Post from the 28/01 2021. Nothing has really changed.
Well people, the way I see it, which is very different from Craig's impressive mumbo jumbo, is that they have averaged a Net Profit of 17.4 million/year over a period of 13 years which includes a once or twice in a lifetime global recession. Now granted with a lot of those earnings they have retained them and destroyed them in spectacular fashion. They also paid out 15 million a year average in dividends and then took back a lot of money in an equity raising, net of which the dividends would have averaged 9 million a year. They at times employed significant leverage to produce these cash flows. The top-line growth over this whole period has been non existent.
So looking forward, which is I believe more difficult that Craig's would have you think - If we take one case and I'm going to call it 'best conservative case' and assume that revenues remain the same going forward, margins remain similar and thus net profit remains the same averaged over time. BUT this time they don't destroy any retained cash, they don't employ it well either, just for every $1 retained only $1 of value is created. Under this scenario we can now try and assume a multiple for this profit.
Now when deciding a multiple, we see that the NZ50 PE according to S&P, is about 45. Yes this will be somewhat because of COVID earnings but regardless it's incredibly high, all time high in fact. People will say 'yes but with the discount rate/bond yields/interest rates so low' and I will think hmmm why are they so low. Mostly because we're in the middle of another massive recession and have had abysmal economic growth really since 2007 aside from what a huge population increase has given us. I digress, but I'm not at all comfortable that we really have conditions that warrant higher than long term average PE's.
So for regular business like Steel and Tube that has kicked it's old habits but still just plodding along... It is a duopoly and now has no debt, so even if it performed as it has in the past, it's now all equity and could be goosed if that made sense in future... Hell I'm not giving it any more than 15. So say 17 million times 15 is around 250 million. There are 166 million shares so that's $1.50.
So in my opinion, anyone that thinks it is worth more than that (and I may be one of them) is speculating, probably on multiple moving balls.
Now I can do a worst case and base that on exact historical performance (it can get worse than that too) and I can do a best case in which I would attribute at least average capital allocation skills, say retained earnings reinvested at 7%, some leverage applied, growth at least in line with population growth. But I'll just stick with my case above and I can tell you I'll probably sell early as a result but I'm totally happy with that as if i don't then I may as well go to the Casino.
This is why I was ranting so hard about it when it was in the 50's. It was massively undervalued.
Personally I’m annoyed they are not doing a share buyback but looking at the $16.1m npat and 166 shares on issue the dividend for the year following their policy should’ve been 5.8cps at the 60% low end of npat policy.
Am I missing something or are the Directors just ignoring their own dividend policy?
Personally I’m annoyed they are not doing a share buyback but looking at the $16.1m npat and 166 shares on issue the dividend for the year following their policy should’ve been 5.8cps at the 60% low end of npat policy.
Am I missing something or are the Directors just ignoring their own dividend policy?
You could ask them this and also how they could cancel rather that postpone a dividend on a share that was. Already trading ex
Tell them that it's not to late to pay it.
You could ask them this and also how they could cancel rather that postpone a dividend on a share that was. Already trading ex
Tell them that it's not to late to pay it.
The record date is 10 September. The ex date is 9 September. Payment is 24 September.
The dividend has been announced, but hasn't gone ex dividend. Until the lockdown last year I'd never seen announced dividends cancelled, but this happened for a number of companies as they looked to preserve cash. There is essentially zero chance of the dividend not progressing this time because the dividend was announced when we were already in L4 lockdown so the directors knew what the current situation was when they made the decision.
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Originally Posted by winner69
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