Skellerup (SKL) Fundamentals

[winner69]

As PT keeps reminding us, read SSH carefully and don't skim through them and jump to conclusions

Mind you besides the bereaucratic need for form filling I believe there should be a short summary somewhere. Not too hard

[Snoopy]

Snoopy.
Raw materials will be costing more.
Imported goods such as gumboots will be costing them more.
Of concern is SKL share price weakness while other exporters' share price has gone up ,including SCT.


Percy, a farmer in need of a new pair of gumboots is not going to risk soiling his woolly socks inside a half manufactuired pair of North Korean gumboots. Yes Skellerup may have a hard time over the next year due to demand side pressuires on their customers. But the fundamentals of producing high quality consumables are still there. Farmers need quality gear at they will continue to buy Skellerup stuff because they can trust it.

The current macro environment is perfect for acquiring SKL shares. Not sure about the exact timing, which is why I am staggering my purchases of SKL throughout the year. One thing am am sure about though. 2-3 years down the track any shares you can buy at anywhere near todays prices will be seen as dirt cheap.

SNOOPY

[Beagle]

For my money Snoopy the trend is absolutely crystal clear and holding off until some technical buy signals start firing appears to make good common sense. Personally I do not try to pick the bottom of a stock in a very clear down-trend as the risk of capital loss is too great and a lot of money has been lost on this stock in the last 12 months. I have this on my watchlist BUT am happy to wait for as long as it takes for a clear break back above the 100 day MA. The market appears to be saying that the severity of the headwinds facing dairy farmers and iron ore producers is impossible to overstate. I don't know about others but I find swimming against the tide too much hard work.

[BlackPeter]

Hi Roger, understand what you are saying. On the other hand - if you look at the trend, buying at the last golden cross and selling at the quickly following cross of death wouldn't have helped you much either (unless you are a broker ;)).

If you look at the stock: they open later this year a brand new (and already paid for) factory, they have a very healthy balance sheet (you probably would call quite lazy), they produce quality consumables required by several important industries (even if these industries go currently through a rough patch, but they will always be needed), most of their raw materials are currently actually quite cheap (low oil price) despite the lower NZ$, they pay a healthy dividend (though not quite as outrageous as PGW) which they can afford ... and their CEO is holding heaps of shares and accumulating.

Whats not to like about them?

Discl: holding and still in accumulation mode ... actually - they might be the right place to park some of my recent SUM gains ;)

[percy]

Thanks Snoopy.Yes I agree a farmer can't put off buying a new pair of gumboots.
I just keep wondering why the sellers have been so dominate for such a long time.
$1.26 today,and it was not long ago they looked sure to go back over $1.40.
Mair and every one buying,yet the sp continues downwards?
I guess it is just proving that share prices over and under shoot fair value.
I see 4-traders have eps 10 cents for 2015,12 cents for 2016 and 13 cents for 2017.So 20% growth followed by 8.3% which is healthy.
ROE is not bad at 13.9% and forecast yields are 6.88% for 2015,7.06% for 2016 and 7.20% for 2017.

[Beagle]

Hi Roger, understand what you are saying. On the other hand - if you look at the trend, buying at the last golden cross and selling at the quickly following cross of death wouldn't have helped you much either (unless you are a broker ;)).

If you look at the stock: they open later this year a brand new (and already paid for) factory, they have a very healthy balance sheet (you probably would call quite lazy), they produce quality consumables required by several important industries (even if these industries go currently through a rough patch, but they will always be needed), most of their raw materials are currently actually quite cheap (low oil price) despite the lower NZ$, they pay a healthy dividend (though not quite as outrageous as PGW) which they can afford ... and their CEO is holding heaps of shares and accumulating.

Whats not to like about them?Discl: holding and still in accumulation mode ... actually - they might be the right place to park some of my recent SUM gains ;)

Hi BP - The fact that the trend is not your friend. Scarcely even believable but sadly true, dairy futures are even further down the toilet than the last GDT auction. Iron Ore has recently taken an even more severe turn to the downside. Companies and investors exiting those industries / putting mines on care and maintenance only ? Dairy farmers converting back to Beef, grain, goats, sheep, deer or whatever ?

[Biscuit]

Hi BP - The fact that the trend is not your friend. Scarcely even believable but sadly true, dairy futures are even further down the toilet than the last GDT auction. Iron Ore has recently taken an even more severe turn to the downside. Companies and investors exiting those industries / putting mines on care and maintenance only ? Dairy farmers converting back to Beef, grain, goats, sheep, deer or whatever ?

Seems unlikely that dairy farmers would convert back to beef etc. They certainly would not do that at the drop of the hat, there is a lot of capital tied up in milking platforms, irrigation, stock etc that would be lost.

[Sgt Pepper]

Hi BP - The fact that the trend is not your friend. Scarcely even believable but sadly true, dairy futures are even further down the toilet than the last GDT auction. Iron Ore has recently taken an even more severe turn to the downside. Companies and investors exiting those industries / putting mines on care and maintenance only ? Dairy farmers converting back to Beef, grain, goats, sheep, deer or whatever ?

In the 1950s at the height of the Korean War wool boom and dairying was very much the poor relation conversions did occur. You feel for the young indebted dairy farmers who are in effect working l 14 hour days for nothing .

[Beagle]

In the 1950s at the height of the Korean War wool boom and dairying was very much the poor relation conversions did occur. You feel for the young indebted dairy farmers who are in effect working l 14 hour days for nothing .

I do indeed as I am sure most Kiwi's feel sympathy. I don't think anyone was predicting it would get this bad and its much the same for Australian iron ore operations, who would have though a tonne of iron ore would be worth south of $50 U.S. ? Worse, the trend in these commodities is not your friend and with China cooling who can reliably say where the bottom is for either commodity ?
I think its that uncertainty that's affecting SKL's SP. Until there's some evidence of a stabilisation in the commodity prices...

I think in relation to conversions nobody is predicting early decisions but if there's a really sustained multi year collapse in dairy maybe farmers will have no other alternative than to start thinking about capital reallocation notwithstanding heavy restructuring costs ?

[macduffy]

Getting a bit off track here but the trend is certainly your friend if you recognised it early enough and steered clear of dairying and iron ore miners. In SKL's case, I hold a few but wouldn't be adding until the present trend reverses.

[tim23]

Macduffy - I'm guessing they owe you more than current share price so won't matter if you keep averaging down will it? Personally I think they are a steal!

[Pricey]

Sorry to labour the point too much, but I agree its important to read SSH right. If you have a look at the disclosure from 3 July, David Mair through DM2 Investment Trust holds the same amount of shares as that specified in the 21 July disclosure (so he can't have bought 50,000 on the 17th).

3 July: https://www.nzx.com/files/attachments/217126.pdf 21 July: https://www.nzx.com/files/attachments/216232.pdf

[(Summary of A or D of relevant interest (excluding specified derivatives) OR Summary of A or D of Derivatives) + Details of Transaction] should be read together and, separately from Summary of OTHER relevant interest.

Interpreting this as I go - how else are people reading this?

Additionally, although its not as compelling as DM buying himself, I doubt a director would risk the performance of a fund he is involved in through buying SKL, if SKL was in trouble. Bought in at $1.26.

[winner69]

Sorry to labour the point too much, but I agree its important to read SSH right. If you have a look at the disclosure from 3 July, David Mair through DM2 Investment Trust holds the same amount of shares as that specified in the 21 July disclosure (so he can't have bought 50,000 on the 17th).

3 July: https://www.nzx.com/files/attachments/217126.pdf 21 July: https://www.nzx.com/files/attachments/216232.pdf

[(Summary of A or D of relevant interest (excluding specified derivatives) OR Summary of A or D of Derivatives) + Details of Transaction] should be read together and, separately from Summary of OTHER relevant interest.

Interpreting this as I go - how else are people reading this?

Additionally, although its not as compelling as DM buying himself, I doubt a director would risk the performance of a fund he is involved in through buying SKL, if SKL was in trouble. Bought in at $1.26.

You got me well and truly stuffed now

Belwo is part of the SSH notice dated 21 July

Doesn't it say that DM InvestmentTrust purchased on market 50,000 shares $62,000 on July 17

Or am I missing something. I know these things are hard to read and totally confuding but why put that in if he didn't buy 50,000 shares

[winner69]

Hey pricey, you are right the number of shares held is unchanged from the previous SSH

Maybe I am really thick and don't understand such things, then again the form fillers (David did say he just signs things they put in front of him) have made a mistake

[Crash Test Dummy]

I may be a dummy but I can work this out.

Public Trust Forte Nominees is acquiring shares and the man has a 'non-beneficial interest as a shareholder of the fund manager' (of Public Trust Forte Nominees).

[Saint]

3 days straight of SP increase. Also a few shares wanting to be sold at $1.18

[cdonald]

3 days straight of SP increase. Also a few shares wanting to be sold at $1.18

Most likely due to the rebound in Dairy prices more than reversing last auctions declines. Might give some farmers enough incentive to open their wallets

http://www.stuff.co.nz/business/farming/dairy/71247428/early-days-warning-as-gdt-dairy-prices-rebound

[benjitara]

I've deemed this to be a nice overall result given mining and diary aren't in great shape at the moment. Nice.

[Beagle]

First impressions.

Very good annual result. Demand from dairy farmers still solid. Final divvy increased to 5.5 cps fully imputed.
EPS 11.38 cps vs consensus forecast on 4 traders of 10.0 cps, compared to 10.76 cps last year.
Directors confident of further growth next year.
Had a quick look at the balance sheet, looks nice and clean, with a very sound structure about it with little if any term debt.
Exports constitute nearly 75% of revenue WOW who would have thought !!
Currency tailwind to come here and who was picking it ?
Gross divvy yield just over 10% so you're being paid very handsomely to enjoy future years growth.
Looks pretty good to me...others thoughts ?

[benjitara]

First impressions.

Very good annual result. Demand from dairy farmers still solid. Final divvy increased to 5.5 cps fully imputed.
EPS 11.38 cps vs consensus forecast on 4 traders of 10.0 cps, compared to 10.76 cps last year.
Directors confident of further growth next year.
Had a quick look at the balance sheet, looks nice and clean, with a very sound structure about it with little if any term debt.
Exports constitute nearly 75% of revenue WOW who would have thought !!
Currency tailwind to come here and who was picking it ?
Gross divvy yield just over 10% so you're being paid very handsomely to enjoy future years growth.
Looks pretty good to me...others thoughts ?

In the words of meatloaf (music by Jim Steinman) "You took the words right out of my mouth" This and briscoes would be a couple of expertly run companies at the moment.
DISC now hold SKL

[Beagle]

https://nzx.com/companies/SKL/announcements/268754

Analyst presentation. Yep, N.Z. sales now only 24% of total sales !! and dairy demand still solid.
Nice to support a Kiwi exporter and get a 10%+ gross return plus growth. Disc - I took a modest position in SKL this morning.

[cdonald]

Pretty good result and I have to say a bit unexpected from me. I was expecting a bit more doom and gloom but there is none there to be seen. The share price must be due a re rate now as they have proved that they can cope with NZ farmers feeling blue. 10% divvie is amazing and the prospect of a stronger year next year is better too with the NZD continuing to benifit exporters. Well done

[BlackPeter]

https://nzx.com/companies/SKL/announcements/268754

Analyst presentation. Yep, N.Z. sales now only 24% of total sales !! and dairy demand still solid.
Nice to support a Kiwi exporter and get a 10%+ gross return plus growth. Disc - I took a modest position in SKL this morning.

Quite respectable (and unexpectedly good) result, given all the gloom and doom in the industry - and a great example how a company can increase its revenue and profit by reducing its exposure to New Zealand and Australia and by diversification. Well done team!

Increased revenue (+3%), increased underlying earnings (+6%), improved dividend (+6%), still very solid balance sheet (liabilities to assets 25%) and promising a continuation of the uptrend. Love it :t_up:. Given that this was a difficult year (and markets expecting terrible things) - I can't wait to see how a good year might look like.

Expect that the SP downtrend might be over :sleep:

Discl: Holding - accumulated already for some time (following the good example of David Mair - the CEO)

[Beagle]

Yep BP...is a very good result in the circumstances.

At $1.25 its trading on very attractive metrics of a historical PE of <11, dividend yield of exactly 10% gross, plus those that buy now get a 5.5 cent fully imputed divvy in a very short timeframe and as you suggest with lots of overseas sales and the currency tailwind still to come no wonder the directors are confident of growth to come.

[Joshuatree]

The currency should be helping this exporting company in FY2016. The problem is two of their biggest selling consumable lines, the rubber attachments used in milking cows and the slurry handling rubber couplings used in iron ore extraction, have customers facing severe headwinds. These headwinds are likely to delay the aforementioned purchases rather than stopping them. But it does mean the first half of financial year coming up could be soft.

There are other good things happening in Europe. Maserati sales exceeded 35,000 in 2014 and are on target to exceed 50,000 in 2015. Skellerup supplies all the driveline couplings for those through their Italian factory. Even better Alfa Romeo are using a modified version of the mid size Maserati platform as the basis for their new rear wheel drive BMW challenging saloon. If that takes off we could see Skellerup driveline coupling sales increase by a factor of 5. What would that do the bottom line in coming years?

SNOOPY
Aussie (Iron ore) still a prob and dairy ok "Relatively solid" but down 9% on pcp.
The europe car thing to look forward to still.
I agree pretty solid considering.

[James108]

Bought in at 1.18 yesterday expecting NPAT to be 10-15% down. Very pleasantly suprised.

[Joshuatree]

Excellent buying/timing :t_up:James

[Beagle]

A whopping 6.5 million shares changed hands so far today. Fair to say the result has been very well received by the market. Normally huge volume like this is a precursor to the SP heading north once long time holders who remain disenfranchised have exhausted their holdings...which looks to be happening at a quick rate of knots !!

[percy]

Liked the result so much I brought in today.

[sb9]

Was on my watch list all along but didn't have enough bravery to dive in purely due to dairy prices.

Good luck to all.

Disc: do not hold, might keep watching for a good entry.

[percy]

Was on my watch list all along but didn't have enough bravery to dive in purely due to dairy prices.

Good luck to all.

Disc: do not hold, might keep watching for a good entry.

I was surprised 76% of turnover came from outside NZ.
I brought half the amount I want.
Not sure whether the share price will go up or down???

[Beagle]

I was surprised 76% of turnover came from outside NZ.I brought half the amount I want.
Not sure whether the share price will go up or down???

I was too. Augers well for further earnings growth with the currency tailwind. Massive turnover of just on seven million shares as I mentioned above, is usually a precursor to a subsequent northwards SP trajectory.
Certainly the metrics are compelling and that's without much of a currency tailwind last year !! Consensus broker estimates before this announcement were for EPS of 12 and 13 cents for the subsequent two years. I'll bet money, (in effect I did today), those forecasts are currently under review :)

[RGR367]

I was too. Augers well for further earnings growth with the currency tailwind. Massive turnover of just on seven million shares as I mentioned above, is usually a precursor to a subsequent northwards SP trajectory.
Certainly the metrics are compelling and that's without much of a currency tailwind last year !! Consensus broker estimates before this announcement were for EPS of 12 and 13 cents for the subsequent two years. I'll bet money, (in effect I did today), those forecasts are currently under review :)

Looks like Roger has found a new love of his eyes :)

[Under Surveillance]

I was surprised 76% of turnover came from outside NZ.
I brought half the amount I want.
Not sure whether the share price will go up or down???
A good guide is to look at what David Mair has thought to be value (in his SSH notices). I recall that 3 months or so ago, around the middle of May, he paid 139 a share for 100K shares. Likely he paid more before that. For mine, 128 at the close today represents a bargain. I hold, having started with a buy at 51 in January 2010, when the Jonahs prevailed as they have recently until the result today.

[Jim]

Looks like Roger has found a new love of his eyes :)

Had been holding it since the day of Brierley Investment and was called Skellmax. Been accumulating on and off for its generous dividend. Not a boring old company anymore

[Beagle]

Looks like Roger has found a new love of his eyes :)

The old dog can smell a feed coming :D Worth noting that before this very encouraging annual result consensus broker valuation was $1.56. Broker Upgrades coming !
http://www.4-traders.com/SKELLERUP-HOLDINGS-LTD-6495638/consensus/

[percy]

A good guide is to look at what David Mair has thought to be value (in his SSH notices). I recall that 3 months or so ago, around the middle of May, he paid 139 a share for 100K shares. Likely he paid more before that. For mine, 128 at the close today represents a bargain. I hold, having started with a buy at 51 in January 2010, when the Jonahs prevailed as they have recently until the result today.

I suppose this is one of the few shares where I got my timing nearly right.
Can't remember exactly when I brought,think it was just over a $1 and sold when the PE was about 17, and growth rate looked to be under 10%.Most probably sold about $1.59. I have had three people I respect, tell me to buy back in.I seriously looked when the sp was $1.39. Yet the sp continued to fall.$1.28 tempted again.$1.18 thank goodness I didn't buy.!!! Then busy today.Quick read result looked good.Then found time for a good read ,and was most impressed.Brought at $1.27.
ps.Part of the reason I brought, is I would like to go to the opening of the new factory, and hopefully have a tour of it.

[cdonald]

If the PE was 17 based on FY2014 earnings, that implies a share price of:

17 x 0.115 = $1.96

If I was looking to buy SKL shares at that price, my expected return, as per my model over a ten year timeframe is as follows:

1.96(1+i)^10 = (3.24 +1.23) => i=8.6%

A compounding return of 8.6% is OK, but not nearly as compelling as 12.1%. If it were me I would be looking out for other opportunities. Paying $1.96 for SKL shares does not excite me. You may have been right to sell Percy if you had better opportunities elsewhere.



Very likely true Percy. There may be opportunities in the next year or so when the share price dips. I didn't buy all the SKL shares I wanted at $1.33 for exactly that reason. The likes of Buffett sees these downturns as an opportunity to buy when the underlying long term outlook of the company is strong.



12.6 is an average PE taken at September 30th (about when the annual result is made public) each year. It isn't meant to be over generous or under generous. It is just a mathematical calculation.

In bad years the PE may be higher (in anticipation of an ultimate recovery). In good years the PE may be lower (in anticpation of the party not lasting forever). I do not expect the actual PE to hug this average of 12.6. But if I look a decade into the future, not knowing whether the share will be in an upcycle or downcycle, this is the average of what it might be based on what Mr Market has valued the share at in the past.

If you think I should use a lower figure than 12.6, what you are saying is you expect the long term rating of the share to be lower in the next ten years than the last nine. The business has a history of performing well, so it would be incongruous to mark it down on a PE basis. 12.6 (average) is still my best guess going forwards based on nine years of SKL history.

SNOOPY

I have to say that this thread has got some of the highest quality posting around. Having guys with such knowledge has made investing in companies like this a pleasure and fairly easy. Thanks guys.

[Beagle]

12.6 x 11.38 cps = $1.43 so you buying Snoopy ?

[Beagle]

CEO Director David Mair buys 500,000 yesterday. Nice vote of confidence.

[cdonald]

it was DM2 investments doing the 500k buying yesterday rather than the usual fund manager that Mair has buying. He has a benificial interest on the ones bought yesterday (taking it up to 3m now. Nice package)

[percy]

Well there is no confusion where the 1,250,000 shares Sir Selwyn brought at $1.245 are going.
Sir Selwyn's holding is now 13,423,826.

[winner69]

it was DM2 investments doing the 500k buying yesterday rather than the usual fund manager that Mair has buying. He has a benificial interest on the ones bought yesterday (taking it up to 3m now. Nice package)

Yes you are correct, once again I read too quickly

[Snoopy]

12.6 x 11.38 cps = $1.43 so you buying Snoopy ?


I have got in in three tranches during the year Roger. Average entry price $1.30. Also manged to pick up the interim divie on some of those.

Unlike many, I am not surprised at the good result. We have to remember the financial year finished on 30th June. The deep drops in world dairy prices did not manifest themselves until the last couple of months of FY2015. Considering this, I am half expecting a slightly disappointing interim result for FY2016. Maybe a chance for me to top up my holding further? Otherwise reasonably content to sit on what I have got at the average price I have paid.

Now is the time to show your real commitment as a Skellerup shareholder Roger. As a fellow Skellerup holder, and I think I have read you are a car guy, we shareholders really need you to purchase that new Maserati you always promised yourself - complete with Skellerup drive coupling! C'mon Roger, you know you deserve it!

SNOOPY

[Beagle]

My cute little doggies are going to go deaf LOL
https://www.youtube.com/watch?v=17wLWt18uvY

[cdonald]

Good to see the Accountants buying up SKL too. Its one thing for a director to buy but a totally different thing for the CFO to start buying.

[sb9]

Yeah, but correct me if I'm wrong, the documents says $114,400 for 60,000 share on-market purchase from 20-Aug to 24-Aug. The av price works out to be $1.91 per share, something missing there, the sp hasn't been that high??

https://nzx.com/companies/SKL/announcements/269011

[percy]

Yeah, but correct me if I'm wrong, the documents says $114,400 for 60,000 share on-market purchase from 20-Aug to 24-Aug. The av price works out to be $1.91 per share, something missing there, the sp hasn't been that high??

https://nzx.com/companies/SKL/announcements/269011

I did think of ringing her and offering her mine for the same price.!! lol.

[sb9]

Got mine filled in today...$1.24

[Omega]

Yeah, but correct me if I'm wrong, the documents says $114,400 for 60,000 share on-market purchase from 20-Aug to 24-Aug. The av price works out to be $1.91 per share, something missing there, the sp hasn't been that high??

https://nzx.com/companies/SKL/announcements/269011

Revised notice $76,300 for avg $1.27 share

[sb9]

Yeah, saw the revised notification. Not a bad endorsement by CFO, isn't it.

[percy]

Yeah, saw the revised notification. Not a bad endorsement by CFO, isn't it.

Chairman,Director ,CFO,sb9,Percy = "we are well positioned."..!!

[sb9]

Chairman,Director ,CFO,sb9,Percy = "we are well positioned."..!!

Yes percy, too good a price to miss out on.

[sb9]

https://nzx.com/companies/SKL/announcements/269357

CFO (Ms Coutts) buying more...always a good sign.

[sb9]

Strong battle going between bid at $1.27 and ask at $1.28, let's see who blinks first no trades yet...

[xafalcon]

Is there a correlation between GDT results and SKL? Or has the market realised this is an undervalued high divvy stock? Or something else?

[BlackPeter]

Is there a correlation between GDT results and SKL? Or has the market realised this is an undervalued high divvy stock? Or something else?

Psst ... some people still might want to accumulate while the price is low ...

Looking at your question ... the dairy industry is one quite important customer for SKL, so some people might see a connection, though obviously one somewhat better auction result (or three) does not make a dairy spring.

I suppose its more the market realising that this is an undervalued company. They are even successful if dairy is low - farmers can delay maintenance on their systems only so long, no matter how low the milk price is - and SKL was as well quite successful in diversifying their products. SP is slowly creeping upwards for the last five weeks or so and just passed the MA100. Some people might call this the start of an uptrend, though (I know Percy ;)) there is obviously still the MA200 to crack.

Discl: holding

[xafalcon]

I overlaid the GDT index and SKL, and the 18 month correlation is strong. Even the temporary price rise in Dec/Jan, and of course the rise over the past month are both mirrored. Probably just coincidence since SKL are much more than just dairy. But I would be interested in any other peoples thoughts.

I jumped aboard SLK 2 weeks ago when I noticed their P/E was comparatively low when they were paying a sizable dividend. So I'm keen to learn more about the drivers for this stock

[Beagle]

Drivers
1. 76% of sales are exported so the recent major fall in the $Kiwi will materially boost FY16 returns and beyond
2. Cheap PE about 11 last time I looked
3. Gross dividend yield north of 10% and presently trades cum a fully imputed 5.5 cent final divvy, ex date early October)
4. Several directors recently bought in decent volume
5. Beat market expectations in FY15 a year that was already gloomy for the dairy industry
6. Expectations that the FY15 result is the bottom of the cycle for SKL ?

Disc : I'm a happy holder

[sb9]

All looking very positive, good points on drivers Roger. Just a small correction goes ex-div end of this month 30/09.

[percy]

Psst ... some people still might want to accumulate while the price is low ...

Looking at your question ... the dairy industry is one quite important customer for SKL, so some people might see a connection, though obviously one somewhat better auction result (or three) does not make a dairy spring.

I suppose its more the market realising that this is an undervalued company. They are even successful if dairy is low - farmers can delay maintenance on their systems only so long, no matter how low the milk price is - and SKL was as well quite successful in diversifying their products. SP is slowly creeping upwards for the last five weeks or so and just passed the MA100. Some people might call this the start of an uptrend, though (I know Percy ;)) there is obviously still the MA200 to crack.

Discl: holding

BP,I use charts as just another tool to help me,yes a very important tool.
I saw the result and thought it was fantastic.The next day I saw Sir Selwyn buy,so I brought some.Thought about it,and doubled my holding the next day.Paid $1.29 and $1.27.
"Well positioned". lol.

ps.Don't worry the chart will catch up with us shortly.!!

[Beagle]

Clear break above the 100 day MA which is back at $1.30. $1.34 now, onward and upward :)

[Beagle]

Selwyn Cushing keeps buying, another 750,000 on to his ledger.

[xafalcon]

2M shares purchased in a month, now holding 7.3% of company shares. A strong vote for his vision of future SKL fortunes

[DarkHorse]

I finally bought some for the first time last week. Have seen many stocks with insider buying fail to perform - can be average managers and mediocre investors; but when the insiders are successful investors and make very substantial purchases... the odds are obviously in our favour :)

[banter]

Drivers
1. 76% of sales are exported so the recent major fall in the $Kiwi will materially boost FY16 returns and beyond
2. Cheap PE about 11 last time I looked
3. Gross dividend yield north of 10% and presently trades cum a fully imputed 5.5 cent final divvy, ex date early October)
4. Several directors recently bought in decent volume
5. Beat market expectations in FY15 a year that was already gloomy for the dairy industry
6. Expectations that the FY15 result is the bottom of the cycle for SKL ?

Disc : I'm a happy holder

To follow, an estimate of SKL's 2016 profit given best-guess exchange rates for the year ending 06/2016.
And allowing for 2016 hedge losses.
If the calculations are right, and assuming 6% inherent growth (same as this year), eps jumps by 65%, to about 19cps.

Over the last 8 years, the median year-low PE and year-high PEs are 9.6 and 16.1 - say 10-16.
Giving a valuation range of $1.90 - $3.04.

Which might help explain point 4) above.
The directors don't give much away about the outlook in the annual report - just describing it as 'promising'.

On top of that - overseas earnings rose from 72% to 76% between 2014 and 2015.
If SKL can continue to grow overseas sales its growth prospects seem 'reasonable.'


Workings and sources follow.



15a
16








npat ul
21.9
35.8
(5)







eps ul
0.113
0.186








po %
79%
79%








gdps
0.125
0.204








gy%
9.3%
15.3%






























Deriv. of 16 NPAT









2015 NPAT
21.9









AUD +/- (1)
1.2









USD +/- (2)
8.6









EUR +/- (3)
3.4









Hedge +/- (4)
-1.4









Adj. NPAT
33.8









+ 6% grwth (5)
35.8




















Effect of a change in exchange rate on 03/15 revenue, NPAT and EPS







06/15 figures
06/15 figures with different ex rates (best guess for 06/16 bolded)


NZD/USD
0.78
0.75
0.7
0.68
0.66
0.64
0.62
0.6


US/other rev (in NZD)
66
68
73
75
78
80
83
86


US/other rev (in USD)
51









Ch rev
0.0
2.6
7.5
9.7
12.0
14.4
17.0
19.7


Ch NPAT
0.0
1.9
5.4
7.0
8.6
10.4
12.2
14.2


Ch eps
0.000
0.010
0.028
0.036
0.045
0.054
0.063
0.074













NZD/AUD
0.93
0.92
0.9
0.88
0.86
0.84
0.82
0.8


Au rev (in NZD)
51
52
53
54
56
57
58
60


Au rev (in AUD)
48









Ch rev
0.0
0.6
1.7
2.9
4.2
5.5
6.9
8.3


Ch NPAT
0.0
0.4
1.2
2.1
3.0
4.0
5.0
6.0


Ch eps
0.000
0.002
0.006
0.011
0.016
0.021
0.026
0.031













NZD/EU
0.65
0.64
0.62
0.6
0.58
0.56
0.54
0.52


EU rev (in NZD)
39
40
41
42
44
45
47
49


EU rev (in EUR)
25









Ch rev
0.0
0.6
1.9
3.3
4.7
6.3
8.0
9.8


Ch NPAT
0.0
0.4
1.4
2.4
3.4
4.5
5.7
7.1


Ch eps
0.000
0.002
0.007
0.012
0.018
0.023
0.030
0.037













Hedge losses
hedged @
Amt local $m
Assumed rate
Hedge val
real val
Gain/loss




AUD
0.9319
4.72
0.86
5.1
5.5
0.42




USD
0.698
3.61
0.66
5.2
5.5
0.30




EU
0.651
1.38
0.58
2.1
2.4
0.26




GBP
0.4722
1.47
0.42
3.1
3.5
0.39










1.4




Sources










Hedge figures and 2015 results - https://www.nzx.com/files/attachments/218922.pdf p34

[sb9]

Selwyn Cushing keeps buying, another 750,000 on to his ledger.

And he paid top dollar too for those shares $1.34, not a bad endorsement isn't it.

[Beagle]

And he paid top dollar too for those shares $1.34, not a bad endorsement isn't it.

Yeah I noticed that mate. I think its safe to say he's a forward thinker so realises that buying now he's really only paying $1.285 per share as he'll get 5.5 cps fully imputed dividend back in five minutes so too speak. He'll know the prospects for the company with the lower $Kiwi better than anyone on here.

Banter - You could say we are well positioned :)

[sb9]

Ms Coutts accumulates more (another 20,000)...

[Beagle]

Yes its very rare for so many senior exec's and directors to be accumulating at once. Its very tempting to go to the On the water boat show this weekend. On one hand one could buy a new boat and watch it depreciate by 20-30% in the first year and cost another 10% of its up front cost in annual opex or one could buy some more SKL and watch them go up by 20-30% in the first year and earn a 10% gross divvy yield. Hmmm

[sb9]

Yes its very rare for so many senior exec's and directors to be accumulating at once. Its very tempting to go to the On the water boat show this weekend. On one hand one could buy a new boat and watch it depreciate by 20-30% in the first year and cost another 10% of its up front cost in annual opex or one could buy some more SKL and watch them go up by 20-30% in the first year and earn a 10% gross divvy yield. Hmmm

Well, the tide has truly turned (up) today....go for more SKL I reckon.

[Beagle]

BOAT - Bring On Another Thousand

P.S. And CFO Ms Coutts is still buying today $1.36.

[sb9]

Ms Coutts accumulates more (another 20,000)...

Wait there's more, she bought another 30,000 today at $1.36..

[xafalcon]

The more this goes on, the more dodgy it's starting to look

I hope the directors are making relevant disclosures of pertinent price-sensitive information to the market, and not just sharing it amoung themselves

[stoploss]

The more this goes on, the more dodgy it's starting to look

I hope the directors are making relevant disclosures of pertinent price-sensitive information to the market, and not just sharing it amoung themselves

It's all there in print if you care to read the Aug 15, 2015 results.
Highlights for the year ending 30 June 2015
o Strategies to boost presence in and develop products for international
markets, particularly in the United States, have delivered increased sales
and earnings.
o NPAT of $21.9 million is up six percent on guidance and the previous year
excluding the $20.4 million gain realised on settlement of the Canterbury
earthquakes insurance claim in FY14.
o Increased final dividend of 5.5 cents per share (cps) giving a full year
dividend of 9.0 cps (up 6% on pcp).
o Construction of our new Dairy Rubberware Development and Manufacturing
facility (Project Viking) has progressed significantly.

A strong finish to the year has allowed Skellerup Group to post improved
earnings for FY15, the Company announced today.
Chief Executive Officer David Mair said the results demonstrated the value of
Skellerup's focus on allocating capital and resources to those markets with
the greatest potential for sustainable long-term growth in revenue and
profit.
"The economic environment is uncertain, however I am confident that our
progress and plans mean we are well placed to deliver a further improvement
in earnings in FY16."

[zigzag]

BOAT - Bring On Another Thousand

P.S. And CFO Ms Coutts is still buying today $1.36.

I believe that Elizabeth Coutts is a director, not the CFO. Once the new factory is completed, and successfully commisioned, then SKL will be very well placed!

[silverblizzard888]

I believe that Elizabeth Coutts is a director, not the CFO. Once the new factory is completed, and successfully commisioned, then SKL will be very well placed!

Quoting from the disclosure it says: "Position held in listed issuer: CFO "
Elizabeth Coutts the CFO unless to doc is wrong, but unlikely, either its good news all the way!

[Snoopy]

It's all there in print if you care to read the Aug 15, 2015 results.
Highlights for the year ending 30 June 2015 ....<snip>


Exactly Stoploss. And having taken the trouble myself to go to the downtown library and study the annual reports, even back to the ones no longer available on the net.... A tangible improvement has been coming for SKL for years. I've been accumulating for about six months in spite of the incredulity of some who didn't think the company was worth studying becasue it was 'in a downtrend'. The latest result announcement simply clarifies a gradually developing story.

The directors put all the facts on the table, start buying themselves, then someone suspects a conspiracy of concealment? How much spoon feeding do investors need these days?

SNOOPY

[xafalcon]

Don't get me wrong, I am a shareholder and like to see my investment increase in paper value.

I read the report (20 Aug). It was good, but I didn't think it was excellent. A 6% increase in NP, 3% revenue increase, dairy tough.

The buying activity seems disproportionately concentrated from people closely associated with the company, with multiple buys from the same people - CFO (they seem to have 2, Liz & Graham) & CEO

Meanwhile insto's are doing the opposite and selling - NZ super fund offloads 4.5M, AMP sells 1.9M (and maybe more since they are now below 5% holding so don't have to notify anymore)

Makes me wonder if some people have greater "insight" than the rest of us. And if that is the case (and I'm not saying it definitely is) then there is a problem.

Hopefully it's nothing more than an extremely solid endorsement of the company by senior management taking advantage of an oversold stock situation with SP still well below their view of true market value

[Beagle]

^^ Relax, your last sentence sums it up perfectly. That and its trading cum a fully imputed final divvy of 5.5 cps...who doesn't like a juicy big divvy :)
Disc - I bought more today myself. If directors and CFO are buying like crazy so am I ! We are in a clear uptrend now, clear break of the 100 day MA, multiple endorsements from directors and senior management in substantial volume, very strong tailwind from dramatically lower currency compared to last year and 76% of sales are exports. Compelling low PE and high gross divvy yield.
You could say that we are very well positioned ! I don't know much about new production efficiencies from the new manufacturing facility being built but I would suggest its pretty obvious the Directors do !

[nextbigthing]

How do you feel about the fact that while dairying might have reached its lowest point and might debatably be on the way up (artificial volume), the spending from dairy farmers will be cut back this year, meaning the flow on to the results is yet to be noticed.
There's some things they have to do (replace broken items), but some things they will certainly be putting off (eg preventative maintenance).

[Brain]

I am always on the look out for insider buying. Not token stuff but serious insider buying. Selwyn Cushing's recent purchases indicate he has a lot of confidence in the company. this is the best buy signal for any share that I have seen for a while.

[Snoopy]

How do you feel about the fact that while dairying might have reached its lowest point and might debatably be on the way up (artificial volume), the spending from dairy farmers will be cut back this year, meaning the flow on to the results is yet to be noticed.


I think you are right NBT.

The Skellerup financial year closed on 30th June, and the worst effects ofthe dairy downturn happened after that. However,as others have said, Skellerup's main dairy market is for consumables, like the rubber interface between the cows teat and the milking machine. These items wear out and farmers can't choose not to replace them eventually. So what we have here is a timing issue. I do expect the first half of FY2016 for SKL to be affected. Was hoping to pick up some more cheap shares, if they do get sold down. But I don't think the outlook for the business is affected longer term. Share prices tend to reflect the future looking a year or two out, not what is happening in the customer market on the day.

SNOOPY

[sb9]

Ms Coutts adds more today (being last day before ex-div) another 50,000 @1.36 a piece.

[frostyboy]

How do you feel about the fact that while dairying might have reached its lowest point and might debatably be on the way up (artificial volume), the spending from dairy farmers will be cut back this year, meaning the flow on to the results is yet to be noticed.
There's some things they have to do (replace broken items), but some things they will certainly be putting off (eg preventative maintenance).


I guess this is the reason for the institutions deciding to sell. They have been selling to the insiders though.

I see a new insider bought shares yesterday, his action is more 'token' compared to the other directors. The guy is John Strowger, a legal guy specialising in mergers and acquisition type stuff. He started early this year. After his buy yesterday he now has 118,000 shares compared to 42,000 in March

[Beagle]

TPP applies to all manufactured goods. :t_up:

[sb9]

Quite a few large off-market transactions today.

[sb9]

Went back to check the market depth...boom its $1.40 now...

[xafalcon]

CEO has bought another 500K @ 1.35 over the past few days

[Jantar]

I may be a touch late to the party on this one, but have placed a small order for market opening.

[sb9]

Well, more buying by another director. At this rate, there'll none left for general public I think ;)

[pierre]

Well, more buying by another director. At this rate, there'll none left for general public I think ;)

They're definitely at sale price - not quite at a Briscoe's 60% off - but best be in before they run out of stock!

[xafalcon]

I particularly like the fact that directors are continuing to buy as the SP rises. Todays notification at a whisker above $1.38

[Beagle]

Well, more buying by another director. At this rate, there'll none left for general public I think ;)

I cannot recall another example of such sustained and widespread directors and senior management purchases in a VERY long time. What is it about the manufacturing efficiencies of the new plant or some other thing they know which shareholders don't fully comprehend yet ? It'll be $1.50 in no time and brokers will have to upgrade their target price. The way this is going they'll all be reinvesting this weeks dividend into more share purchases as well.

[sb9]

That was good finish for the day, wasn't it?

Yeah, my thoughts are with you Roger, is there something that the insiders know about future prospects that we ordinary shareholders does not. In which case, if its materially sensitive they should issue a formal earnings update/upgrade.

Just realised the ASM is in Auckland (Eden Park) on 28 Oct (wed), are you going for this one Roger?

[Beagle]

Not sure at this stage mate.

[zigzag]

I believe that Elizabeth Coutts is a director, not the CFO. Once the new factory is completed, and successfully commisioned, then SKL will be very well placed!

You don't have to be an insider to work that out.

[malus]

Info on Elizabeth from SKL site http://www.skellerupholdings.co.nz/Board.php

She has been and remains a busy lady!!

[BlackPeter]

Just received my annual report and voting pack. Just wondering - is the Elizabeth Coutts sitting on the SKL board (and standing for reelection) the same Elizabeth Coutts who happened to sit on the VTL board when they created the framework for Nathan Finance? If yes - the board must have been at best pretty tired (firm asleep?) at that time ...

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10554397

Does anybody know?

[percy]

Same person,but she and Larsen were gone when they smelt a rat.
As an aside, I received a Nathan's Finance "prospectus".
It read really well.No related party lending.Offcourse it was all lies.

[Beagle]

I wonder what all the directors and senior managers are going to do with all that lovely cash they received in their bank account yesterday from that juicy dividend ?

[sb9]

I wonder what all the directors and senior managers are going to do with all that lovely cash they received in their bank account yesterday from that juicy dividend ?

Buy more of the stock they love I guess, nice juicy divvy in the bank this morning :t_up:

Can't wait for the ASM to hear more exciting stuff!!!

[malus]

Same person,but she and Larsen were gone when they smelt a rat.
As an aside, I received a Nathan's Finance "prospectus".
It read really well.No related party lending.Offcourse it was all lies.

Hmmm... VTL was a costly $5000 lesson for me back in the day... assume Elizabeth moved out early having, as you say Percy, potentially "smelled a rat"... one hopes that a brush with this(those) rodent(s) early on in her directing career has lead to her acquitting herself with aplomb as a director ever since... I am not aware of her scoring any black marks since... anyone else??

[BlackPeter]

Same person,but she and Larsen were gone when they smelt a rat.
As an aside, I received a Nathan's Finance "prospectus".
It read really well.No related party lending.Offcourse it was all lies.

Thanks percy, this would put her on my "never again" list. Don't need directors who disappear when they smell dead rats, but instead directors who do something about problems before shareholders hurt. Shall vote against her re-election (not that it matters, but still ...)

[percy]

Thanks percy, this would put her on my "never again" list. Don't need directors who disappear when they smell dead rats, but instead directors who do something about problems before shareholders hurt. Shall vote against her re-election (not that it matters, but still ...)

VTL was,or had the potential for great things.
A number of very astute investors were caught.
I am fortunate enough to have a holding in Ebos.Last year Coutts came up for re-election,and spoke to the meeting.A very capable director,who would add a great deal of knowledge to any board in Australasia.The board of Ebos hold her in very high regard.The chairman spoke at length of her contributions.
Sir Selwyn was on my "never again list" after his extremely poor chairmanship of AIR NZ and Cabletalk [turned out a complete disaster].
Yet, since then I have invested in both SKL, and Sir Selwyn's REL [unlisted] ,and extremely happy with both.
When you are a director and disagree with the "major"shareholders all you can do is resign.
That is why we watch for directors/CFOs resigning,or in SKL's case buying more shares."Inside knowledge."

[Beagle]

Caught up with my reading over the weekend. Annual report made for a very good read. Good solid and sound company with 75 year plus trading history looking to build their business the old fashioned way through careful product expansion and innovation without throwing too much money at capital projects or new products until they're proven to be a profitable exercise. (A report like this should be compulsory reading for some of the tech company executives).
Very strong balance sheet, exchange rate tailwind, project Viking initiative and production efficiencies and the wide array of meaningful director and senior management buying in give people the obvious clue this company and its shareholders are very well positioned.

Based on a conservative estimate of FY16 dividends of 10 cps fully imputed 10 / 0.72 = 13.89 cents gross SKL trades on a gross dividend yield of a fraction under 10% and has a consistent record of strong and reliable dividends so shareholders are being paid handsomely to hold and enjoy future growth.

[sb9]

Yeah agree with you Roger, the annual report was good read over the weekend, very encouraging overall. I reckon $1.50 by ASM next week.

[Beagle]

Yeah agree with you Roger, the annual report was good read over the weekend, very encouraging overall. I reckon $1.50 by ASM next week.

In a market that's starting to look like its recovered quicker than the fundamental's of the economy suggest it should have this still stands out as good value at $1.42 IMO. Bought some more yesterday.

[sb9]

Hmmm.., looks like someone wants to get out at $1.42, once that seller gone, should be up and away.

[Beagle]

Hmmm.., looks like someone wants to get out at $1.42, once that seller gone, should be up and away.

Its had a good strong run since the annual result so some consolidation around there level's is to be expected by my reckoning. Great long term hold for further capital gains over time and 10% gross yield.

[Beagle]

Hmmm.., looks like someone wants to get out at $1.42, once that seller gone, should be up and away.

Its had a good strong run since the annual result so some consolidation around there level's is to be expected by my reckoning. Great long term hold for further capital gains over time and 10% gross yield.

[sb9]

Its had a good strong run since the annual result so some consolidation around there level's is to be expected by my reckoning. Great long term hold for further capital gains over time and 10% gross yield.

Seems to be on the move now slowly marching towards 150 mark.

[Beagle]

Yeah agree with you Roger, the annual report was good read over the weekend, very encouraging overall. I reckon $1.50 by ASM next week.

Not many sellers ahead of tomorrow's annual meeting so you could be right. I'd imagine the vibe at tomorrow's meeting should be pretty good so if I get time I'll go.

[Snoopy]

2010: ($11.958-+0.67x$1.180m)/ 191.148m = 6.7cps
2011: ($29.560-$0.265-$9.360)m/ 192.806m = 10.3cps
2012: ($34.493-$1.663m-$10.229)m/ 192.806m = 11.7cps
2013: ($26.631-$0.871-$7.595)m/ 192.806m = 9.4cps
2014: ($29.202-$0.093-$8.458+$1.6)m/ 192.806m = 11.5cps

Notes:
a/ Results for all years have had foreign exchange currency gains removed. Foreign currency gains (or losses) are not a measure of operational business performance.
b/ Result for FY2010 removes the effect of the golden handshake on the retirement of previous CEO Donald Stewart.
c/ Result for FY2014 adds back a $1.6m long standing warranty dispute adjustment.

Note that I have made various adjustments to the normalised profit figures to normalise them a bit more. I have removed any currency hedging profits or losses. I don't consider these indicative of ongoing operational profitability. I have also removed gains and losses from property plant and equipment sales. Again these are restructuring costs that are not indicative of future profitability. Finally I have removed declared 'one off' effects. In FY2014 that includes the adding back of a $1.6m long standing warranty provision.

Conclusion: Requirement satisfied (two significant figures)


Time to update the eps figures from a five year perspective

2011: ($29.560-$0.265-$9.360)m/ 192.806m = 10.3cps
2012: ($34.493-$1.663m-$10.229)m/ 192.806m = 11.7cps
2013: ($26.631-$0.871-$7.595)m/ 192.806m = 9.4cps
2014: ($29.202-$0.093-$8.458+$1.6)m/ 192.806m = 11.5cps
2015: ($30.956-$0.558-$9.023)m/ 192.806m = 11.1cps

Conclusion: Fail test

SNOOPY

[Snoopy]

ROE= (Net Profit)/(EOFY Shareholders Funds)

2010: $12.748m /$100.890m= 12.1%
2011: $19.935m /$110.325m= 18.1%
2012: $22.600m /$121.372m= 18.6%
2013: $18.165m /$124.673m= 14.6%
2014: $22.251m /$144.691m= 15.4%

Conclusion: Requirement satisfied


Time for a FY2015 perspective update:

2011: $19.935m /$110.325m= 18.1%
2012: $22.600m /$121.372m= 18.6%
2013: $18.165m /$124.673m= 14.6%
2014: $22.251m /$144.691m= 15.4%
2015: $21.375m /$159.660m= 13.3%

Conclusion: Requirement satisfied

SNOOPY

[Snoopy]

Margin = Net Profit/Sales

2010: $12.748m /$180.719m= 6.7%
2011: $19.935m /$193.593m= 10.3%
2012: $22.600m /$207.313m= 10.9%
2013: $18.165m /$189.496m= 9.6%
2014: $22.251m /$196.606m= 11.3%

While not increasing every year, the five-year trend is definitely upwards with a solid improvement from FY2010.

Conclusion: Requirement satisfied

An update on perspective from the FY2015 financial year

2011: $19.935m /$193.593m= 10.3%
2012: $22.600m /$207.313m= 10.9%
2013: $18.165m /$189.496m= 9.6%
2014: $22.251m /$196.606m= 11.3%
2015: $21.375m /$203.011m = 10.7%

The above is a fairly flat looking margin trend. But with inflation near zero, margins are largely holding up.

Conclusion: Requirement satisfied

SNOOPY

[Snoopy]

Skellerup meets all the criteria of being a Warren Buffett style growth company. This growth is largely overseas. So Skellerup have proved that they can work outside of the ‘New Zeland box’. Skellerup has done this through the development of offshore-based manufacturing sites and distribution channels.

Subsidiary Gulf industries in Australia have access to manufacturing facilities in Vietnam. The famous Red label Skellerup gumboots, and their more upmarket and specialized Quatro brand cousin, are designed in New Zealand. But manufacturing is done in low cost China.

In 2014 Skellerup bought ‘Thermoplastic Foam Industries’ as a distribution platform for the wider group Skellerup products within. Australia. Likewise in 2007, Skellerup bought ‘Turenedi’ in Itaily as their beachhead into Europe. Fully owned US subsidiary “Canewango” does a similar job in the Americas.

Skellerup have shown their ability to reinvest profits at rates of return that far outstrip their cost of capital over many years. This more than makes up for what on paper today is an average dividend payer. IMO Skellerup is one of those below the radar NZX gems that if bought at the right price should prove a very rewarding investment.

SNOOPY

disclosure: New shareholder

The numbers aren't painting quite such a bullish picture from an FY2015 perspective. The dip in ROE to below 15% will need to be watched. The fall in this figure is more due to an increase in equity than due to falling earnings. The increase in equity is largely being used to finance the brand new Wigram factory. In FY2015 this construction consumed $15m of funds with another $25m of spending earmarked for FY2016 before it opens. Right now, spending on the new factory is 'dead money', an asset on the books producing no return. This will no doubt change when the new factory gets up and running. But even then depreciation charges will be higher. So will the increase in profitability from the new facility outweigh the increase in depreciation charges? This is something we shareholders will need to monitor.

The inability to cement an increasing five year earnings trend (test 2) is disappointing. Granted the eps drop in FY2015 was small. In fact Skellerup management would disagree with me as they reported a normalised profit increase for FY2015. However Skellerup managment have considered the $1.6m warranty payment that depressed FY2014 earnings as part of normal business. I regard that one off payment to be a high enough 'one off' that it should be pulled out of the normal results. Hence the difference of opinion, and of course I am right ;-).

Looking back, what happened to depress results in FY2013? Here is what chairman Sir Selwyn said in the annual report of that year:

"A protracted drought in New Zealand and sluggish international markets impacted customer purchasing decisions; this, in turn, affected Skellerup’s trading performance – breaking a run of record results in recent years"

Could this happen again in FY2016? We shareholders hope not, but yes it could. So I think it is worth looking at Skellerup from the 'five year dividend model', rather than from the 'retained earnings growth model' perspective that I used last year.

SNOOPY

[winner69]

A bit so so eh Snoopy

So you not buying more at the moment

[Snoopy]

I think it is worth looking at Skellerup from the 'five year dividend model', rather than from the 'retained earnings growth model' perspective that I used last year.




YearDividendsDividend Total


20112.5c+2.0c4.5c


20124.0c+3.0c7.0c


20135.0c+3.0c8.0c


20145.0c+3.5c8.5c


20155.0c+3.5c8.5c


Total36.5c



Averaged over 5 years, the dividend works out at 36.5/5 = 7.3c (fully imputed).

So based on a 7.5% gross yield, fair value for SKL is:

7.3 / (0.075 x 0.72) = $1.35

SNOOPY

[Snoopy]

Nothing I have done so far has confirmed the case for investment in Skellerup. A excellent company can still be a lousy investment if the price you pay for access is too high. So is the price for Skellerup today on the market too high? To answer that I plug the numbers into the Buffett style ten year growth model.

For this model I am using an ROE of 17.8% (the actual average of the last 9 years) and a dividend payout ratio of 62% (the actual dividend payout of the last 9 years).



SOFY


FYAsset BackingEarningsDividendRetained Earnings


20130.630.0940.0800.014


20140.650.1150.0850.030


20150.750.1340.0830.051


20160.800.1430.0880.054


20170.850.1520.0940.058


20180.910.1620.1010.062


20190.970.1730.1080.066


20201.040.1850.1150.070


20211.110.1980.1230.075


20221.190.2110.1310.080


20231.270.2250.1400.086


20241.350.2410.1490.091


20251.440.257


Total1.13



With a 2025 year earnings of 25.7cps and using a PE of 12.6 (actual average over the last 9 years) the expected share price for Skellerup in ten years time is:

12.6 x 0.256 = $3.24

The dividend return over that time is $1.13 (as per above table)

Using a market share price today of $1.39, the expected compounding annual return 'i' can be calculated from the following equation.

$1.39(1+i)^10 = (3.24 +1.23) => i=12.1%

This return is a net return, before imputation credits. I haven't seen anywhere else on the NZX I can get a return so strong for so long. So for me investment in SKL at under $1.39 is a no brainer.

Some however, may consider a 12.1% return not good enough. What price (P) would you need to buy at to get a 15% compunding return?

P(1+0.015)^10 = (3.24+1.13) => P= $1.08

SNOOPY

PS The reason I like this method of analysis is that all the data used to generate it comes from Skellerup itself. I haven't assumed a return on equity rate, nor have a assumed the market value multiple of Skellerup will be anything to different to how 'Mr Market' has valued Skellerup in the past.


A bit so so eh Snoopy

So you not buying more at the moment

As you can see from my other valuation Winner, I bought in when it was a 'no brainer' at $1.39. Actually I paid less than that overall, my average purchase price being $1.30. But let's say I had paid $1.39 back in February.

Since that time, I have received dividends totalling 8.5c and 7c of capital gain (based on today's trading price of $1.46). So my gain on shares bought at $1.39 is:

(8.5c+7.0c)/ $1.39 = 11.1% (net)

That isn't a bad return over 8 months. In fact it is getting close to the 12.1% return I predicted under the previous model as an 'average' return over 12 months.

The question here is not 'is Skellerup a good company to invest in?' (it is). The question is, what price is too much to pay? I think there is a good chance I might pick up some more shares at less than $1.46 over the next six months. Remember the worst of the 'dairy crisis' forms part of FY2016, not the already declared FY2015. Throw some international uncertainty into the mix and I see no compelling reason to buy right now. But then again, I already own a handy portion of SKL shares. So I can afford to be picky with my buying timing.

SNOOPY

[winner69]

Snoopy

I would contend the increase in equity over the last few years is essentially from retained earnings (including the impact of the insurance payout)

It would appear that so far the new building has been funded largely by debt.


One could say that the declining ROE sort of implies that they not really putting retained earnings to work, a bit lazy in fact?

Instead of ROE I prefer ROIC (all capital in the business). This is about 12%/13% so above its cost of capital and the company is adding economic value in the process.

On that basis market cap deserves to be more than $160m but $260m current suggests a lot of good stuff priced in.

Good work though Snoopy

[Beagle]

YearDividendsDividend Total


20112.5c+2.0c4.5c


20124.0c+3.0c7.0c


20135.0c+3.0c8.0c


20145.0c+3.5c8.5c


20155.0c+3.5c8.5c


Total36.5c



Averaged over 5 years, the dividend works out at 36.5/5 = 7.3c (fully imputed).

So based on a 7.5% gross yield, fair value for SKL is:

7.3 / (0.075 x 0.72) = $1.35

SNOOPY

Thanks snooper but I think the resident beagle is better off thinking about the next dividend feeds. My old beagle always seemed to be thinking about her next feed so if it was good for her, then may I suggest you follow suit :)
Pretty clear to me the tailwind of lower currency and the way the company is headed suggests dividends will grow from here and judging from Director and senior management purchases they agree.
My view is that dividends going forward of 10 cps fully imputed appear sustainable based on best known current information so I have them on a gross forward dividend yield of 10.0 / 0.72 = 13.89 / 146 = 9.51%.

[sb9]

Year

Dividends

Dividend Total



2011

2.5c+2.0c

4.5c



2012

4.0c+3.0c

7.0c



2013

5.0c+3.0c

8.0c



2014

5.0c+3.5c

8.5c



2015

5.0c+3.5c

8.5c



Total


36.5c




Averaged over 5 years, the dividend works out at 36.5/5 = 7.3c (fully imputed).

So based on a 7.5% gross yield, fair value for SKL is:

7.3 / (0.075 x 0.72) = $1.35

SNOOPY

Just a correction divvy for 2015 was 5.5+3.5 - 9c.

[Snoopy]

Just a correction divvy for 2015 was 5.5+3.5 - 9c.

sb9, I am using the calendar year June to June, corresponding to the financial year. You are correct, but that final dividend for FY2015 of 5.5c was actually paid in FY2016. So I stand by my figures as presented.

One thing to note, as you point out, is that with the increased final dividend of 5.5c already paid, my 'figures' are already out of date. On a five year perspective, that 5.5c final divvy replaces the 2.5c from FY2011 in my model. So you might argue my model valutaion should be a bit higher than $1.35. If so I would agree with you. But my calculation is a purely mechanical process calculation based on the financial five calendar years. Add your own fudge factor!

Perhaps I should have said, I see a value SKL at 'at least' $1.35. I find a bit of conservatism in these valuations never hurts.

SNOOPY

[Beagle]

Oh the irony Snoopy. Most people think bean counters are obsessed with historical information but I'm the hungry beagle always trying to peer around the corner to see what feed is coming next. Good reversal of roles going on here :)

[sb9]

sb9, I am using the calendar year June to June, corresponding to the financial year. You are correct, but that final dividend for FY2015 of 5.5c was actually paid in FY2016. So I stand by my figures as presented.

One thing to note, as you point out, is that with the increased final dividend of 5.5c already paid, my 'figures' are already out of date. On a five year perspective, that 5.5c final divvy replaces the 2.5c from FY2011 in my model. So you might argue my model valutaion should be a bit higher than $1.35. If so I would agree with you. But my calculation is a purely mechanical process calculation based on the financial five calendar years. Add your own fudge factor!

Perhaps I should have said, I see a value SKL at 'at least' $1.35. I find a bit of conservatism in these valuations never hurts.

SNOOPY

Fair enough snoopy, tht you're using FY numbers for divvies.

I thin we might learn more tomorrow from the ASM abut their future growth plans and what else they've in pipeline.

[Snoopy]

Oh the irony Snoopy. Most people think bean counters are obsessed with historical information but I'm the hungry beagle always trying to peer around the corner to see what feed is coming next. Good reversal of roles going on here :)


Let's be clear what I am saying Roger. The $1.35 is a 'no growth' valuation of a company, bumbling along through the business cycle, and subject to normal cyclical forces. Does that sound like the Skellerup that you and I invested in? Hopefully not. Yet if you look at the historical results only, you can make a case for this no long term growth scenario. You can regard the $1.35 valuation as a bottom line valuation if all growth initiatives fizzle out.

For myself , I believe the long term growth scenario is most likely intact. I would presume the directors who have been buying SKL think the same. The only problem is, they have yet to earn their stripes - on paper. Hence my cautionary alternative valuation, if things do not pan out as planned.

SNOOPY

[banter]

This just in:
"28 October 2015 Skellerup expects strong increase in profit
Speaking ahead of today’s Annual Shareholders Meeting, Skellerup Chairman, Sir Selwyn Cushing said based upon the strong trading performance in the latter part of FY15 and in the first quarter of FY16, the company is forecasting net profit after tax (NPAT) between $24 million and $26 million for FY16, up from $21.9 million in FY15."

Bit disappointing - I was expecting more.

[sb9]

This just in:
"28 October 2015 Skellerup expects strong increase in profit
Speaking ahead of today’s Annual Shareholders Meeting, Skellerup Chairman, Sir Selwyn Cushing said based upon the strong trading performance in the latter part of FY15 and in the first quarter of FY16, the company is forecasting net profit after tax (NPAT) between $24 million and $26 million for FY16, up from $21.9 million in FY15."

Bit disappointing - I was expecting more.

I think its very good, keep in mind they're always bit conservative in their estimates.

[xafalcon]

Skellerup expects strong increase in profit

https://nzx.com/companies/SKL/announcements/272427

[sb9]

I'm sure those who are able to make it to ASM this arvo, would be in far better position to give us more snippets.

[xafalcon]

SP up 10c since announcement

[sb9]

I reckon $1.50 by ASM next week.

Not bad prediction from last week posting...

[stoploss]

Always a good sign when the CEO & CFO put there personal mobile numbers on an announcement ...not afraid to answer questions .

[sb9]

Skellerup expects strong increase in profit

https://nzx.com/companies/SKL/announcements/272427

Now it all makes sense about all that strong insider buying over past few weeks (months).

[DarkHorse]

Low valuation (PE/PCF/yield); No debt; Strong management with large stakes; agri division at cyclical low, industrial division showing good growth and great potential; solid annual growth forecast.
Won't be a multi-bagger but risk-reward in low-interest rate environment looks very attractive to me :)

[stoploss]

Now it all makes sense about all that strong insider buying over past few weeks (months).

Cushing told shareholders that the company's share price had risen to $1.57 today which was a “fine way to start” the 14th annual meeting.
He also assured them that recent share purchases by directors and management were in line with stock exchange rules and were not a result of them “knowing anything in advance” of other shareholders.
Earlier this month NBR referred to share purchases by directors and officers and, in particular, noted Mair and Cushing had been especially bullish on the company, investing $2.5 million and $1.4 million respectively. Skellerup’s shares had been on a downward trend until it delivered a better-than-expected result in late August.
Cushing said a lot of the company’s stock had come on the market at one time due to a sell-down by institutional shareholders which could have had a negative impact on the share price but instead it has risen.
One of those institutions is AMP Capital Investors which held 16 percent of Skellerup according to the 2014 annual report, reduced to 8 percent in the 2015 report. In a September notice to the stock exchange AMP further reduced its shareholding to 4.93 percent.
http://www.scoop.co.nz/stories/BU1510/S00895/skellerup-bullish-on-profit-prospects.htm

[percy]

Cushing told shareholders that the company's share price had risen to $1.57 today which was a “fine way to start” the 14th annual meeting.
He also assured them that recent share purchases by directors and management were in line with stock exchange rules and were not a result of them “knowing anything in advance” of other shareholders.
Earlier this month NBR referred to share purchases by directors and officers and, in particular, noted Mair and Cushing had been especially bullish on the company, investing $2.5 million and $1.4 million respectively. Skellerup’s shares had been on a downward trend until it delivered a better-than-expected result in late August.
Cushing said a lot of the company’s stock had come on the market at one time due to a sell-down by institutional shareholders which could have had a negative impact on the share price but instead it has risen.
One of those institutions is AMP Capital Investors which held 16 percent of Skellerup according to the 2014 annual report, reduced to 8 percent in the 2015 report. In a September notice to the stock exchange AMP further reduced its shareholding to 4.93 percent.
http://www.scoop.co.nz/stories/BU1510/S00895/skellerup-bullish-on-profit-prospects.htm

Thank you for your comments and the link.
Directors/management have been making excellent decisions,and I agree with DarkHorse's summary.
Pleasing to see the Ultrathom foam products starting to do well in the US.

[sb9]

Based on the update from ASM, I'm picking 4c interim and 6c final for the FY 16 making a total of 10c divvy for the year. Thoughts?

[Under Surveillance]

Based on the update from ASM, I'm picking 4c interim and 6c final for the FY 16 making a total of 10c divvy for the year. Thoughts?
You might be right, especially if NPAT comes in at the top of, or above, the forecast band of $24 to $26 million.
The policy was to pay dividends within the range 40% to 60% of NPAT.
In FY 2012 NPAT was $24.7 million and the payouts, 3 and 5 cents, amounted to 62.2% of NPAT.
I don't know what the dividend policy is now, but clearly 60% is no longer a cap.

[Snoopy]

You might be right, especially if NPAT comes in at the top of, or above, the forecast band of $24 to $26 million.
The policy was to pay dividends within the range 40% to 60% of NPAT.
In FY 2012 NPAT was $24.7 million and the payouts, 3 and 5 cents, amounted to 62.2% of NPAT.
I don't know what the dividend policy is now, but clearly 60% is no longer a cap.

I don't think there is any indication of a change in dividend policy here. If SKL had reduced their final dividend from 5cps to 4.72cps, then they would have remained under their 60% self imposed 'payout ratio cap'. I wouldn't have expected any shareholder have actually expected such a fractional adjustment to meet the declared 40% to 60% target range though. Sometimes one can take this decimal point business one step too far.

SNOOPY

[Under Surveillance]

I don't think there is any indication of a change in dividend policy here. If SKL had reduced their final dividend from 5cps to 4.72cps, then they would have remained under their 60% self imposed 'payout ratio cap'. I wouldn't have expected any shareholder have actually expected such a fractional adjustment to meet the declared 40% to 60% target range though. Sometimes one can take this decimal point business one step too far.

SNOOPY

I'm not quibbling about the payout for FY 2012.

The payout ratio for FY 2015 was 79% of NPAT according to Sir Selwyn's speech to the ASM.

[Beagle]

Now it all makes sense about all that strong insider buying over past few weeks (months).

Sure does.


Based on the update from ASM, I'm picking 4c interim and 6c final for the FY 16 making a total of 10c divvy for the year. Thoughts?

I'd say that's bang on the money mate.


I think its very good, keep in mind they're always bit conservative in their estimates.

I agree and think they're keeping something up their sleeve. For me the key takeaway is this
Skellerup CEO, David Mair said, “We have put a lot of effort into prioritising the growth opportunities available to us, and made significant investment in the people and structures we need to make the most of those opportunities. That work is now starting to pay off.” Emphasis added.
Rome wasn't built in a day so if the work they're doing is now starting to pay off that clearly suggests there more gains to come in future years.

Based on the mid point of their forecast = $25m that equates to 13 cps. On a PE of 12, (which I think is conservative for a company that's growing profitability and now has only 10% of their sales linked to dairy), that suggests a fairly conservative fair value is 13 x 12 = $1.56. Happy holder for long term growth and excellent dividend income.

[Pricey]

To those that thought the 2015 Annual report was a good read, do you mind sharing why you thought it was so compelling? 2014 seemed to be a better read. It included more detail around SKL’s growth into the US. I thought 2015 seemed quite nondescript and ‘flat’.

Key factor this year will be whether any growth comes from revenue growth in the US or currency tailwinds. I still believe the downturn in diary and Aus industrial will have a great impact – and wouldn’t be surprised if they come in at the lower end of their guidance. If anything, recent announcements demonstrate it is more diversified than once thought and it is delivering on its expansion into the US.

And, I also wasn’t sure that the company always understates their forecasts:

NPAT 12 forecast/result: $22m - $23m / result $24m
NPAT 13 forecast/result: $20m revised down to $17m / result $19m
NPAT 14 forecast/result: $22m - $24m / $20m
NPAT 15 forecast/result: no forecast? / result $21

[Sideshow Bob]

Farmer Weekly Article

http://viewer.zmags.com/publication/1e02a9ad#/1e02a9ad/14

[dumbfounded]

Pricey - my puzzlement as well. Hope someone could offer some explanation. Nonetheless the price went up. Sold a quarter of my holding as I am not sure what's up.

[macduffy]

Pricey - my puzzlement as well. Hope someone could offer some explanation. Nonetheless the price went up. Sold a quarter of my holding as I am not sure what's up.

It's a well-run company, supplying NZ's biggest and most important industry - admittedly one with its own problems but not likely to stop using SKL's products; benefitting from the weaker NZD v USD in respect of its exports; paying an attractive yield in a low interest rate environment; management with significant shareholdings.

Enough to justify its shareprice in current market conditions, IMO.

[BlackPeter]

It's a well-run company, supplying NZ's biggest and most important industry - admittedly one with its own problems but not likely to stop using SKL's products; benefitting from the weaker NZD v USD in respect of its exports; paying an attractive yield in a low interest rate environment; management with significant shareholdings.

Enough to justify its shareprice in current market conditions, IMO.

not to forget ... have been over the last couple of years very successful in geographic (US and Europe) as well as industry (added building industry) diversification and will move over the next handful of months into totally new and purpose build premises (which should further improve their output and efficiency).

[Beagle]

Farmer Weekly Article

http://viewer.zmags.com/publication/1e02a9ad#/1e02a9ad/14

Thanks for sharing. I see Craigs have increased their valuation from $1.55 to $1.75. Obviously they see value there.

[Beagle]

Bought more this morning @ $1.50. Excellent divvy yield and nice tailwind from even lower currency.

[sb9]

Good buying there Roger, no reason for this one to be under 155 at least in my opinion.

[cdonald]

This seems to be treading water at the moment in regards to share price. Fully valued or no longer the hot share that it was a couple of months ago?

[BlackPeter]

This seems to be treading water at the moment in regards to share price. Fully valued or no longer the hot share that it was a couple of months ago?

I wouldn't expect wild SP jumps with SKL - this is a solid company, doing a good job - and they sell real stuff, not hype.

Forward PE is 11.5 - and I would think that some of the big industries they operate in (like agriculture, mining) are currently closer to the bottom than to the top. This means, I would longterm see still lots of upwards potential. When will it materialise? I don't know ... can be months, but more likely years. In the meantime they pay a good dividend, so I have no problem with being patient.

Meanwhile - for the people who prefer hype, excitement and instant rewards ... find a way to short PEB ... this is more likely to make you rich (or poor) in the short term.

Discl: holding (SKL, not PEB) & DYOR

[Beagle]

Well said BP. It seems to have settled at $1.50 and institutions appear willing to let stock go above that price. We're being paid handsomely with high dividends to wait and enjoy further growth in the years ahead.
Old fashioned company requiring old fashioned patience from investors wanting further gains.

[cdonald]

with the NZD set in concrete at 0.65USD and cost of raw materials pretty low at that moment I am wondering how the year is going to play out for these guys. Might be a win/win situation coming up I think.

[sb9]

I'm picking there'll be more surprises come half year results time.

[Beagle]

I'm picking there'll be more surprises come half year results time.

Technically its looking pretty weak and there's plenty on offer at $1.45. Pretty clear slow downtrend for the last 3 months since hitting a high of $1.60. A sustained breech of the 100 day MA currently at $1.43 would be a bad sign. Maybe global sales have been impacted a bit by the instability and with no sign of a dairy recovery things aren't quite as rosy as we'd hoped ?

[Yeshiva]

Technically its looking pretty weak and there's plenty on offer at $1.45. Pretty clear slow downtrend for the last 3 months since hitting a high of $1.60. A sustained breech of the 100 day MA currently at $1.43 would be a bad sign. Maybe global sales have been impacted a bit by the instability and with no sign of a dairy recovery things aren't quite as rosy as we'd hoped ?

Maybe there's nothing in it at all? I think there was a sustained bout of insider buying recently. I don't see any insider selling?

[benjitara]

Technically its looking pretty weak and there's plenty on offer at $1.45. Pretty clear slow downtrend for the last 3 months since hitting a high of $1.60. A sustained breech of the 100 day MA currently at $1.43 would be a bad sign. Maybe global sales have been impacted a bit by the instability and with no sign of a dairy recovery things aren't quite as rosy as we'd hoped ?

I bought in after the strong full year results a while back with an eye of the price drifting into the realms of low $1.20's. Macro features aren't really in their favour but the company has a good leadership team and good long term prospects with usa expansion/performance a surprise packet in their last report. good divi too so I will not be all that worried if there's a squeeze on the share price for the next 9 months or so.

[xafalcon]

Technically its looking pretty weak and there's plenty on offer at $1.45. Pretty clear slow downtrend for the last 3 months since hitting a high of $1.60. A sustained breech of the 100 day MA currently at $1.43 would be a bad sign. Maybe global sales have been impacted a bit by the instability and with no sign of a dairy recovery things aren't quite as rosy as we'd hoped ?

Their growth strategy was to expand in USA. We are lead to believe USA economy is generally on the up-tick, except for energy. Exchange rate remains favourable. As noted above, no executive sales announcements. PE still relatively low. But some big volume offerings @ $1.45. On balance, seems like it's oversold to me. Interim results announcement in 3 weeks which should clarify the situation

[Beagle]

You guys are probably right. Hopefully nothing to worry about...a bit of consolidation after the strong run last year was probably to be expected. I'll go back to :sleep:

[Yeshiva]

If its helpful Roger, then it would be safe to say that a 10% dip from September until today is actually quite benign considering some of the global carnage out there.

[frostyboy]

Their growth strategy was to expand in USA. We are lead to believe USA economy is generally on the up-tick, except for energy. Exchange rate remains favourable. As noted above, no executive sales announcements. PE still relatively low. But some big volume offerings @ $1.45. On balance, seems like it's oversold to me. Interim results announcement in 3 weeks which should clarify the situation


Last year, half year results were released 19 Feb, I think the rule is insiders can't buy this far out from results. Previously insiders bought from instos when they sold. If the big volume offerings at $1.45 are instos exiting, expect further weakness down to 200 SMA.

Half year is the date; revenue is the key

[Yeshiva]

I always thought that a company that is likely to miss guidance by more than 5% will announce such a deviation around a month prior to the earnings announcement. If we are expecting half year results around 19 February (as it was last year), which suggests 18 Feb this year (third Thursday of Feb), then Skellerup would have already disclosed this.

Given that the last message around guidance was Sir Selwyn Cushing's speech at the AGM on 28 October, then we can only assume that the strong increase in profit is still all on track.

[winner69]

I always thought that a company that is likely to miss guidance by more than 5% will announce such a deviation around a month prior to the earnings announcement. If we are expecting half year results around 19 February (as it was last year), which suggests 18 Feb this year (third Thursday of Feb), then Skellerup would have already disclosed this.

Given that the last message around guidance was Sir Selwyn Cushing's speech at the AGM on 28 October, then we can only assume that the strong increase in profit is still all on track.

Guidelines re disclosure are anything around the 15% mark impact on expectations/guidance .....when they are aware of it

Of course the company can say anything anytime - like today they could say guidance will be met if they wanted - no +/- 5% or 15% there

[sb9]

Looks like one big seller has the sp strangled at $1.45 with a big lot on offer.

[BlackPeter]

Looks like one big seller has the sp strangled at $1.45 with a big lot on offer.

I guess these things happen - and I never can understand the motivation of traders putting such large packets into the market instead of selling in smaller parcels ... unless, obviously - unless they want to influence the market in some funny way.

On the other hand - SKL is in my view an investment, not a trading stock ... so - who really cares about the daily jitter?

[sb9]

I guess these things happen - and I never can understand the motivation of traders putting such large packets into the market instead of selling in smaller parcels ... unless, obviously - unless they want to influence the market in some funny way.

On the other hand - SKL is in my view an investment, not a trading stock ... so - who really cares about the daily jitter?

Precisely my thoughts too BP, why wouldn't the big seller offload in small tranches to achieve better price. On the contrary if you put a big lot on offer bids will be at lower price.

Anyway, I'm in for long haul not too worried short term weakness in sp.

[Beagle]

Yes I agree it is an unusual way for an insto / larger shareholder to sell a holding. Seller has gradually come down from an original ask of $1.50 so they're determined to clear their stake and until that's gone its probably fair to say the price is capped. Hopefully the depth we see on market is all they have to offer.

[xafalcon]

Yes I agree it is an unusual way for an insto / larger shareholder to sell a holding. Seller has gradually come down from an original ask of $1.50 so they're determined to clear their stake and until that's gone its probably fair to say the price is capped. Hopefully the depth we see on market is all they have to offer.

Seems the big seller has had a change of heart overnight

[Beagle]

Seems the big seller has had a change of heart overnight

Must have been reading this thread LOL...I'd imagine they're still there in smaller parcels :)

[sb9]

Hmm...forget banks, look like SKL is getting hammered over the past few days.

[Pricey]

Fundamentals are still the same - good US expansion and a weak USD. Div yield should put a floor on the price too. Will look to top up if it drops to the low $1.30s.

[sb9]

IIRC, similar pattern happened in days leading to FY results in Aug last year. The price was hammered down all the way to $1.18 or so and boom they came out with big results followed by trading update at ASM.

Wonder if there's another surprise in store this time or market pricing in a not so great result?

I guess all will be revealed in a weeks time on Thu 18th Feb.

[xafalcon]

https://nzx.com/companies/SKL/announcements/277828

[Beagle]

Considering the significantly lower currency and the fact that some 76% of sales are exported...the result seems pretty underwhelming to me.

Phrases like "tough market conditions" and later in the statement under Outlook Chairman Sir Selwyn Cushing said Skellerup’s results represented a solid performance in what remained a difficult market. are a little concerning.
9% increase in sales on much lower currency which should have boosted margins, where's the money going ?
Disc: No longer hold.

[percy]

https://nzx.com/companies/SKL/announcements/277828

Thanks for the link.
Mixed,flat,steady dividend,yet there is progress being made.
Diversified means when one sector is down other sectors are on the rise.
Still a well run business with a strong balance sheet that is "well positioned" to take advantage of any opportunities that come along.Great seeing they are finding more of those opportunities in the USA.

[Beagle]

Glass half full Percy...must be the new brand of coffee my wife bought last week...I see the glass half empty...change coffee or get new glasses ?

[BlackPeter]

https://nzx.com/companies/SKL/announcements/277828

Solid performance in a difficult market. Increased their revenue by 9%, kept their earnings and their balance sheet looks very healthy indeed. Great example for the benefits of diversification.

Just imagine how their profits will soar as soon as their major markets mining and agriculture (mainly dairy, but the gumboots) will come out of the doldrums and need to catch up with all this delayed maintenance.

Their recent move into automotive can't hurt in my view either (more diversification, and an industry which will do well as long as the oil price is low ...).

Like it ... not a speculative share but in my view one of these value games.

Discl: Happy holder (goes without saying).

[James108]

Pretty average result, down on HY15 which was also an average result (EBIT 10% lower than HY14). To be expected though given the state of their main markets. Also agree with BP, that I am impressed by their development of new markets/diversification.

I will look to purchase if price drops significantly on this news.

[percy]

Glass half full Percy...must be the new brand of coffee my wife bought last week...I see the glass half empty...change coffee or get new glasses ?


Remember a good business can have a poor year, and a bad business can have a good year.
SKL is a very good business.
The only surprise to me was how poor NZ dairying was.I thought the consumables would have held up better.Can't see how farmers can keep putting off buying the liners.

[percy]

Pretty average result, down of FY15 which was also an average result (EBIT 10% lower than FY14). To be expected though given the state of their main markets. Also agree with BP, that I am impressed by their development of new markets/diversification.

I will look to purchase if price drops significantly on this news.
Yes we could see under $1.20 again.
The buy signal will be when Sir Selwyn "tops up".

[Beagle]

Remember a good business can have a poor year, and a bad business can have a good year.
SKL is a very good business.


Yes we could see under $1.20 again.
The buy signal will be when Sir Selwyn "tops up".

Fair comment and yes I'd be interested at around $1.20 again but as for whether its worth $1.40+ on the back of this result...

[Biscuit]

Thanks for the link.
Mixed,flat,steady dividend,yet there is progress being made.
Diversified means when one sector is down other sectors are on the rise.
Still a well run business with a strong balance sheet that is "well positioned" to take advantage of any opportunities that come along.Great seeing they are finding more of those opportunities in the USA.

Yes, given the known headwinds in Agri division and in oil/gas mining in the US, its not a bad result.

[xafalcon]

I read it as a net neutral report.

I don't know SKL's hedging policy, so hard to confirm what actual exchange rate(s) they are converting at.

SKL are in some tough market segments with the current commodities rout - mining, dairy, oil, so almost certainly some downwards pressure on domestic sales (into dairy) and margins (world wide) would be expected

International sales volumes do appear to be increasing, so this bodes well for the future

[James108]

I read it as a net neutral report.

I don't know SKL's hedging policy, so hard to confirm what actual exchange rate(s) they are converting at.

SKL are in some tough market segments with the current commodities rout - mining, dairy, oil, so almost certainly some downwards pressure on domestic sales (into dairy) and margins (world wide) would be expected

International sales volumes do appear to be increasing, so this bodes well for the future

I tend to agree, I guess I am just hoping for another opportunity to top up at $1.18

[winner69]

Love how things are told

Yesterday Trade Me went to 2 decimal places on the EPS calculation so they could say EPS increased

Today Skellerup say earnings are 'similar level to prior corresponding period (pcp)' when they are actually less

Beauty is in the eyes of the beholder Or something like that

[macduffy]

SKL, STU and FBU's results show how difficult it is to grow earnings in a low inflation, flat local and world economy. Don't expect too many spectacular results around this reporting season.

[Jantar]

On looking through the financial statement I see that revenue is up nicely. The expenses that have increased are marketing and distribution. Administration expenses have been held or reduced slightly. That seems like a good result to me.

[xafalcon]

The market doesn't seem to like the report

[Beagle]

Love how things are told

Yesterday Trade Me went to 2 decimal places on the EPS calculation so they could say EPS increased

Today Skellerup say earnings are 'similar level to prior corresponding period (pcp)' when they are actually less

Beauty is in the eyes of the beholder Or something like that

Yes my jaundiced eye noticed a little bit of creativity there. Must be horrible to admit EPS has actually reduced especially in a lower currency environment for an exporter.
Market reaction is not surprising.

[percy]

The market doesn't seem to like the report

I decided to sell the balance of my holding at the open this morning.
Have received the contract note; sold at $1.33.The other half I sold a few weeks ago at $1.45.
Will use the funds for any company that surprises on the upside.

[Beagle]

This has been a good example of the technical's working for people. 100 day MA has been about $1.45 as previously noted and I sold half at $1.49 and the other half when it was clear the 100 day MA had been broken at $1.44. The market was telegraphing for some time the result wasn't going to be stellar. I suspect one or two broker analysts had visited the company over the last month or two.
With dairy and mining stuck in the doldrums and no sign of even the faintest relief on the horizon its hard to see the company making much headway this year...risks to me appear to be to the downside to the company's forecast.

[percy]

This has been a good example of the technical's working for people. 100 day MA has been about $1.45 as previously noted and I sold half at $1.49 and the other half when it was clear the 100 day MA had been broken at $1.44. The market was telegraphing for some time the result wasn't going to be stellar. I suspect one or two broker analysts had visited the company over the last month or two.
With dairy and mining stuck in the doldrums and no sign of even the faintest relief on the horizon its hard to see the company making much headway this year...risks to me appear to be to the downside to the company's forecast.

Agreed.!!!!!!

[benjitara]

Sound company. good long term prospects. accumulate accordingly

[Beagle]

Excellent example / debate this morning of perspective and viewpoint.

A psychologist investor / friend once told me the issue of whether a glass is half full or half empty has finally been resolved and is all to do with one's perspective and viewpoint.

Try this at home. Get half a glass of water and put it right on the very edge of the table with some of the glass sticking over the edge. Now get your eyeballs right down to floor level below the glass and look up. Looks full doesn't it !!

Moral of the story, even an average company looks good if you buy it cheap enough.

[sb9]

Overall my rating for results is 5.5/10, some parts are encouraging and other parts not so great.

On that basis, have sold out my small holding this morning, might look at it in 6 months time depending on how is being progress made. Better to stay out for now in these uncertain times imo.

[warthog]

Sound company. good long term prospects. accumulate accordingly

So you're an SKL shareholder accumulating more SKL shares benjitara?

[benjitara]

Interesting reading into both SKL AND STU. Both have headwinds but have managed to report decent increases in revenues but margins are squeezed. I'd be slightly more bullish about SKL given that I don't believe STU can replicate their FY15 performance although I'd certainly argue STU is better priced to buy into currently given yield, etc... Both satisfactory reports in my book.

[benjitara]

So you're an SKL shareholder accumulating more SKL shares benjitara?

I will accumulate on a softening of the share price and continued dairy lull yes. and I currently hold SKL shares yes

[winner69]

Excellent example / debate this morning of perspective and viewpoint.

A psychologist investor / friend once told me the issue of whether a glass is half full or half empty has finally been resolved and is all to do with one's perspective and viewpoint.

.

The guys at the London School of Economics would love the responses to todays announcement. I will point them to this.

Skellerup long term company performance is nicely summed up in a long term share price chart (below)

Skellerup is always gunna be a great company - but never delivers

Anything changed -- nah, nothing

Good for the occasional medium/long term trade but then again they only coincide when the whole market is going up anyway. Good for dividends - maybe

A growth company - come on tell me another one

[BlackPeter]

The guys at the London School of Economics would love the responses to todays announcement. I will point them to this.

Skellerup long term company performance is nicely summed up in a long term share price chart (below)

Skellerup is always gunna be a great company - but never delivers

Anything changed -- nah, nothing

Good for the occasional medium/long term trade but then again they only coincide when the whole market is going up anyway. Good for dividends - maybe

A growth company - come on tell me another one

Didn't we have similar discussions two (or was it three?) years ago around NPX? While I agree, that SKL is due to the nature of many industries they sell into more a cyclical than a "growth" company would I think that the new factory plus additional products for construction / automotive managed to shift the baseline for this cycle upwards.

Probably not a company to hold forever, but still think that they can and will do much better than what they did now, if mining and dairy start to "fire" again.

[winner69]

Didn't we have similar discussions two (or was it three?) years ago around NPX? While I agree, that SKL is due to the nature of many industries they sell into more a cyclical than a "growth" company would I think that the new factory plus additional products for construction / automotive managed to shift the baseline for this cycle upwards.

Probably not a company to hold forever, but still think that they can and will do much better than what they did now, if mining and dairy start to "fire" again.

If share price follows earnings the chart says all the previous changes to 'baseline' over the years have come to nought ...and there has been several. What's different this time around?

Forget about telling me how great an investment it has been since 2010 - nearly everything has been (inc Nuplex) and that's more market action than great Skellerup performance.

Glad you see that probably not a hod forever - so let the trader in you loose and trade the inevitable ups and downs between 130 and 180

Like Nuplex best outcome for Skellerup might be for them to be taken over

[Beagle]

Funny you mention that Winner as they did bounce a bit more than the rest of the market on the NPX and DIL takeover announcements on Monday...but back to reality now and an institution seems to have plenty to unload at $1.33 so it would appear that's the new normal for the time being.

[Snoopy]

Remember a good business can have a poor year, and a bad business can have a good year.
SKL is a very good business.
The only surprise to me was how poor NZ dairying was.I thought the consumables would have held up better.Can't see how farmers can keep putting off buying the liners.


I find myself agreeing with the 9am Percy. Not the 10am Percy that sold out an hour later.

If you look at the HY2016 Agri division notes in the presentation your dairy conundrum is explained.

From p2

----

Subdued NZ demand for dairy rubberware and footwear due to international milk price and resultant Fonterra pay-out. However liners and tubing remain an essential consumable.

----‒

From p6

Footwear mixed‒
NZ market slower than expected due to dairy market and dry weather

-----

So farmers are walking around with holes in their boots, even as they pipe up their cows with new liners as they are plumbing them them up to the milking shed. All udderly obvious when you read the detail :-)

SNOOPY

[percy]

I find myself agreeing with the 9am Percy. Not the 10am Percy that sold out an hour later.

If you look at the HY2016 Agri division notes in the presentation your dairy conundrum is explained.

From p2

----

Subdued NZ demand for dairy rubberware and footwear due to international milk price and resultant Fonterra pay-out. However liners and tubing remain an essential consumable.

----‒

From p6

Footwear mixed‒
NZ market slower than expected due to dairy market and dry weather

-----

So farmers are walking around with holes in their boots, even as they pipe up their cows with new liners as they are plumbing them them up to the milking shed. All udderly obvious when you read the detail :-)

SNOOPY

It would appear the non-deferrable liners are still being being deferred.

[xafalcon]

Sir Selwyn is buying up again, very large increase in his holding

[BlackPeter]

Sir Selwyn is buying up again, very large increase in his holding

Wow - another odd 6 million shares. He has certainly more "play money" than I have ... and he clearly must think that the company is at current price undervalued. 8 million dollars must be even for him a meaningful sum ...

Maybe he does know the company better than the sellers?

Edit:
.... maybe I should have read the full announcement before commenting. The newly acquired number of shares is not as huge as I first thought (though the number went up by that much, but this seems to be more an accounting issue). Still:


(6) On 18 February 2016 H&G Limited purchased 547,065 shares in Skellerup
on-market at an average price of $1.329 per share.

Sir Selwyn holds a 20% interest in H&G Ltd

[RTM]

The market doesn't seem to like the report

I wonder what this result means for PGW which I hold ? Not a sign of good things I suspect.
They "will be released to the NZX at approximately 8:30am on Wednesday 24 February 2016. "

[BlackPeter]

I wonder what this result means for PGW which I hold ? Not a good indicator I suspect.
They "will be released to the NZX at approximately 8:30am on Wednesday 24 February 2016. "

Not sure ... it is easier to delay maintenance of dairy liners and sealing (though it still might not be wise) than to stop feeding your animals. As well - PGW has a significant exposure to non dairy agriculture (wool, red meat, horticulture, pip fruit, wine), and many of these sectors are currently doing quite well.

[RTM]

Not sure ... it is easier to delay maintenance of dairy liners and sealing (though it still might not be wise) than to stop feeding your animals. As well - PGW has a significant exposure to non dairy agriculture (wool, red meat, horticulture, pip fruit, wine), and many of these sectors are currently doing quite well.

Agreed. So like SKL, PGW are likely to report uneven results across the different sectors they operate in. Not sure the Market is going to like that. Hope the dividend does not need to be reduced.

[Beagle]

It doesn't auger well. Now two full years of low dairy prices with many farmers struggling to come anywhere near breakeven. Pretty clear they're trimming...no slashing costs wherever they can.
Not even the faintest sign of a glimmer of any price recovery on the horizon and with the supply demand imbalance on a global basis this suggests dairy will be extremely challenging for the foreseeable future.
PGW do 24% of their business with dairy farmers. You can't get blood out of a stone...

[RTM]

It doesn't auger well. Now two full years of low dairy prices with many farmers struggling to come anywhere near breakeven. Pretty clear they're trimming...no slashing costs wherever they can.
Not even the faintest sign of a glimmer of any price recovery on the horizon and with the supply demand imbalance on a global basis this suggests dairy will be extremely challenging for the foreseeable future.
PGW do 24% of their business with dairy farmers. You can't get blood out of a stone...

Thanks for the 24% figure....I hadn't checked. Its a lot like the oil story we are enduring at the moment. Although I suspect Dairy is being screwed more by subsidies that what the oilers are,

[xafalcon]

Keep in mind that "accounting break-even production cost" is quite different to "real break-even production cost". At least $1.00/kgMS. Real break-even production cost for a primarily grass based dairy farming system without excessive debt servicing cost is in the $3.50-$4.00/kgMS range

Yes, dairy farmers are having a challenging time atm. But they were "on the pigs back" 2 years ago, and generally for the 4 years before that

Dairy is a cyclical industry with a long lead-in period. Always has been, probably always will be. Allowance must be made for this aspect of business in cash flow and debt management decisions

But any business which does not spend "stay in business" expenses, is simply making their situation worse. Milking plant consumables fall into this category. They are only "discretionary spending" to delusional farmers, because milk yield decreases as liners age. Kind of like a spark plug in an engine. It still works as it gets older, but you use more petrol if you don't change them periodically

Gumboots are a different situation......

[BlackPeter]

But any business which does not spend "stay in business" expenses, is simply making their situation worse. Milking plant consumables fall into this category. They are only "discretionary spending" to delusional farmers, because milk yield decreases as liners age. Kind of like a spark plug in an engine. It still works as it gets older, but you use more petrol if you don't change them periodically


good comparison ... and here is the research paper:

http://www.uwex.edu/uwmril/pdf/MilkMachine/Liners/00_NMC_Liner_Abstract.pdf

[Jantar]

....
Gumboots are a different situation......Not a dairy farmer, but I do have a lifestyle block, and need gumboots for a few times each year when I get irrigation. I used to get cheap Chinese gumboots from the red shed, and a pair would last a couple of years before leaking. Then, 12 years ago, I bought a pair of Skellerup boots at 5 times the price. They are still going strong. So it is possible that some dairy farmers think they are saving $40 by buying cheap boots, but it will cost them more in the long run.

[Biscuit]

good comparison ... and here is the research paper:

http://www.uwex.edu/uwmril/pdf/MilkMachine/Liners/00_NMC_Liner_Abstract.pdf

The economics of how often to change liners comes down to the cost of lost production incurred through not changing the liners compared to the cost of changing the liners. The older the liner, the more production is lost. As the price of milk comes down, the cost of lost production also reduces, so farmers are correct to replace liners less often when the milk payout is lower.

[Biscuit]

Also, it is wrong to think of "deferred" spending on "stay in business" expenses as meaning that eventually the farmer will spend the money and Skellerup's revenue will go back up again. If the milk pay-out stays down, sensible farmers will replace liners less often and skellerup's revenue will stay down.

[xafalcon]

Another million shares for Sir Selwyn

https://nzx.com/companies/SKL/announcements/278214

[Biscuit]

Another million shares for Sir Selwyn

https://nzx.com/companies/SKL/announcements/278214

He might have done better to buy some EBO shares

[Jantar]

Another million shares for Sir Selwyn

https://nzx.com/companies/SKL/announcements/278214
And he is still buying:
https://www.nzx.com/companies/SKL/announcements/278822
If the directors have this much confidence it bodes well for the future.

[winner69]

SKL at 128

One that doesn't seem to have recovered the slide after that not so good announcement.

Mind you PGW not looking flash either

[Gunny]

Both on my watch list after getting out ahead before slides. Still like both.

Gunny

[kiora]

SKL at 128

One that doesn't seem to have recovered the slide after that not so good announcement.

Mind you PGW not looking flash either

Sir Selwyn still loves it :) He is still appears to be buying for long term?Can't go wrong :)

[Snoopy]

Sir Selwyn still loves it :) He is still appears to be buying for long term?

I think you have to take a longer term view with SKL. I started buying last year, average buy price $1.30. The share price sank, then raced up just before the latest half year announcement, then sank again. I bought some more just recently at $1.30! There are some on this forum who have bought and sold over that time frame.

But the new factory is only just starting to come on stream. Any efficiencies captured will be trickling their way into the accounts over the next 18 months. Meanwhile the exchange rate is weakening off. Their new Alfa Romeo drive coupling contract in Italy is yet to start, but ready to go. Countering that is tough times for dairy and iron ore producers which keeps a lid on the profit SKL is making from those respective industries. But the rubber milking cups and slurry carrying rubber connectors are ultimately 'must have' consumables, not luxuries. Purchase cannot be postponed forever.

It all adds up to an ideal time to accumulate SKL by my reckoning.

SNOOPY

[winner69]

Both on my watch list after getting out ahead before slides. Still like both.

Gunny

Gunny - SKL been gunny be good for years and years

Has anything really changed?

[Beagle]

SKL at 128

One that doesn't seem to have recovered the slide after that not so good announcement.

Mind you PGW not looking flash either

Looks like anything with major exposure to dairy is under serious pressure.

[Gunny]

Not changed just taking a holiday and earning greater capital gains in other shares at the moment before getting back in. THL and SCL doing it for me currently, CAV not (bugger) . May peg SCL back to balance my portfolio and reinvest in the expected upswing in SKL in a while but seeing too much upside in SCL over SKL at the moment.

Gunny

[percy]

I think you have to take a longer term view with SKL. I started buying last year, average buy price $1.30. The share price sank, then raced up just before the latest half year announcement, then sank again. I bought some more just recently at $1.30! There are some on this forum who have bought and sold over that time frame.

But the new factory is only just starting to come on stream. Any efficiencies captured will be trickling their way into the accounts over the next 18 months. Meanwhile the exchange rate is weakening off. Their new Alfa Romeo drive coupling contract in Italy is yet to start, but ready to go. Countering that is tough times for dairy and iron ore producers which keeps a lid on the profit SKL is making from those respective industries. But the rubber milking cups and slurry carrying rubber connectors are ultimately 'must have' consumables, not luxuries. Purchase cannot be postponed forever.

It all adds up to an ideal time to accumulate SKL by my reckoning.

SNOOPY

The drive coupling is a potential mine field.
Car manufacturers are mean,and usually demand supply ex warehouse.ie SKL may need to carry stock in Italy.
SKL were sued [successfully] by Marley for supplying not to specification products.Doing the same thing for a car manufacturer,would mean a recall.The manufacturer would then sue SKL for the cost of the recall.It could/would break SKL.
Drive couplings would be a lot more sophisticated than down pipes or irrigation pipes used by Marley.

[Under Surveillance]

The drive coupling is a potential mine field.
Car manufacturers are mean,and usually demand supply ex warehouse.ie SKL may need to carry stock in Italy.
SKL were sued [successfully] by Marley for supplying not to specification products.Doing the same thing for a car manufacturer,would mean a recall.The manufacturer would then sue SKL for the cost of the recall.It could/would break SKL.
Drive couplings would be a lot more sophisticated than down pipes or irrigation pipes used by Marley.
A thought-provoking post percy.
SKL's refusal to face up to its failings with the Marley product was grubby. Copped a drubbing when it went to court.

[Snoopy]

The drive coupling is a potential mine field.
Car manufacturers are mean,and usually demand supply ex warehouse.ie SKL may need to carry stock in Italy.
SKL were sued [successfully] by Marley for supplying not to specification products.Doing the same thing for a car manufacturer,would mean a recall.The manufacturer would then sue SKL for the cost of the recall.It could/would break SKL.
Drive couplings would be a lot more sophisticated than down pipes or irrigation pipes used by Marley.

Relax Percy. The driveshaft couplings will be made by Skellerup's subsidiary in Italy by passionate Italians, not squeezed out of the old barn in Woolston. Carrying stock in Italy won't be a problem because the stock is already there! Skellerup have been supplying Maserati for a few years now with no problems. So supplying a driveshaft coupling for a less powerful vehicle shouldn't be an issue.

SNOOPY

[percy]

Relax Percy. The driveshaft couplings will be made by Skellerup's subsidiary in Italy by passionate Italians, not squeezed out of the old barn in Woolston. Carrying stock in Italy won't be a problem because the stock is already there! Skellerup have been supplying Maserati for a few years now with no problems. So supplying a driveshaft coupling for a less powerful vehicle shouldn't be an issue.

SNOOPY

Thank you for your excellent reassuring post.

[xafalcon]

Lots of activity today. Perhaps Sir Selwyn is buying up large again

[BeeBop]

Lots of activity today. Perhaps Sir Selwyn is buying up large again

It was me (well actually, my purchase was one of the small ones)! Sold my NPX shares and put it into SKL. Was planning to go into SCL but (with my wishful thinking) am hoping the price might ease, whenever I try to buy a climbing share it comes down!

I had a tiny parcel of SKL and decided to extend it. I redid my numbers and re-read the reports and decided that this company is a good home for my cash at the moment (with the price under 1.30).

[Louloubell]

That is quite a big jump for Skellerup standards. Something up?

[winner69]

Up 12% since beginning of month

Amazing

Must be the stock of the month

[percy]

Up 12% since beginning of month

Amazing

Must be the stock of the month
No.
!st place in the percy's avoid list goes to CAV,up 21.43%
2nd place SCT up 19.57%
3rd place MVN up 13.27%
And it gets worse, even MGL has outperformed my favourites, being unchanged.
My much loved EBO is down 1.37%,while my largest most loved holding, HBL is down 4.10%,[would be a lot lees taking account of HBL's divie]

[Beagle]

Yes CAV have leapt out of the blocks this new financial year giving holders a sweet return but maybe running out of steam now...but better still CVT up from $9.80 on 31 March to $12.00 today, $12.40 on 13 April..shows you the power of entry into the NZX50, (26.5% gain for those canny enough to exit on the 13th being square up day for the index entry).

[percy]

CVT is even sweeter for those of us who have held it for over a year,up 207.30%.
Even beats TIL up 197.27% in the same time.
Both make SCL up 105.66%, seem to be a bit of a laggard.!!! lol.

[LAC]

CVT is even sweeter for those of us who have held it for over a year,up 207.30%.
Even beats TIL up 197.27% in the same time.
Both make SCL up 105.66%, seem to be a bit of a laggard.!!! lol.

Poor SCL....just cant keep up!!

[LAC]

https://www.nzx.com/companies/SKL/announcements/281481

Not looking good.

[Beagle]

Anything with meaningful exposure to dairy will face similar strong headwinds so this shouldn't be a surprise to anyone. Perhaps a warning for other companies exposed to the severe dairy downturn ?, banks and PGW spring readily to mind.

[winner69]

It doesn't auger well. Now two full years of low dairy prices with many farmers struggling to come anywhere near breakeven. Pretty clear they're trimming...no slashing costs wherever they can.
Not even the faintest sign of a glimmer of any price recovery on the horizon and with the supply demand imbalance on a global basis this suggests dairy will be extremely challenging for the foreseeable future.
You can't get blood out of a stone...

Roger - SKL making about 10% less than last no surprise to you after this warning not that long ago

Reckon there will be more downgrades?

You did say you might get interested again in SKL at $1.20 - still on the agenda

[winner69]

I didn't realise this not first profit down grade this financial year

When announcing FY15 profit $21.9m they said well placed to further grow profits

At ASM before excited shareholders on 29 Oct it was going to be $24m-$26m

H1 results nit looking too good and on Feb 18 still ahead of last and guided $23m

And now jeez $20m-$21m

So from $26m to $20m in a few months

Wonder what next announcement in July will be like

Skellerup - always gunna to do great things

[Beagle]

The guys at the London School of Economics would love the responses to todays announcement. I will point them to this.

Skellerup long term company performance is nicely summed up in a long term share price chart (below)

Skellerup is always gunna be a great company - but never delivers

Anything changed -- nah, nothing

Good for the occasional medium/long term trade but then again they only coincide when the whole market is going up anyway. Good for dividends - maybe

A growth company - come on tell me another one


If share price follows earnings the chart says all the previous changes to 'baseline' over the years have come to nought ...and there has been several. What's different this time around?

Forget about telling me how great an investment it has been since 2010 - nearly everything has been (inc Nuplex) and that's more market action than great Skellerup performance.

Glad you see that probably not a hod forever - so let the trader in you loose and trade the inevitable ups and downs between 130 and 180

Like Nuplex best outcome for Skellerup might be for them to be taken over


I didn't realise this not first profit down grade this financial year

When announcing FY15 profit $21.9m they said well placed to further grow profits

At ASM before excited shareholders on 29 Oct it was going to be $24m-$26m

H1 results nit looking too good and on Feb 18 still ahead of last and guided $23m

And now jeez $20m-$21m

So from $26m to $20m in a few monthsWonder what next announcement in July will be like

Skellerup - always gunna to do great things


Roger - SKL making about 10% less than last no surprise to you after this warning not that long ago

Reckon there will be more downgrades?

You did say you might get interested again in SKL at $1.20 - still on the agenda

I think you've summed this company up extremely well mate. I think shareholders have every right to expect better forecasting than they've received and the trend is definitely down so maybe as you suggest the actual result will be below even the most recent disappointing guidance, assuming there isn't yet another downgrade before then, which is by no means a safe assumption. The currency hasn't been helpful either in the last month or two tracking back up towards 70 cents U.S. Headwinds remain for the foreseeable future and with the currency above the 20 year average it doesn't have any appeal to me anymore even at $1.20.

[Snoopy]

YearDividendsDividend Total


20112.5c+2.0c4.5c


20124.0c+3.0c7.0c


20135.0c+3.0c8.0c


20145.0c+3.5c8.5c


20155.0c+3.5c8.5c


Total36.5c



Averaged over 5 years, the dividend works out at 36.5/5 = 7.3c (fully imputed).

So based on a 7.5% gross yield, fair value for SKL is:

7.3 / (0.075 x 0.72) = $1.35




Thanks snooper but I think the resident beagle is better off thinking about the next dividend feeds. My old beagle always seemed to be thinking about her next feed so if it was good for her, then may I suggest you follow suit :)
Pretty clear to me the tailwind of lower currency and the way the company is headed suggests dividends will grow from here and judging from Director and senior management purchases they agree.
My view is that dividends going forward of 10 cps fully imputed appear sustainable based on best known current information so I have them on a gross forward dividend yield of 10.0 / 0.72 = 13.89 / 146 = 9.51%.


I managed to salt away a few more of these at $1.28 today.

If profit for the year is only $20m, followimng recent downgrades, then based on the 192.8m shares on issue, I get eps of 10.4c. So it is probably too early to say that last years fully imputed total dividend of 8.5c is under threat. It will depend on the capital expenditure requirements and outlook. The brand new Wigram factory is almost ready, so hpefully most capex is done. Given a bottoming oulook for milk and iron ore, I am guessing the board will try and hold the dividend steady.

I don't need the current level of dividend to make my investment case stack up though.

My five year average dividend yield, I am forecasting to be 8.1c (down 0.4c from last years actual).

So at $1.28 SKL is on a 5 year modelled yield of:

8.1/ 128 = 6.3% net, or 8.75% gross

A very nice little dividend earner to put away. 'Worth it's salt' some might say :-) Roger unfortunately has recently scared himself off from this bargain!

SNOOPY

[Beagle]

Funny thing is Snoopy me ol mate, whenever I would take my old beagle Kelly to the beach she always seemed to make better progress swimming with the tide than against it. This silly old dog took notes and has recently decided to follow suit :)

[Snoopy]

Funny thing is Snoopy me ol mate, whenever I would take my old beagle Kelly to the beach she always seemed to make better progress swimming with the tide than against it. This silly old dog took notes and has recently decided to follow suit :)


When you are in for the long haul Roger, it matters not one jot which way the tide is flowing, provided you are not at risk of drowning in the meantime! SKL has low debt, so I have no doubt that it will be around when the tide turns. And it is very likely that those who prefer to swim with the tide will be paying more than I am today. Of course SKL may get cheaper. But if that has happened around results time, I will buy more shares to take advantage of it.

Take advantage of the clouded outlook for dairy and iron ore (you didn't really expect that SKL would be unscathed did you?), take advantage of the profit downgrade that knocked 10c off the share price, take advantage of a less than successful dairy auction overnight and transfer some of by 2% call money to a "7.5% bond" (and counting) in the meantime.

Another 'risk' is SKL falling out of the NZX50, due to newcomers like Tegal. But that just provides an opportunity that has nothing to do with the operations of the company. Nuplex and Coates will shortly be departing the NZX50. So SKL should be safe inside the NZX50 for now.

SNOOPY

[Beagle]

One needs to "weigh" up carefully who might get added to the NZX50 instead, (big hint there) and not discount the effect an exit or entry to the NZX50 has on a company's SP, good recent example the bounce in CVT.

Its management's inability to forecast with any degree of accuracy that surprises me the most mate. Surely they should have been the best placed to sniff the breeze earlier in the year ?

I guess like my late and much loved Beagle if I can't smell a feed coming in a reasonable time frame, I "weigh" up my options and go sniffing elsewhere :) Beagle's by their very nature usually have a poor attention span and lousy stamina when swimming, you must be the exception to the rule mate.

[Snoopy]

Ms Coutts adds more today (being last day before ex-div) another 50,000 @1.36 a piece.

I see director Liz Coutts has bought 40,000 more shares from May 6th to May 10th. I am a little surprised, as surely these purchases are well outside the normal purchase window for director. Is not now between reporting periods? Not surprised at her support for the company though!

SNOOPY