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  1. #161
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    Quote Originally Posted by DarkHorse View Post
    I'll bite - can you share what it was about ACF that affected your slumber?
    Well I had a capital requirement that the size of my ACF nicely fit, so a superficial thought.

    I've really enjoyed my shareholding in ACF. Bought roughly at 43-44c initially, enjoyed a number of dividends which had DRP.

    I didn't take an overly scientific approach...I could have sold other shares, but the way I view it is at this spot price would I be more likely to invest in it right now...some of my more cyclical shares are impacted by cyclical forces and at the bottom half of the cycle - maybe not at the exact bottom but at least below the average of the cycle. So for those affected stocks I'm less likely to want to sell them. ACF has ridden a wave up, and I struggle pinpoint how much of that is due to its very capable management team and execution of their growth plans vs an underlying boon in construction. I have no doubt much of the growth is because its a great management team and they are sensibly executing. But with scaffolding, much depends on the utilisation rate of the kit. If utilisation goes from low to high it dramatically expands earnings and % margins. We've seen that at ACF - earnings, % margins, returns on funds capital employed, have really expanded these last 2 years.

    But I've always been mindful the inverse could happen if there was a lull in activity. The sort of construction projects ACF participates in have been at high levels but I struggle with how to sort of determine how maintainable is that. IE when I purchased, was underlying activity at cyclical lows and its just rebounded to average levels, or are current levels now well above the average of the cycle? I don't know the answer to that and is one thing that always weighed over my head.

    Finally I started reading about the number of mines that are being shut with gusto in Australia it gave me some pause for thought. I know mining is more around the edges type stuff for Acrow but they do participate in it.

    I don't have any particular concerns around ACF or where it's trading or heading. Indeed I think its a marvelous company and has some legs. I just think my decision to sell was a confluence of the above factors.

  2. #162
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    Thanks for sharing your thoughts Muse.
    They have certainly increases sales at a much faster rate than the construction market has grown, with increasing margins and very high returns on capital, by expanding into ancilliary products and services to provide and complete product offering and greater geographic footprint.
    I take your point that sector tailwinds could reverse, but also note that a large share of their work is on long-term public sector infrastructure projects, as well as non-residential construction projects with long lead times (with only 10% of revenue from scaffolding nowadays and falling).
    Just my initial thoughts...

  3. #163
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    Quote Originally Posted by DarkHorse View Post
    Thanks for sharing your thoughts Muse.
    They have certainly increases sales at a much faster rate than the construction market has grown, with increasing margins and very high returns on capital, by expanding into ancilliary products and services to provide and complete product offering and greater geographic footprint.
    I take your point that sector tailwinds could reverse, but also note that a large share of their work is on long-term public sector infrastructure projects, as well as non-residential construction projects with long lead times (with only 10% of revenue from scaffolding nowadays and falling).
    Just my initial thoughts...
    aye there is a lot of good stuff happening. Do I have fear I've missed out (on the upside?) absolutely. Wished I had held on a bit longer with the benefit of hindsight. But I'm also a believer that on occasion its wise to take some chips off the table when you've had a winning hand. Maybe I was a bit influenced by my experience with Liontown (see the LTR thread and my posts on my investment there over the course of my holding). I praise the investment gods I realised my investment at $3/shr with it now at 1.27.

    I hear ya on lots of good stuff on long term public infrastructure. That is a double edged sword in some respects. You get to park up your kit for long durations at a time - 100% utilisation on that gear while under contract and often for a large chunk of the fleet. When that contract ends, invariably it takes time to find a home for that kit and utilisation falls as does margins and earnings. It's a contract business at the end of the day and in my view its sort of inescapable the business will experience lulls between major contracts where earnings & divies take material step downs which has the potential to be followed by the SP.

    I look at Acrow's end markets and I sort of see lots of end segments, like transport (mainly roading), power (various types of plants, maintenance shutdowns) and construction (apartments, social infrastructure like hospitals, commercial towers etc) and increasingly overwater solutions with their latest acquisition. That diversity is great because hopefully the pistons fire at different times. But I also don't understand the long term outlook for some of them. Roading I am most familar with and I think that is at or near the peak of many infrastructure forecasts, and I believe it to be a big part of Acrow's business.

    Faced with these sort of conundrums I often fall back on maintainable earnings and how that compares to spot price. I don't think it fair to assume an average over recent year earnings (say the last 5 years including current year) because they've grown their book a lot. But you take the average return on invested capital over 5 years (operating EBIT / net working capital plus fixed assets), apply that to current invested capital to derive a maintainable EBIT, take off current year net interest and tax to get a sort of 'through the cycle' NPAT.

    I didn't do that, as I sort of know the sort of number & multiple it would produce.

    A bit of a meandering post. Just a flicker of my thought pattern. Don't take this as me poo poo'ing the company by any means, as I said previously I had a lot of various reasons to sell down. Happy to leave some on the table for the next guy and gal. Business has my obvious respect, as do all you fine Acrow shareholders.

    EDIT: sorry last thing that had crossed my mind, but the upgrades stopped. That seems like a silly thing to say, the company has issued many and looks set to achieve its latest guidance. But the tempo of steady upgrades has slowed. In my little suspicious mind, I started to wonder what that meant.
    Last edited by Muse; 28-02-2024 at 10:18 PM.

  4. #164
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    Quote Originally Posted by Muse View Post
    aye there is a lot of good stuff happening. Do I have fear I've missed out (on the upside?) absolutely. Wished I had held on a bit longer with the benefit of hindsight. But I'm also a believer that on occasion its wise to take some chips off the table when you've had a winning hand. Maybe I was a bit influenced by my experience with Liontown (see the LTR thread and my posts on my investment there over the course of my holding). I praise the investment gods I realised my investment at $3/shr with it now at 1.27.

    I hear ya on lots of good stuff on long term public infrastructure. That is a double edged sword in some respects. You get to park up your kit for long durations at a time - 100% utilisation on that gear while under contract and often for a large chunk of the fleet. When that contract ends, invariably it takes time to find a home for that kit and utilisation falls as does margins and earnings. It's a contract business at the end of the day and in my view its sort of inescapable the business will experience lulls between major contracts where earnings & divies take material step downs which has the potential to be followed by the SP.

    I look at Acrow's end markets and I sort of see lots of end segments, like transport (mainly roading), power (various types of plants, maintenance shutdowns) and construction (apartments, social infrastructure like hospitals, commercial towers etc) and increasingly overwater solutions with their latest acquisition. That diversity is great because hopefully the pistons fire at different times. But I also don't understand the long term outlook for some of them. Roading I am most familar with and I think that is at or near the peak of many infrastructure forecasts, and I believe it to be a big part of Acrow's business.

    Faced with these sort of conundrums I often fall back on maintainable earnings and how that compares to spot price. I don't think it fair to assume an average over recent year earnings (say the last 5 years including current year) because they've grown their book a lot. But you take the average return on invested capital over 5 years (operating EBIT / net working capital plus fixed assets), apply that to current invested capital to derive a maintainable EBIT, take off current year net interest and tax to get a sort of 'through the cycle' NPAT.

    I didn't do that, as I sort of know the sort of number & multiple it would produce.

    A bit of a meandering post. Just a flicker of my thought pattern. Don't take this as me poo poo'ing the company by any means, as I said previously I had a lot of various reasons to sell down. Happy to leave some on the table for the next guy and gal. Business has my obvious respect, as do all you fine Acrow shareholders.

    EDIT: sorry last thing that had crossed my mind, but the upgrades stopped. That seems like a silly thing to say, the company has issued many and looks set to achieve its latest guidance. But the tempo of steady upgrades has slowed. In my little suspicious mind, I started to wonder what that meant.
    Thanks Muse, I do appreciate your thoughtful post - living up to your moniker.
    I think the modest valuation allows for growth well below what's been achieved over recent years.
    Regardless, some friendly debate with smart investors like you is invaluable.

  5. #165
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    Quote Originally Posted by DarkHorse View Post
    Thanks Muse, I do appreciate your thoughtful post - living up to your moniker.
    I think the modest valuation allows for growth well below what's been achieved over recent years.
    Regardless, some friendly debate with smart investors like you is invaluable.
    The market is clearly saying you are right and I’m wrong

  6. #166
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  7. #167
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    I think one thing I should had better considered was Acrow's value as an acquisition platform - they operate in such a fragmented industry, and are able to make lots of low risk acquisitions at accretive multiples. The ones they have made look to have been successful and there is no reason why they can't continue to find and execute them. oh wells. nice wee bump in the SP today.

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