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Lizard
18-07-2006, 08:54 PM
Structural Systems is a company I have been meaning to write up for some time and which I think should perform well coming into results season.

STS is a specialist provider of Engineering and Contracting services to the Construction and Mining sectors (more construction than mining, but lets not get picky...). Established 1959. Listed 1987 and clearly not heading for the ASX100 at any great pace...the price appears to have peaked in the late 1990's at just below $3 before falling off to a low around 40cps in 2003.

After a strong re-rate during the second half of 2005, the share price has stagnated at around the current price of $1.08 for most of 2006.

A heavy loss in 2004 (over 30cps) was followed by a large convertible note issue which meant fundamental analysis had to allow for dilution. Most of these have now been converted to ordinary shares and associated options, but fully diluted there are 47m share equivalents on issue. 2005 saw a return to profitability and resumption of dividends at full year with payment of 1.5cps. A HY dividend of 2.5cps brings rolling 12 mth yield to 3.7% plus franking credits. A share buyback is also underway to re-purchase and cancel 3.9m shares (10% of ordinary shares on issue), so my analysis allows for 43m shares.

The company is predicting a record FY NPBT of $6.0-$6.3m, an increase of 70%+ on 2005. This probably extrapolates to NPAT of around $4.3m, putting STS on a fully diluted P/E of around 10. The outlook should remain strong for the coming year. At half year, the company had cash of $7.9m (much of which will have been used for dividends and buyback) and minimal debt. Free cashflows are running ahead of NPAT, so the company should be in a strong position to pay higher dividends going forward or to expand through acquisitions.

Management seem solid if unexciting. With positive outlook and a likely increase in dividend yield, the shares seem unlikely to stay on a P/E of 10. My current valuation is $1.48.

Lizard
26-07-2006, 02:59 PM
Has been climbing steadily and hit $1.30 today, though on low volume.

lewinsky
26-07-2006, 04:24 PM
Hi there Lizard,
Just so you are not chatting to yourself. I like the prospects for STS. Good sector,good op cashflow,debt under control. Should have a good full year result. I think your $1.48 could be a bit low. But I said that about IMD as well.

Cheers

LEW

Lizard
27-07-2006, 11:26 AM
NPBT forecast upgraded by approx 12% on that of two months ago, to $7.1m. Have upped my valuation to $1.54.

Glad to have company on this one Lew. Looks like we have $1.30 on some better volume today [8D]

Costa
24-08-2006, 07:53 PM
Hi guys - at least now there are three of us following this share so you don't need to chat among yourselves.

I've been following STS for a number of months on sharescene after buying in several months ago. Have to agree with your comments - will be interesting to see their full year results but more importantly comments re outlook for FY2007. Encouraging in the latest profit upgrade to see the comments about how they have a good book of orders going into the next year.

Will also be interesting to see what the full year dividend will be.

Lizard
25-08-2006, 06:46 AM
Hi Costa. Nice to have your input :). Lewinsky and I turn up on ShareScene occasionally too.

Outlook will be interesting, though so far the companies of a similar nature that I've followed have stuck with "expecting to maintain growth in the coming year" - a statement which has little effect on valuations given some growth is already priced in.

Lizard
07-09-2006, 04:17 PM
Result out - NPBT in as forecast at $7.2m and NPAT $5.3m - fully diluted 12.7cps or P/E of 10 at current price of $1.25. Nice surprise in the final dividend of 5 cps, which takes yield to 6.0% plus franking.

corky
08-09-2006, 11:27 PM
Lizard

I'll preface these comments by saying I'm a novice at reading reports but...

one aspect I was surprised about in the STS report was the deterioration in cash flow from operations. Is this likely to be a timing issue (perhaps the Welsh tank works)? Any thoughts?

Thanks
Corky

Lizard
09-09-2006, 08:02 AM
From my reading, the differences are all accounted for by movements in working capital - refer to note 19 for details. Last year there was a big increase in payables (coming from pre-payments) which boosted operating cashflow. This year the payables increased further (even larger pre-payments though lower trade payables), but was more than offset by a larger increase in receivables which reduced operating cashflow.

Personally, was a little disappointed to see the lower level of revenue and/or cash receipts in the second half. However, comments regards the expected 2007 revenues from the Welsh project and forward order book are reassuring at this stage. This is probably a timing issue and the high dividend level with suspended DRP and continuing share buyback suggests directors remain confident.

I am working on NPAT of $5.7m for 2007 - most of which can probably be achieved from a continuation of current trading plus the reduced interest payments as the convertible notes convert.

corky
31-10-2006, 10:02 PM
Been a nice riser and seems to have settled at a new level with plenty of buying support at 1.50. Of course the buyback has hardly got out of first gear and provides solid support (highest buy back to-date has been 1.30 - how does the level they can buy at get adjusted?).

Corky

Lizard
03-11-2006, 02:59 PM
STS still running hot, currently $1.61, which is just about at my current valuation of $1.62.

Most of this move has come on no real news, but with a near absence of sellers and some serious volume on the buy side, I have to think that it's got more in it. Though will maybe put in a tightish stop to take profits if this run starts flagging.

Costa
04-11-2006, 08:50 PM
It has been interesting to see how much the SP has moved on no news -although STS have never been big on news (the only announcements they seem to issue are the half year / full year reports with a couple in between!).

It would be good to get an update on how there operations are going round the world, espically in the Middle East (since they now have full ownership of the operations over there).

Lizard
06-11-2006, 11:59 AM
Now $1.72. Only 3 sellers, but one of them isn't very serious and keeps moving his 37k shares back out of reach... Alot of price movement on not much news, so I am getting twitchy.

Lizard
08-11-2006, 12:38 PM
From the Chairman's address to the agm:

"With regard to 06/07, we expect the 1st half result to be in excess of $4m".

The only question I have is whether this refers to before or after tax, as in the past they have tended to give a before tax figure. The way this is written, the assumption would be after...

Assuming it's NPAT, then despite the recent sharp rise, it suggests an annualised forward P/E is around 9 at current price. If it's before tax, then looks to be on track with my own assumption of $5.8m NPAT and a forward P/E of 12.5.

Either way, I am relaxing a little bit, as seems there could be more in it.

Lizard
09-11-2006, 01:08 PM
Seems that the forecast was NPBT (thanks to Veecat off HC who checked with the company). Careless of them not to make this clear in the wording!

So am sticking with a FY profit target of $5.8m and fully diluted P/E of 12.5. Probably fair value at this point.

Lizard
29-11-2006, 03:49 PM
I wrote these up on ST in July when they were $1.08. I've now sold at $1.75, plus divi. They have run faster and higher than I ever expected and outstripped my valuation. The quality of management has not inspired me to keep them in the "Buy and hold forever" category. Probably still cheapish (forward P/E of around 12), but I am willing to leave something in it for the next person.

OneUp
29-11-2006, 04:40 PM
Great pick Lizard :).

Lizard
29-11-2006, 08:58 PM
Thanks One Up. STS has done well. KLM even better - but I'm not selling those.

Anyway, with nearly all my cheapies having run up hard of late (except ESS and LGD), I am going to have to get to work and find some new stocks!

corky
15-01-2007, 03:54 PM
First half upgraded to > $5m pre-tax on $69m rev. Nice eh Lizard?

Lizard
15-01-2007, 07:10 PM
As per usual, I'm in too early, out too early... Phaedrus will be shaking his head in disbelief once again if he's spotted this. [8D]

Glad to see they're still going well for holders. Hopefully the cash will inspire me to find some more good stocks once the kids go back to school and stop dragging me off to the beach...

Costa
15-01-2007, 07:31 PM
Yeah nice to see a further profit upgrade - I thought the prior updgrade of AUD 4mm was quite conservative so it is good to see the growth STS was experiencing has continued for the past 6 months.

Annoyed I missed the opportunity to top up over the past few days when the SP fell back to around $1.65!

Will continue to hold.

Costa
16-05-2007, 06:03 AM
STS has just had another update on Boardroom Radio. Some key points to note include:

* Continued growth into the second-half of 2007 and expect to make a positive announcement on the full year results.

* A number of projects are currently underway. In the past 6 - 8 weeks STS have obtained two very large projects in Australia, another major tower project in Dubai as well as two considerable projects in the UK.

* Bob Freedman mentioned there are around 5 - 6 interesting developments currently underway which they hope to announce shortly. As always he seems to say quite a lot of information which at times appears to verge on market sensitive information. Expanding on these projects he mentioned they have been expanding their operations in the Middle East, with a project recently commenced in Qatar. STS is also looking at several acquisitions globally of which India was specifically mentioned. Finally, he also mentioned there are around 3 acquistions STS is looking at within Australia .

Overall a very encouraging update. There should be several announcements in the coming months in relation to the forecast full year profit (they usually provide an upgrade in May) as well as the potential acquisitions / new projects. STS has exposure to the construction industries in some very high growth markets (Dubai / Qatar) and has also significantly benefited from the mining boom over the past couple of years. Given the potential growth opportunities and the dividend payout STS should continue to be a steady growth stock in the mid - long term.

Lizard
19-08-2007, 03:33 PM
Another great result reported for STS on Friday, with NPBT coming in $1.3m higher than May guidance at $12.3m. NPAT of $8.8m is up 65% on prior year, putting STS on a P/E of 13.5 at current price of $2.49.

Final dividend of 6cps brings the total for the year to 10cps and yield to 4.0%.

Positive outlook for 2008 and strong forward order book.

Costa
21-08-2007, 07:17 AM
Hi Lizard,

Good to see you are still following STS!

Once again they have delivered a very strong result. The thing I like about STS is that the share price has still not got away from the fundamentals. A price of $2.60ish is well support by future growth prospects, a current dividend of 10cps and a strong balance sheet.

Will continue to hold.

Costa
22-09-2007, 09:28 PM
ASX ANNOUNCEMENT

MARKET UPDATE
The Company wishes to advised that it has signed a Heads of
Agreement to acquire the business of Meridian Concrete Pty Ltd
subject to the satisfactory completion of due diligence.
Meridian Concrete is the largest supply and place concrete
subcontractor in the Victorian construction market. Structural
Systems has had a close working relationship with this company
since 2002.
The acquisition will be earnings accretive from the first year.
David Perry
Company Secretary
Released : 21 September 2007

Good to see STS making another acquisition (Meridian Concrete's website below). From reading up on Meridan Concrete it appears to be a good decision provided they can intergrate quickly:


* Meridian was founded in 1997 and already has revenues of over $60 million. Given STS FY revenue for 2006 / 07 was $141mm Meridian will form an integral part of STS.

* STS has worked with Meridian since 2002 which should assist the integration of the two companies.

* Meridian has already had some significant projects, including the upgrade of the Melbourne Airport runway which was completed in 10 days.

* Given STS's other complementary businesses, they should be able to obtain some good leverege across businesses.


http://www.meridianconcrete.com.au/profile.php

Costa
09-11-2007, 08:05 PM
The Meridian Concrete acquisition has been finalised for what appears to be a reasonable price. Expected to increase diluted EPS by 2.5cps in first year. This combined with the very good first quarter results announced the other day now has the SP on $3.60. Continue to hold.

drworm
28-02-2011, 08:12 PM
I think it's time to have another look at Structural Systems.

It's a mining services and construction company. Had a big fall during the GFC, and in most respects it has already turned around. Through it's held back from posting impressive numbers from losses incurred by their already shutdown formwork business and its impact on their concreting business (Meridian). The latter appears under control with the division being scaled down and management providing NPBT forecasts for the next 1.5 years.

It's mining services and civil divisions have been doing very well with the former posting excellent YoY growth and it has now become 50% of the company.

Assuming the company continues as present, with zero growth and that the troubled concrete division is reined in as management have stated - I'm getting an EPS forecast of 23cps for FY12 which is a P/E of less than 3.5 (based on 80c). I think this is pretty conservative based on the growth the mining services division is displaying.

3228

Biggest mis-pricing on the ASX? What do you guys think?

Corporate
28-02-2011, 08:28 PM
Dr, this is another that I've stumbled upon. It does look cheap. However, the high debtors (50% of half year revenue) and negative operating cashflow worries me a little bit!

drworm
28-02-2011, 09:15 PM
You're right on both counts Corporate.

Though the debtors has reduced since last half. With the operating cash flow, I'm giving the company the benefit of the doubt. They're only just a little negative and they only posted a profit of $2m for the half.

I guess the question is whether you stick around and wait for the next report and risk having the shareprice gallop or not.

drworm
16-03-2011, 07:03 PM
Might be making a bit of a move. Some volume in the last few days, made a nice high today and a director has added $50K worth to his position.

drworm
30-08-2011, 03:46 PM
FY11 results out today. Solid result, coming at the top of their guidance range. Got the operating cashflow back into positive territory as well.

Some profit catalysts coming up soon. Losses from discontinued operations coming to an end ($5m after tax loss in FY11) and underperforming concrete business has been scaled down and scheduled to turn a positive result ($6.4m before tax loss in FY11). Their mining services division has been going great guns despite being bang-smack in the middle of the QLD floods.

I have a pessimistic forecast of around EPS 17cps for FY12. But my conservative forecast would be around 21cps. Plenty of upside.

Lizard
09-07-2013, 06:51 PM
I first bought STS at about 40cps... sold out at $1.75, then watched it more than double to over $3.50... now it's back at 33.5cps on the back of a slump in mining and construction contracts.

Probably too soon to buy and maybe needs another depressed year to normalise the business for "slump" conditions before they can pull out of stall, but has reached a price where it deserves a space on the contrarian watchlist.

Lizard
21-10-2013, 07:18 PM
Looks like the market is re-rating STS now in the light of prevailing optimism. Currently 50cps and back in an uptrend...

Lizard
27-02-2014, 11:54 AM
STS seemed to turn in a good half year, despite tough conditions. Now has no net debt after sale of the Meridian Concrete business and has increased the HY div, bringing 12 month divs to 4.5cps on 58c share price. No real decline in order book, despite sale of Meridian.

Lizard
18-07-2014, 05:20 PM
Bit of a melt-up on STS today to 65cps after a patch in the doldrums. Possibly another one like BYL that is just too cheap given the chances of a decent result and dividend.

Lizard
21-07-2014, 04:29 PM
Knocked back today - update announcing the former profit forecast won't be met due to a "contractual issue". However, still forecasting a good dividend of 2.5cps.