FBU - Fletcher Building

[Lease]

As we know from history - there are always 3 ways share buy backs can influence the SP:

1) Don't change it
2) Increase it
3) Drop it



Do I need to provide examples?

Generally speaking, share buy backs are positive for SP, and indeed FBU has been up since buy back. Drops in these two days are normal fluctuating shouldn't read too much.

[winner69]

Buyback announced 26 June share price $5.29

Confirmation detAils 21 August share price $4.72


Current share price $4.76

Share price when buy back is completed ???

[tim23]

Can buy more cheaper has to be good for share holders?

[BlackPeter]

Can buy more cheaper has to be good for share holders?

It depends - if the shares are undervalued, then it is good for shareholders. However - not everything which is cheap is as well undervalued ;

[Beagle]

https://www.marketscreener.com/FLETC...49/financials/
Average analyst view is for EPS of 35 cps in FY20. I don't believe the growth in eps projected for FY21 and FY2 will eventuate.
Given managements truly appalling track record I think a no growth PE of the standard 8.5 is best applied which suggests fair value (even if one assumes no further write-down's and that's a VERY big call) is 8.5 x 35 = $2.98. I think its a very stock to short with the aim to close out the position at about $3.

Nothing the company has done since August 2019 has changed my view that this is a hopelessly mismanaged company deserving of a $3 handle. Buying back its own shares at over $5 was just the latest chapter in an almost endless litany of completely inept management, in my opinion.
I see analysts have now pulled back estimated eps for FY20 to 34 cps. No doubt average anticipated earnings for FY21 and FY22 will get revised as more skeletons come out of the closet.

[Leemsip]

Salt (investment advisors) reckon that Fletcher may drop out of the MSCI NZ index if the market cap drops any further.

Quote from their Sept report
"We may be seeing another interesting example at present, where Fletcher Building’s diminished share price is seeing it flirt with the removal threshold as one of seven NZ members of the MSCI Global Index. FBU announced a $300m share buyback in late June and they are executing this with quite some vigour. For example, it accounted for 47% of on-market volume on 26 Sept, 40% on 25 Sept etc. We may be too cynical and FBU doubtless views itself as undervalued but our observation is that more normal levels for buybacks tend to sit in the 10-20% region. Personally, I’d save my firepower for the tens of millions of shares that will be offer if it does fall out in November."

Had a quick look at the MSCI index to verify this https://www.msci.com/documents/10199...2-006f3d10bf8a
Indeed looks like this could occur, with fletcher the lowest market cap of the 7 in the index. Not sure exactly how this will work in Nov, but we could have a large forced seller.

[Beagle]

Welcome to the forum Leemsip, an excellent first post !

[Leemsip]

Thanks beagle. Long time lurker

[bull....]

hope fbu are not cutting corners in there building construction.

Too many of our buildings are broken. We have been warned

https://www.stuff.co.nz/business/116...arned#comments


One thing the media has missed is the building guarantees around cladding in that the product only has to last 15 years now , another wave of broken leaky homes in the making.

[Beagle]

In the last few days I have read several reports of multi million dollar disputes FBU is involved with. Maybe its a media beat-up but it seems to me there's a huge range of very serious problems this company is grappling with. Does anyone know the final cost of for example, the International Convention centre ? Will this actually go over $1 billion against its first contracted price if my memory serves me correctly of just $420m ? Have SKC got a bargain or a lemon ?