Gaynor commented in that above mentioned article this little snippet -
Australian investors will lap up this opportunity because they view Vulcan’s two main New Zealand competitors, Steel & Tube and Fletcher Steel, as being inefficient and poorly run.
That Aussie view is one of the main reasons why the likes of FBU have over the years appeared 'cheap' compared to its Aussie peers
Only time will tall
Last edited by winner69; 23-10-2021 at 06:08 PM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
A broker tells me that the shares offered in the Vulcan sell down we’re gone in 3 hours. Stu still largest comparing sales in NZ. There is no getting away from the large difference in margins. Will be a lot of pressure on stu to lift there game. CEO stated that focus is now on margin not volume.
Gaynor commented in that above mentioned article this little snippet -
Australian investors will lap up this opportunity because they view Vulcan’s two main New Zealand competitors, Steel & Tube and Fletcher Steel, as being inefficient and poorly run.
That Aussie view is one of the main reasons why the likes of FBU have over the years appeared 'cheap' compared to its Aussie peers
Only time will tall
Observation by Gaynor is spot on - Fletcher Steel (actually almost the whole of FBU) & STU had grown fat & lazy on the back of the oligopolistic nature of the building material industry in NZ over the years.
Hence, the opportunity imo for new management (& investors) to reset their businesses and benefit from the strong underlying base due to the nature of the industry.
I can recall sitting in on a presentation by Ralph Waters a year after he took over the management of FBU and he was asked 'why FBU?' given how badly run the company was.
He made the observation that FBU attracted him because the group had strong underlying businesses and management issues can be fixed with strong direction and appropriate reward/incentive structures.
And Ralph went ahead and did exactly that - restructured management, sold off non-performing assets and really got the company firing on all cylinders.
remember how the sp went from $2.70 to over $13.50?
Then he stepped down & the CEOs who took over from him got distracted, made overseas acquisitions and allowed the underlying operations to run down & management to become fat & lazy again.
No complaints here as we all got to buy FBU cheap again!
STU is going through exactly the same exercise as FBU - difference being that STU does not have as diversified and as deep an operational base as FBU, so recovery will be slower and take longer.
Good post Balance. I agree Fletchers seemed to be to big for the caliber of management they had. I still think they have a lot of issues still to sort out. Whenever I have to go to Placemakers it reminds me of something between Faulty Towers and Arcrites general store. I had FBU shares for 15 years and sold out as I had lost faith and have no intention of ever buying back in. STU is a simple buisness in comparison and I agree now is the time for them to shine. If you go back a bit STU had a long history of good profits over $20m a year and was a great dividend stock. They have trimmed expenses and from what I hear focused on doing the “basics the best” all while we are in the largest building boom I have ever seen.
Good post Balance. I agree Fletchers seemed to be to big for the caliber of management they had. I still think they have a lot of issues still to sort out. Whenever I have to go to Placemakers it reminds me of something between Faulty Towers and Arcrites general store. I had FBU shares for 15 years and sold out as I had lost faith and have no intention of ever buying back in. STU is a simple buisness in comparison and I agree now is the time for them to shine. If you go back a bit STU had a long history of good profits over $20m a year and was a great dividend stock. They have trimmed expenses and from what I hear focused on doing the “basics the best” all while we are in the largest building boom I have ever seen.
And it is extremely poorly analyzed, researched and covered by the broking industry - exactly how I like it at this stage of the sp recovery cycle.
Thanks Winner69. Good point re the property sale . A distribution business with cash in the bank and a PE of 12 is still a steel in my books anyway. I’m finding it hard to stop buying at these prices. It’s my largest position.
Agree with what you say Shareguy, and with the long history of decent profitability and return on equity.
Agree cheap BUT only in the context of the NZX. There are hundreds of far higher quality businesses for sale at similar prices if not even cheaper in global markets, the US has many of them.
Even in the SP500 the median PE is much lower than the markets, somewhere around 16.
I own STU and think it is fair value in any context but not screaming value in the context above. With consideration given to long term performance going back pre GFC and nothing attributed to improvement in future (as how do we know) I think full value would be $1.50.
Yes I have seen that. I can’t understand why and only assume that they lack experience and don’t understand the steel industry. Nothing beats doing your own research. On the STU website is a copy of a presentation they did for Craigs I think in September. Apparently they were impressed with Mark’s presentation but yet have not updated their report. There was a lot of demand for Vulcan shares so would imagine that Investors and some big players will be having another look at STU over the next few months.
The offers to buy STU three years ago at 170/190 was at a time when the likes of Fletcher were seduced by the ‘forecast / target EBIT of $40m plus
Jeez, F21 EBIT on a comparable basis was just $16m
So when Rob says STU is full value at $1.50 he could be right …but could still be rather optimistic.
But one day all the positive words and the actions they are taking to improve performance might just come true ….but even current management isn’t really demonstrating successful execution of plans so the future is still based on hope….like hope it’s gunna to get better
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Agree SailorRob that there are plenty of good buys offshore even better than STU. I invest directly in NZ and Australia (a bit) and apart from a long 20 year holding in Apple use PIE funds for my overseas exposure and diversification as I spend enough time just on the NZ market. My fair value for STU is closer to $2 and I believe it will attract a lot more interest once they post their 6 month result. We will see.
Originally Posted by Rawz
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