution from the corresponding Australian meat robotic joint venture. Other joint ventures were ever so slightly negative with cumulative losses under $NZ100,000.

Al this means that ‘standard equipment’ profit is almost all attributable to ‘Rocklabs’. $3.57m for the half year from this business unit is over 80% of last year's full year result. Profit growth on the equivalent half-year result last year was over 100%! SCT directors must be so grateful that Rocklabs founder, Ian Devereaux, approached the company to become his succession plan.

Meanwhile over at ‘automated equipment’ (translation: ‘appliance manufacturing production lines’) a $422k profit on the equivalent half year has reversed this half into a $432k loss. Ouch! However I do note that there is over $6m of contract work in progress on the balance sheet (c.f. none in the equivalent period last year). This implies that for the full year, notwithstanding the poor outlook for Appliance Lines in Europe and America, I do expect ‘automated equipment’ to be near to break even for FY2012. The fact that SCT have sent their head of appliance systems on secondment to China, where the inquiry level is good, suggests they are very serious about moving this part of the business back into profitability.

OK, time for me to stick my neck out. Barring some disaster at Rocklabs, I predict the full year net profit at SCT will be near to $7m. That would equate to a net profit of some 30cps and an historic PE of 5.5 (based on a share price of $1.65). Look for the SCT share price to track up to $2 by Christmas.

SNOOPY

Under Surveillance
12-04-2012, 05:03 PM
There are 40.3 million shares out, Snoopy, which upsets your arithmetic. 200 by christmas would represent a PE of 11.4 (with 40.3 million shares issued). However, shares issued under the current DRP, and an assumed full year DRP, could take the December towards 42 million, with which the PE would be close to 12.
For mine 12 would be a fully appropriate PE for a company with SCT's record over the last few years, assuming the $7 million is in the bag.

macduffy
27-04-2012, 02:33 PM
Joint Venture with XRF announced.

http://asx.com.au/asxpdf/20120427/pdf/425vvgtbpr71z4.pdf

I don't hold either company but take a mild interest in XRF, a company that I wouldn't be surprised to see my old friend CPB have a crack at, some day!

Stranger_Danger
28-04-2012, 10:03 AM
I've held XRF since 09 and rate the management. I agree that a CPB takeout is likely one day. XRF is worth consideration in my opinion.

Snoopy
26-05-2012, 01:10 PM
There are 40.3 million shares out, Snoopy, which upsets your arithmetic. 200 by christmas would represent a PE of 11.4 (with 40.3 million shares issued). However, shares issued under the current DRP, and an assumed full year DRP, could take the December towards 42 million, with which the PE would be close to 12.
For mine 12 would be a fully appropriate PE for a company with SCT's record over the last few years, assuming the $7 million is in the bag.

Yes, I temporarily forgot about all of those shares created as a result of the cash issue. So thanks for the correction. No real excuse for that because I was one of the subscribers!

That $7m of profit is never in the bag until it is, well, in the bag. However by year end that will be old news and the market will be looking towards FY2013. I have an inkling that FY2013 will see profits fall back from $7m, before rising again in FY2014.

Why? I think the global appliance production line market will take time to come on line again. While the extra effort being put into China is good, these things do not come together overnight.

Mining servicing almost by the law of averages can't continue being as buoyant as it has been (can it?). I will be very interested in following how the joint venture with XRF in Australia works out. I am seeing FY2013 as a year of consolidation, which may explain the act of SCT treachery I committed last Friday!

SNOOPY

Snoopy
26-05-2012, 01:24 PM
I am seeing FY2013 as a year of consolidation, which may explain the act of SCT treachery I committed last Friday!


I reluctantly carved off a few more SCT shares from my holding last week. Not really abandoning ship as SCT remains my second largest NZX holding. But I didn't want to continue to be overweight in a relatively illiquid share. I decided to sell down some more two months ago and it has taken this long for the market to match my price!

My investment stats on SCT are looking very good. Median holding time for my SCT shares is four years. Average entry price $1.03. Dividends booked over that time 15cps. Capital appreciation 71cps. Of course I have invested a lot of 'sweat capital' coming to grips with the company. But I would be very happy if all my NZX investments perform as well as this one has.

Despite this I have probably slightly underperformed the 'buy and hold' investor who bought in at only 85c four years ago. But of course that assumes that I could have bought all of the shares I did at 85c without driving the price up. I suspect I could not have which means the win of my theoretical buy and hold competitor investor remains theoretical.

SNOOPY

percy
26-05-2012, 01:35 PM
You were right to sell down.
Long led times,distance from customers,few customers,lumpy earnings,and forex concerns,make this unstable company too high risk for the majority of sensible investors.

Snoopy
26-05-2012, 01:43 PM
I reluctantly carved off a few more SCT shares from my holding last week. Not really abandoning ship as SCT remains my second largest NZX holding. But I didn't want to continue to be overweight in a relatively illiquid share. I decided to sell down some more two months ago and it has taken this long for the market to match my price!

<snip>

Despite this I have probably slightly underperformed the 'buy and hold' investor who bought in at only 85c four years ago. But of course that assumes that I could have bought all of the shares I did at 85c without driving the price up. I suspect I could not have which means the win of my theoretical buy and hold competitor investor remains theoretical.


Just a note on the investment management of illiquid shares. I think that anything illiquid requires extra careful due diligence, because you may have to hold such shares for a lot longer than you consider as ideal. I like SCT because it is very conservatively managed as regards debt. So even if you have to hold for longer than anticipated to get your price, it is unlikely you will do your dough.

There is research out there that shows small cap companies tend to outperform large cap companies over time. But there is also research that shows when investors try to capitalise on this phenomenon they tend to come unstuck. The liquidity trap means that when it comes time to sell at 'market value' you usually can't. My solution to this conundrum is to be contrarian. That means selling into strength and buying into weakness.

All this is of course an anathema to a trader, who preaches the exact opposite strategy. However, as even the good traders like Phaedrus found out with SCT, the evaporation of paper profits due to poor market liquidity is a very real market hazard. I guess if Mr P was still about on this forum he would preach avoiding a share like this because market liquidity is not enough to make a trading plan work with any meaningful number of shares. As a result I doubt if many shareholders in SCT classify themselves as 'traders'.

But as I have proved that doesn't mean you can' t make excellent returns on a share that wouldn't make it within a bollinger band of our traders Metastck.

SNOOPY

Under Surveillance
27-06-2012, 08:44 PM
Here's an article, posted yesterday on the TWR website, which might interest SCT followers:
Investment case study: Scott Technology
At TOWER, we are believers in the ability of Kiwis to innovate, invent and design.
Indeed the use of number 8 wire for a myriad of purposes has become a symbol of the country‟s ingenuity and self sufficiency.
It should come as no surprise then that many of the companies that we invest in are world leaders in industrial design and fabrication.
While we invest to generate long term wealth for our clients, this can be achieved by providing capital to Kiwi companies that are taking these skills to the world market.
When we look at our portfolio we see many excellent examples of world standard designers such as; Skellerup, Fisher & Paykel Appliances, Fisher & Paykel Healthcare and Scott Technology.
The longest established of them is Scott Technology, which has been operating since 1913.
The company evolved to become a manufacturer of machines that go into factories that in turn manufacture products, such as fridges and washers.
At one time almost every fridge made in the United States was in part assembled using Scott Technology production line machines that came from Dunedin, New Zealand.
Scott Technology is now translating this technology dominance to other industries where it can create automated solutions, such as meat processing, mineral testing, recycling and even diary milking.
Graham Batts is a director of Scott Technology and played a key role in developing the business in the 1970s and 80s.
Here he recalls the breakthrough into the important U.S. marketplace:
“I travelled to the United States in 1975 and set about networking with a lot of potential clients, including someone from Electrolux who I had previously met, and who had expressed interest in our Australian manufacturing lines and innovatory approach.
“Electrolux were themselves in the process of launching a new product line, meaning they were open to a different approach to mass manufacturing, so the timing was perfect.
“They recognised that our production equipment and methods could be an answer to their large manufacturing volume requirements.
“Following my initial meeting with their senior executives, they expected me to return to New Zealand to co-ordinate a proposal with the Scott team.
“However, I felt timing would be crucial to cement the deal and spent the weekend following the meeting, sketching potential designs and preparing a layout in my hotel room.
“The executives were impressed with what they saw as a „well thought through solution‟ to their pending production problem, which I was able to present to them only 48 hours later.
“Having never seen anything like my design and proposal, they took the risk of dealing with „an outsider‟, and agreed to a $6 million order there and then.
“Scott's biggest project to that point had been $400,000, so such a large overseas contract presented us with considerable challenges.
“This meant our team had to quickly upscale resources to be able to respond, however, we were certainly up for the challenge.
“Not only was that first order the beginning of ongoing work from Electrolux, the breakthrough opened up massive new market possibilities in the States.
“We also successfully used such a direct approach with potential clients in Europe and Asia, developing several opportunities which we quickly exploited.
“It was very hard work, however, we proved that a small New Zealand business could successfully compete with much larger rivals in the global marketplace.
“Additionally, our innovative ideas, quality workmanship, technical expertise and responsive approach to building strong business relationships surprised many potential clients, and won business for us.
“It was the beginning of Scott's very successful export story.”
Source: Scott Technology website
We can think of no better example of that famous kiwi “can do” attitude, unfazed by the situation and just getting the job done.
And through that ability and determination these innovators create real value for their businesses.
We are fortunate that today there are several such businesses that are listed and we can invest in on behalf of our clients.
Outlook
We are confident that over the course of next few years the innovators in our portfolio will be significant contributors.
Companies such as Scott Technology have the potential scope to not only double their sales but to then double them again.
Where companies achieve that kind of sales growth, our experience has told us that their share price can more than double as they demonstrate their true growth capabilities.

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

The reference to "diary [sic] milking" reminds me that the SCT 2011 annual report had it that "The dairy sector investment is expected to progress with production prototypes on display in early 2012, followed by commercialisation in 2013."

Snoopy
28-06-2012, 03:50 PM
You were right to sell down.
Long lead times,distance from customers,few customers,lumpy earnings,and forex concerns,make this unstable company too high risk for the majority of sensible investors.


I really only sold down the money I put into the rights issue Percy. I retained most of my shares for the following reasons.

1/ Long lead times mean results are easy to predict. Just look at the 'Inventories' section of the balance sheet and you can as good as guess the Appliance manufacturing line profits for the upcoming six months period. The downside to working on big projects is lumpy earnings. Management have addressed this by diversifying into meat industry, milking and honey harvesting robotics. And of course the hugely successful Rocklabs, producing testing equipment for the global mining industry.

2/ Manufacturing of the Appliance Production System lines takes place in New Zealand. But in every important continent where SCT operates they have a company owned sales office staffed by hand picked personnel. This means they are very close to the needs of their customers, much closer in fact than any other New Zealand exporter than I can name.

3/ The global appliance industry consists of just a few big players. This makes keeping up contact with the key customers very easy.

4/ The company runs a no term debt policy, and hedge all contracts in overseas currency as soon as they are confirmed. In the worst case some jobs are done on tight margins, particularly is casual contractors are required to be hired to get work done. But because of the high intellectual property which cannot be easily duplicated by lower cost competitors I would judge SCt as the safest manufacturer in New Zealand to invest in.

I have of course put my money where my mouth is and only have one manufacturing investment in new Zealand. This one.

SNOOPY

PS Percy if need another SCT referee, try talking to your mate Mr Waller at the next EBOS AGM.

Snoopy
28-06-2012, 04:10 PM
Outlook

We are confident that over the course of next few years the innovators in our portfolio will be significant contributors.
Companies such as Scott Technology have the potential scope to not only double their sales but to then double them again.
Where companies achieve that kind of sales growth, our experience has told us that their share price can more than double as they demonstrate their true growth capabilities.


Interesting article US. At the risk of deflating the superbullish sentiment I should point out that none of the SCT robotic joint ventures produce any significant profit as yet. Double the sales on something that makes no money and the increase in profit is zero. Result: no benefit to the share price.

Rocklabs is currently the jewel in the SCT crown. But Rocklabs was not started by those running SCT at board or management level. I would prefer to judge the growth potential of SCT on when those robotics joint venture projects start making some real money.

SNOOPY

percy
28-06-2012, 04:33 PM
I really only sold down the money I put into the rights issue Percy. I retained most of my shares for the following reasons.

1/ Long lead times mean results are easy to predict. Just look at the 'Inventories' section of the balance sheet and you can as good as guess the Appliance manufacturing line profits for the upcoming six months period. The downside to working on big projects is lumpy earnings. Management have addressed this by diversifying into meat industry, milking and honey harvesting robotics. And of course the hugely successful Rocklabs, producing testing equipment for the global mining industry.

2/ Manufacturing of the Appliance Production System lines takes place in New Zealand. But in every important continent where SCT operates they have a company owned sales office staffed by hand picked personnel. This means they are very close to the needs of their customers, much closer in fact than any other New Zealand exporter than I can name.

3/ The global appliance industry consists of just a few big players. This makes keeping up contact with the key customers very easy.

4/ The company runs a no term debt policy, and hedge all contracts in overseas currency as soon as they are confirmed. In the worst case some jobs are done on tight margins, particularly is casual contractors are required to be hired to get work done. But because of the high intellectual property which cannot be easily duplicated by lower cost competitors I would judge SCt as the safest manufacturer in New Zealand to invest in.

I have of course put my money where my mouth is and only have one manufacturing investment in new Zealand. This one.

SNOOPY

PS Percy if need another SCT referee, try talking to your mate Mr Waller at the next EBOS AGM.

Yes I forgot to mention staffing problems;Impossible to attract when required,expensive to retain in slow downs.
As for talking to Mark Waller at EBO;no way can I get near him.Everyman and his dog go to EBO agms.First one I went to there were about eight or ten sharehoders including great SCT shareholder Ian Urquarhart,the chairman Jamnie Maddren served the tea.That was offcourse about 1991 Mark Waller I greatly respect,infact EBO is my largest holding.I do not like NZ manufacturing,although we hold some SKL,but even those I watch carefully,and that holding is not large.

Snoopy
29-06-2012, 02:33 PM
Yes I forgot to mention staffing problems: Impossible to attract when required, expensive to retain in slow downs.


Attracting skilled labour is always an issue when you company relies so much on intellectual capital, including the very valuable eyes and hands of the ground floor workers. However, I am not aware of this problem delaying the development of any SCT projects. Once hired labour has a habit of sticking around at SCT. I would go so far as to say they have the best labour relations of any New Zealand company. I have talked to many workers over the years and have been surprised by their enthusiasm and long service.

The problem with keeping these workers busy between big projects is a long term issue. SCT is addressing this by increasing the complementary work allocation between the Christchurch and Dunedin bases. Having more standardized product, as most of the new generation robotics are, will also assist in filling those work flow holes.

SNOOPY

Snoopy
13-07-2012, 08:55 PM
The problem with keeping these workers busy between big projects is a long term issue. SCT is addressing this by increasing the complementary work allocation between the Christchurch and Dunedin bases. Having more standardized product, as most of the new generation robotics are, will also assist in filling those work flow holes.


Someone wanting in as share volume was 100,000 today. That is way more than usual with a buyer there at $1.73 and sellers at $1.79. I can't think of a particular reason why this should happen. True management and directors have been topping up their shareholdings of late, usually a good sign.

Then again SCT is small enough that one or two big deals can make a significant difference. I wonder how that under the radar dairy shed automation project is progressing? Progress so far has been tardy, but maybe some light at the end of the horizon?

SNOOPY

Snoopy
19-09-2012, 06:17 PM
Then again SCT is small enough that one or two big deals can make a significant difference.


Looks like one of those deals came up today. The share price is up 5c to $1.80, and at close there were buyers at $1.82.

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

HEADS OF AGREEMENT – INTEGRATED CONVEYOR SYSTEMS
The Board of Scott Technology Ltd (“Scott”) are pleased to announce that the Company has
entered into an agreement to acquire the assets and intellectual property of Integrated
Conveyor Systems Ltd (“ICSL”).
The agreement allows the company time to complete due diligence on the technology whilst
enabling Scott to take effective control during the due diligence period. The due diligence
period ends in June 2013, at which time Scott has the option to acquire ICSL. The due
diligence period can be extended at Scott’s option for a further 12 months.
ICSL is based in Western Australia and has developed patented conveyor technology. ICSL
design, manufacture and distribute their flexible enclosed belt conveying system to meet the
global conveying demands for a wide range of industries. ICSL’s conveyor technology is a
logical extension for Scott with our progress in the mining automation market where the
technology is aimed at improving speed, OSH and labour costs, particularly in remote areas
or over difficult terrain. Of key interest to Scott is the work that ICSL is undertaking in
conjunction with a major mining company who is using and trialling the innovative conveyor
for a technically advanced project.
The immediate commitment is less than A$0.5m and is supported by tangible assets.

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

SNOOPY

Under Surveillance
19-09-2012, 07:14 PM
Looks like another capital raising in 2013? Based on the happy event that was the 2011 capital raising, I'll be in again.
As I recall, some years back the board was aspiring to SCT being a $100 million company by the time of the centenary (which is to be celebrated around the AGM in Dunedin in December 2013, towards which an history has been commissioned). At 180 the capital value is about $73 million.

Snoopy
19-09-2012, 08:50 PM
Looks like another capital raising in 2013? Based on the happy event that was the 2011 capital raising, I'll be in again.
As I recall, some years back the board was aspiring to SCT being a $100 million company by the time of the centenary (which is to be celebrated around the AGM in Dunedin in December 2013, towards which an history has been commissioned). At 180 the capital value is about $73 million.

The 2012 capital raising was really to pay for Rocklabs, built up by the founder over a working lifetime, as all the debt incurred in buying that company was wiped afterwards. I would be surprised if another capital raising will be needed for what is in reality a startup acquisition of Integrated Conveyor Systems Ltd (“ICSL”) though. Notwithstanding the continuous capital raising that is the dividend reinvestment plan, the best way to get to that $100m market valuation would be to improve the operational performance of the existing assets IMO. In fairness the ICSL potential acquisition, in combination with Rocklabs, may be designed to do exactly that.

SNOOPY

Snoopy
21-09-2012, 01:09 PM
Someone wanting in as share volume was 100,000 today. That is way more than usual with a buyer there at $1.73 and sellers at $1.79. I can't think of a particular reason why this should happen. True management and directors have been topping up their shareholdings of late, usually a good sign.


SCT bid at $1.89 with shares on offer at $1.94. Good volume (for SCT) going through too. I would say the share price is being pushed up in anticipation of a good annual result, which could be released in as soon as a week. I don't think the Integrated Conveyor Systems potential acquisition is really enough to cause this kind of price movement, as it is still under trial.

I guess the other explanation could be holders selling out of F&P and looking for another export tech investment. A very small percentage of F&P proceeds would be enough to move the SCT share price.

I am still predicting a very good result but a subdued outlook. That may yet see the SCT share price 'do a MVN', but here's hoping not.

SNOOPY

discl. Hold SCT and will consider if I need to adjust my holding after the annual result information is in the public domain.

Snoopy
24-09-2012, 02:56 PM
Then again SCT is small enough that one or two big deals can make a significant difference.


Bids in the market for SCT shares at $1.90 today. Possibly fueled by this announcement?

-----

24 September 2012
Listed Company Relations
New Zealand Exchange Limited

AUSTRALIAN BASED MEAT PROCESSORS INVEST IN AUTOMATION
Scott Technology is pleased to advise that the Company, in association with its joint venture
with Silver Fern Farms (Robotic Technologies Ltd (“RTL”)), has been contracted to provide
lamb boning room automation to two Australian meat processors. Innovative meat
processors the Australian Lamb Company (“ALC”) and JBS Australia (“JBS”), a division of
the world’s largest meat processor, have both agreed to invest in technology to help drive
automation in their Australian operations. Supported by Meat and Livestock Australia and
the Australian Meat Processor Corporation, the projects total NZ$11 million sales to Scott
Technology and are due to be installed and operational before the end of 2013.
Both ALC and JBS see enormous benefits in the technology, including improved carcass cut
accuracy, significant increase in room product flow, OHS improvements for staff and data
analysis for stock procurement.
The investment follows on from the 2011 installation by ALC of RTL’s automated x-ray
primal system.
Yours sincerely
Stuart McLauchlan,Chris Hopkins
Chairman,Chief Executive


About the project
In 2010 Australian Lamb Company, an innovative family owned lamb boning room based in
Melbourne Australia, made a significant investment in the future of its boning room by investing in a
fully automated x-ray primal system. The benefits that ALC have received to date include accurate
cutting via use of the x-ray image on each individual carcase, a significant reduction in bandsaw
meat dust and a consistent room product flow. With two less operational staff now using bandsaws
it is anticipated that future OH&S claims will also significantly reduce.
"We knew of all the cutting accuracy benefits that we would receive, however one of my biggest
surprises is the benefit of consistent room product flow as a result of the x-ray primal. This has
resulted in processing an extra 250 carcasses per shift" said Darren Verrall, General Manager of
Operations at ALC. "The Scott team delivered on their promise of a well engineered solution that
integrated seamlessly into our existing operation, delivering the pre-agreed benefits and then some.
Scott are always available either in person or on the phone if any questions arise." said Mr. Verrall.
The x-ray primal accurately dissects the lamb carcass into forequarter, middle (rack and loin) and
hindquarter segments with the use of the x-ray image in defining every bone position. Along with
powered rotary cutting knives that can pitch and yaw at the required angles, the entire system can
produce accurate cuts that are just not possible using a traditional manual bandsaw. When
questioned about the bottom line benefits John Verrall, Joint Managing Director (ALC) responded by
saying that "the scallop cuts give us extra loin recovery that was previously lost to waste. We have
already received unsolicited positive feedback from our customers on increased product
presentation and consistency."
During June 2012 Don Jackson, CEO of JBS USA, witnessed the operation of the ALC system first hand
and commented that "This was the future for JBS smallstock processing." "Why aren't you guys
doing this in beef and pork as well?" questioned Mr. Jackson. Both ALC and JBS have bought into the
vision of the future of an automated lamb boning room. JBS has contracted Scott to deliver a fully
automated and integrated x-ray primal middle system at their Bordertown facility in South Australia.
At the same time, ALC has contracted Scott to supply an automated middle machine to integrate
with their existing x-ray primal system. Denis Zarpellon, Joint Managing Director at ALC, when
referring to the recently signed ALC contract said, "we can't stop now, this is our future!"
JBS has requested that Scott hold a fixed price for another two complete units for their other
Australian lamb processing facilities. Graham Treffone, Innovation Manager at JBS said "once we
prove this to the rest of the company it is only a matter of time before we have the system at our
other sites in quick succession." Neil Brereton, JBS Group Engineer, concluded that "if you can
demonstrate to us, as you have ALC, that we do not need to 'nursemaid' this technology, we will be
installing more."
Scott will have the new systems operational for both ALC and JBS before the end of 2013. Along with
the original x-ray primal system installed at ALC, the total commitment from both ALC and JBS, has
resulted in a total Australian industry investment of A$11 million in automated lamb deboning.
Scott are currently working with both JBS and ALC to determine how to use the individual carcass
grading data that is obtained from the x-ray system to benefit their producers, in addition to bone-in
and boneless forequarter automation developments.
ALC, JBS and Scott would like to acknowledge the ongoing support of both Meat and Livestock
Australia and the Australian Meat Processor Corporation.

-------

SNOOPY

Snoopy
24-09-2012, 02:59 PM
AUSTRALIAN BASED MEAT PROCESSORS INVEST IN AUTOMATION

<snip>
Supported by Meat and Livestock Australia and the Australian Meat Processor Corporation, the projects total NZ$11 million sales to Scott Technology and are due to be installed and operational before the end of 2013.
<snip>


In number terms this announcement is superficially not that fantastic. Scotts only have a 50% of the robotics joint venture. So $5.5m of sales translates to an after tax profit of what? $0.5m?



<snip>
During June 2012 Don Jackson, CEO of JBS USA, witnessed the operation of the ALC system first hand and commented that "This was the future for JBS smallstock processing."
<snip>
Graham Treffone, Innovation Manager at JBS said "once we prove this to the rest of the company it is only a matter of time before we have the system at our other sites in quick succession." Neil Brereton, JBS Group Engineer, concluded that "if you can demonstrate to us, as you have ALC, that we do not need to 'nursemaid' this technology, we will be installing more."
<snip>


I believe the above is the exciting bit of the announcement. SCT look to have gained a (lamb?) leg into the American market and these guys look keen to buy, and soon. This is I believe the global kick start that Robotic Technologies has been threatening to make for nearly five years. Very exciting stuff for SCT going forwards.

SNOOPY

Lizard
24-09-2012, 03:25 PM
I believe the above is the exciting bit of the announcement. SCT look to have gained a (lamb?) leg into the American market and these guys look keen to buy, and soon. This is I believe the global kick start that Robotic Technologies has been threatening to make for nearly five years. Very exciting stuff for SCT going forwards.

SNOOPY

An unusual informality in the latter page of the announcement, but suggests big potential. Not sure who takes the prize for informal reporting though - Teamtalk's "2012 Annual Report and Cocktail Guide" is up there... (I went straight to the back looking for the cocktails... they were at the front of course!)

percy
24-09-2012, 03:33 PM
These latest announcements are very positive.Good news for shareholders.

Snoopy
24-09-2012, 03:40 PM
These latest announcements are very positive. Good news for shareholders.


I just hope management aren't setting shareholders up for a fall come annual result time Percy. I note no announcement has been made on the appliance production line side of the business. That division still accounts for 50% of SCT's work. I can't see much good news from production line arm of the business looking into 2013. Bracing myself for the bomb to be dropped, although I do expect a decent final dividend from this years work to cushion any blow!

SNOOPY

percy
24-09-2012, 03:59 PM
I just hope management aren't setting shareholders up for a fall come annual result time Percy. I note no announcement has been made on the appliance production line side of the business. That division still accounts for 50% of SCT's work. I can't see much good news from production line arm of the business looking into 2013. Bracing myself for the bomb to be dropped, although I do expect a decent final dividend from this years work to cushion any blow!

SNOOPY

Yes you are most probably right,however being too dependent on the appliance production line side is not good for the company.The expansion of new areas should help smooth out earnings/cash flow.SCT will then be able to grow any of these new areas should they see potential.
These announcements have me looking at SCT again.

Under Surveillance
24-09-2012, 07:49 PM
I just hope management aren't setting shareholders up for a fall come annual result time Percy. I note no announcement has been made on the appliance production line side of the business. That division still accounts for 50% of SCT's work. I can't see much good news from production line arm of the business looking into 2013. Bracing myself for the bomb to be dropped, although I do expect a decent final dividend from this years work to cushion any blow!

SNOOPY
Appliance manufacturing systems amounted to 29% of group sales in FY 2011 (page 11 of 2011 annual report). "All areas of the business remain fully engaged with forward work extending toward 2013." (page 2 of H1 2012 report).
Given the SCT dividend policy is to pay out 50% of NPAT, the final dividend for 2012 will increase from 5cps to 6 cps if your forecast of NPAT of $7M is met.

Snoopy
25-09-2012, 03:47 PM
Appliance manufacturing systems amounted to 29% of group sales in FY 2011 (page 11 of 2011 annual report).


Of course I keep forgetting how fast Rocklabs has developed. However, taking a five year (backward) view I still stick to Appliance Line Manufacturing making up 50% of SCTs business, or more specifically profits. Remember the Appliance line manufacturing is lumpy (p7 of the AR2011 notes they had a challenging year). Going forwards you may be right - 30% work (profit) share may be a more realistic view.



"All areas of the business remain fully engaged with forward work extending toward 2013." (page 2 of H1 2012 report).


I hate to say it, but we are getting towards 2013!



Given the SCT dividend policy is to pay out 50% of NPAT, the final dividend for 2012 will increase from 5cps to 6 cps if your forecast of NPAT of $7M is met.


First I have heard of that dividend policy. Traditionally SCT has paid out something like 90% of profits as dividends. Of course this is not taking into account the DRP.

I wonder if you are thinking about last year U.S.? The nominal profit was $5.217m. But half of that was unrepeatable foreign exchange gains. Underlying profit was only $2.679m or 6.7c per share. The dividend was 6cps in keeping with the 90% payout ratio history.

Meanwhile onwards and upwards for SCT. Trading at $1.97 today.

SNOOPY

Under Surveillance
25-09-2012, 08:25 PM
First I have heard of that dividend policy. Traditionally SCT has paid out something like 90% of profits as dividends. Of course this is not taking into account the DRP.

I wonder if you are thinking about last year U.S.? The nominal profit was $5.217m. But half of that was unrepeatable foreign exchange gains. Underlying profit was only $2.679m or 6.7c per share. The dividend was 6cps in keeping with the 90% payout ratio history.SNOOPY
I concede, I can't find any SCT statement of the current dividend policy. The dividends paid in relation to 2009/10 (5.25 cps, paid also on new shares under a 1:10 bonus issue) amounted to 59% of audited NPA. The dividends paid in respect of 2010/11 (7.0 cps) totalled 49% of audited NPAT.

Snoopy
27-09-2012, 04:23 PM
Meanwhile onwards and upwards for SCT. Trading at $1.97 today.


The good news continues for SCT shareholders with the price up another 7% today to $2.12. Volume was very thin though (only 1000 shares), and buyers have now retreated back to $2.05. This is a low liquidity share so we can expect some buffeting along the way. But now signs of it yet! Existing shareholders I suspect are holding out for that annual result due in a few days time.

SNOOPY

Snoopy
05-10-2012, 01:15 PM
There are 40.3 million shares out, Snoopy, which upsets your arithmetic. 200 by christmas would represent a PE of 11.4 (with 40.3 million shares issued). However, shares issued under the current DRP, and an assumed full year DRP, could take the December towards 42 million, with which the PE would be close to 12.
For mine 12 would be a fully appropriate PE for a company with SCT's record over the last few years, assuming the $7 million is in the bag.

As all SCT holders know, Christmas has come early this year. SCT trading at about $2.20 as I write this. That equates to an FY2012 PE of about 13.2, assuming my $7m profit prediction comes to fruition.

I am still a little nervous about the outlook for FY2013. With the SCT share price at its highest point for several years, I took a few more profits yesterday at $2.25. Taking a layer of profit off the top is a strategy I call "peeling the onion" - taking off just the top layer doesn't make that much difference to the weight of your overall holding. Even though it may produce a few tears! I have a gut feeling the SCT share price has run up a little too hard too quickly. Plus the rather frothy press release on meat line automation struck me as a mostly head and little body brew up. My average acquisition price is now down to 90c as a result of my 'peel'.

I have no plans to sell out of the company completely of course. But I just felt my position was getting a little overweight again. And the way to put this right is to sell into market strength. Phaedrus's disastrous result of selling SCT into market weakness some years ago is laid out earlier in this thread (post 41)!

SNOOPY

Under Surveillance
11-10-2012, 03:29 PM
I concede, I can't find any SCT statement of the current dividend policy. The dividends paid in relation to 2009/10 (5.25 cps, paid also on new shares under a 1:10 bonus issue) amounted to 59% of audited NPA. The dividends paid in respect of 2010/11 (7.0 cps) totalled 49% of audited NPAT.

They're paying out 48% this year, Snoopy, 8.0c/16.7c. The gross dividend yield is 5.1%, @ yesterday's close of 224, more than a little underwhelming for those seeking income. You'll be feeling smug about selling recently @ 225?

Snoopy
11-10-2012, 04:36 PM
They're paying out 48% this year, Snoopy, 8.0c/16.7c. The gross dividend yield is 5.1%, @ yesterday's close of 224, more than a little underwhelming for those seeking income. You'll be feeling smug about selling recently @ 225?


U.S., although I am an 'income investor', I am happy for the company to retain capital if it means if it means a higher income earning base that will lead to higher dividends in future years. Even so a 5.1% is still higher than you would get at the bank!

Smug selling a few at $2.25? I still think it was the right thing to do from a portfolio risk perspective. But as I said peeling one layer off the onion was really an adjustment, not a trading coup!

SNOOPY

Snoopy
11-10-2012, 04:51 PM
I just hope management aren't setting shareholders up for a fall come annual result time Percy. I note no announcement has been made on the appliance production line side of the business. That division still accounts for 50% of SCT's work. I can't see much good news from production line arm of the business looking into 2013. Bracing myself for the bomb to be dropped, although I do expect a decent final dividend from this years work to cushion any blow!


Looks like some problems with the appliance production line arm of the business. The page I always turn to first is the segmental results. Net profit for automated systems was a mere $34,000 in FY2012, down from $3.442m last year! Revenue was only slightly down, from $32,150m in FY2011 to $29,499m in FY2012. So perhaps there were technical problems that caused cost overruns? Also no evidence of any sales to China, despite the head of Appliances spending a year up there. I was looking for hedges in yuan which would mean confirmed business on the Chinese mainland. However, these kind of deals do take time. So it is probably too early to judge the success of more investment in China. If Haeir take over FPA it will not be good for SCT. FPA have their own production line engineering division!

Moving on to the industry segmentation, from $2.334m (FY2011) to $3.113m (FY2012) represents a 50% rise in revenues for the superconductor magnets - very encouraging. Of course it is still early days, so probably this division is still loss making.

Despite the recent bullish outlook, meat processing robot revenue was down from $6.376m (FY2011) to $5.371m (FY2012). The disappointment here continues from a profit perspective, even if technically from a production perspective it is all very successful.

But look at the mining equipment revenue! $34.046m, up from $28.407m! Most of that equipment is standardized so this is where the profit is coming from.

The headline after tax profit of $6.110m, I am disappointed with. But if the Appliance Line side of the business had turned in even an average year, the result would have well exceeded my expectations. I think this result was better than the headline figure suggests.

SNOOPY

Snoopy
24-10-2012, 04:17 PM
I think this result was better than the headline figure suggests.


An investor presentation was made today to try and convince others of the above.

http://www.scottech.co.nz/investor-relations/annpdf/2012-10-24-investment+advisor+presentation.pdf

Only real news, not announced before, is that they have sold a meat processing robot into Brazil. Maybe the market expected more? SCT share price down to $2 on the usual light volume.

SNOOPY