Saunders SND

[mark100]

I've held these since the mid $0.30s. You need patience though.

Market Cap is $34.6m. That have $20m cash. They forecast on Friday NPAT of $4m for FY10.

I have previously spoke with management and the cash (which was raised during the IPO in 07) is for an acquisition if a suitable one is found. However they acknowledge that as time goes on the pressure to return some to shareholders is increasing

[Huang Chung]

Where do you see the growth coming from Mark? I would have thought the oil tank market fairly static, and maybe falling, if there is a greater move to gas (especially in buses/commercial vehicles). Hence, your low multiple.

What are you seeing that I'm not?

[mark100]

HC, I'm hoping for a capital return in the next 6-12 months. Management know they can't sit on the cash forever.

Lets say the core business has forward maintainable earnings of around $3.5m after tax. Give it an undemanding PE of 7 to give a value of $25m. Add on the $20m cash to get $45m. Thats almost 60c a share.

Of course you need a capital return or a good earnings accretive acqusition to be the catalyst here. SND makes up less that 4% of my cash and shares so its far from a big investment but I'm comfortable holding it with all that cash lying around. I have previously sold at prices in the mid 40s and bought back under 40 but with a decent profit figure confirmed I probably want mid 50s now before I sell any

[mark100]

Forgot to note they also get work from the LNG industry. They are hoping to get work if any of the Gladstone LNG plants go ahead (so they told me anyway)

[shasta]

Forgot to note they also get work from the LNG industry. They are hoping to get work if any of the Gladstone LNG plants go ahead (so they told me anyway)

I'd be a little wary of companies promoting CSG/LNG work before any FID are made.

Look what happened to WDS!

[mark100]

I'd be a little wary of companies promoting CSG/LNG work before any FID are made.

Look what happened to WDS!

Would you mind pointing me to where they made a public release promoting LNG work? In their comment to me they actually expressed doubt that any Gladstone plants would happen soon but said they would target work there if any went to FID.

Unlike WDS they haven't made any such promise and unlike WDS they have net cash

[shasta]

Would you mind pointing me to where they made a public release promoting LNG work? In their comment to me they actually expressed doubt that any Gladstone plants would happen soon but said they would target work there if any went to FID.

Unlike WDS they haven't made any such promise and unlike WDS they have net cash

WDS seem to think they are in the drivers seat for Gladstone work!

http://www.wdslimited.com.au/_upload/20091123170316582.pdf

I saw the SND ann on Friday which caught my interest on first glance, but if SND's management cant add any value other than returning the capital, i'd be questioning there ability to start with!

Whats the point returning it, only to ask for it back for an acquistion down the line?

I'll keep a watch of SND for now, & see what the next 6 months brings (including how they allocate there capital)

[mark100]

Whats the point returning it, only to ask for it back for an acquistion down the line?



Well that's what the market demands, efficient use of capital. Companies are always buying back shares only to issue them again to raise capital. That's the market!

[Lizard]

I have previously sold at prices in the mid 40s and bought back under 40 but with a decent profit figure confirmed I probably want mid 50s now before I sell any

I see now 57cps there Mark. Still doesn't look expensive on yield - but somewhat dependent on how 2011 is shaping up. Heading in the right direction, but agm indications will be interesting - no real clues for growth in revenue there at present that I could spot. Any thoughts?

[mark100]

Hi Liz, I sold down sustantially once it went above 50c on an ex-div basis. WIH I think was $33m as at 30 June 2010, up from $30m as at 30 June 09 but down from $37m as at 31 Dec 09. I am waiting for the AGM to give a bit of guidance as they usually do. They did mention with the FY results something about an improving second half so reading between the lines I thought maybe that meant the first half might be a bit weak.

[Lizard]

Thanks for the thoughts Mark. Agree that the outlook maybe not so good - currently indeterminate.

Looking more positive on outlook (and also reasonably priced) would be Brierty (BYL). Just came across it, so haven't had a good look. Might start a thread later in the week if it stands up to closer examination.

[lewinsky]

Hi Liz,

I would throw EAL into that comparison. The presentation at the AGM was positive with margins looking to increase.

A healthy dividend yield especially if there is an increase this year, which could be on the cards with an increase in profits. PE ,like BYL looks low.

Lew

[mark100]

Haven't had a chance to start a thread on it but DGX is WA contractor trading on a very low multiple. FY10 PE of 4.5. ROE >20%. Yield of 6% despite low payou ratio.

Seems to be winning new contracts and is talking about earnings growth. Plus a 10% buyback has just been announced.

Main negatives are moderate-high gearing (although down a lot on 12 months ago) and no diversification outside of WA.

[mark100]

Couple of handy contract wins by SND. I bought a few back when they announced the fall in H1 profit due to legal costs although my holding is well down on its peak. It seems the WIH is going to slowly creep up. And they still have that mountain of cash relative to their market cap

[Lizard]

Will be interesting to see how SND goes in second half. Seems it will have been a slow year revenue wise, but if they can match first half, will look reasonably priced here at 49cps, especially after taking the 19cps of cash into account. EV/EBIT looks to be down at around 3.7 and total divs of 4.0cps put it on a yield of 8.16% (plus franking).

Nervous about the sector though - construction of storage tanks doesn't seem like an easy niche in the current environment.

[soulman]

Will be interesting to see how SND goes in second half. Seems it will have been a slow year revenue wise, but if they can match first half, will look reasonably priced here at 49cps, especially after taking the 19cps of cash into account. EV/EBIT looks to be down at around 3.7 and total divs of 4.0cps put it on a yield of 8.16% (plus franking).

Nervous about the sector though - construction of storage tanks doesn't seem like an easy niche in the current environment.

Sector that are related to the mining industry are all getting a good old rogering. MND for 2 days down about $1 each day. MAH getting rooted today. ASL getting rooted. Something is up??? Is China about to fall?

SND should do alright because they are not really related to China but the illiquid of the stock just not anyone's cup of tea.

[Lizard]

STS was another one I was mulling over buying here, as 76.5cps seems just too cheap... but then re-read the reports and realised how dependent they are on mining these days too... and as you say, market gone cold on mining services for now.

Illiquidity doesn't put me off very often - probably should, but I'm just not big enough or fast enough for it to matter most of the time.

[soulman]

Something's definitely not right here. Maybe risk aversion from fundies from mining contractor.

I am also angry re: a drop in deposit rate in most banks. They drop mortgage rate by 0.37 - 0.40 percentage point but deposit rate a full 50 basis point. What a crook.