For sure -- seems to be a good acquisition & STU probably need good skillsets onboard .. ;)
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Any of the STU bulls or recent posters care to comment on this note from Craig’s? Considering a position. Thanks
Quote:
Cost out driven earnings lift. No signs of rational industry margins: STU provided a trading update showing earnings improvement over the first five months of FY21 and provided 1H21 normalised EBIT guidance of $6.5-7.5m, up 23% at the mid-point relative to the pcp. This was largely driven by cost out (FY21 c$10m guided due to staff redundancies) and sub-leasing property. Revenue for the first five months of FY21 is tracking slightly lower relative to the pcp (albeit November in line with pcp), below expectations given a soft 1H20 and elevated NZ building activity. No guidance has been provided for FY21 as STU remain cautious on the outlook for 2H21. STU had been aggressive on pricing to start FY21 and we are yet to see any signs of the industry becoming more rational on margins. As a result, it is difficult to see value. Due to limited downside to current share price, we retain our neutral recommendation.
Cost containment ahead of expectations. CIP FY21 EBIT +48%: We lift our FY21 EBIT forecast by $5m to $16m. Assuming STU achieves the mid-point of guided $6.5-7.5m 1H EBIT range, our forecast implies a $2m improvement in 2H due to the labour cost reduction being weighted to the 2H. While STU has materially improved its near-term EBIT, revenue fell with cost containment the key driver. The indicated revenue decline was contrary to our expectations given FBU's recent positive trading update.
Zero debt on balance sheet. Potential for earnings payout lift: STU’s net cash position improved over the past five months from $7m as at June 2020 to $24m currently. In the final month of the half some working capital impact is expected to support seasonal inventory holdings and STU is negotiating the sale of its remaining property as part of its property divestment programme. The current dividend policy is to payout 60-80% of normalised net earnings. With zero debt on the balance sheet there is potential for a lift or top end earnings payout. We have a FY21 NPAT expectation of $7m, this translates to a FY21 dividend of 3.5cps (top of range payout), a yield of 4.1%. STU is on a PE of 18X (1BF), not cheap rel. to peers.
Target price increased, Neutral rating retained: Our DCF derived 12-month TP (WACC 7.8% and TGR of 1.5%) is $0.80 (from $0.67). Key risks included domestic competition, volatility in steel prices and change programme execution
Interesting post Entrep
I have the same thoughts -- SP seems to have fallen back, now know why
The growth expected out of the current construction boom appears to be missing in
action in so far as STU are concerned -- any comment from the pundits ? ;)
A new CFO aint going to be able to help things much if Sales & Marketing Dept are
still away on holiday & missing something fairly important .. ;)
Was there more to why the last CFO left ? ;)
Sure, I will have a go. Don't know the analyst but when I see an analyst increasing ebit forecast by circa 50% and dcf by 20% my mind tends to wander and I think of baby Jesus. But seriously 21F is a terrible year to be basing things off due to a myriad of macro factors that affected STU. Hopefully the analyst has got forward assumptions right for the dcf. Cashflow, in part reduction of capital deployed, is strong. Debt nil. Expect board to review the divvy policy and run more off cahgliw and the cash sloshing around. There is no reward gor directors go hold onto cash, just opens a company up to easy activism.
I like the reduction in sites and staff but maintaining rev. This will eventually flow through to margins. There are other reasons I find it interesting but the simple reasons are always the best.
How they do all depends on the topline
Declining sales and margins over the last few years not a good look
Still appear to be struggling to grow sales (H1 guidance) and margins probably still under pressure
The most revealing part of that report entrep posted was '.....we are yet to see any signs of the industry becoming more rational on margins.'
Book the cost savings and that's it for a few years I fear
At least the share price shouldn't go lower but even if the dog remains a dog but pays a divie STU might become a star of the NZX (after all the CEO picked it 5 times in the picking competition)
So Craigs are forecasting a FY21 EBIT of 16 million and a Net profit of 7 million... With no debt or real interest expenses... that's a heck of a tax bill?