STU - Steel & Tube Holdings

[winner69]

STU will come right one day

[winner69]

But if I was a share holder I’d be worried with this bit. Code for we don’t really know what we are doing

“As part of Project Strive the Board and Management are continuing to review the business operating model. This may result in further restructuring costs”

[Timesurfer]

That ridiculously low offer that the board turned down is looking pretty attractive about now.

[Scrunch]

But if I was a share holder I’d be worried with this bit. Code for we don’t really know what we are doing

“As part of Project Strive the Board and Management are continuing to review the business operating model. This may result in further restructuring costs”

I'd tend to interpret it the other way. We know the current results aren't acceptable and management are continuing to look at ways to do things better.

You are however correct in that if there is a better way, why aren't they already shifting to it rather pondering whether to do something while they continue to be paid and the now poorer shareholders don't get the returns that are potentially possible.

[SailorRob]

Hi Beagle,

Always value your opinion. I know shes a dog... but at .80 the market cap is less than working capital minus total liabilities. A Benjamin Graham net-net.

The balance sheet is pristine now, very little chance of solvency issues in the foreseeable future. Insider buying in reasonable volumes. Not much has happened to change the intrinsic value that was expressed in the offer just over a year ago at twice todays market cap.

I've been over 6 years of cash-flows 84 million has been paid out in dividends and there has always been positive cash flow from operations and generally been free cash flow. Yes the cycle is old and construction may be rolling over but also may not be. In the long term this country is young and popular and is going to need a lot of Steel.

Yes there are many problems and I've been through the thread back to 2018. But surely the price now reflects all of this and more and if investing for the medium/long term the upside potential is decent with protection on the downside from the balance sheet and lack of debt.

What am I missing apart from all the things already noted in this forum? This looks like a classic Walter Schloss/Ben Graham cigar butt situation.

Cheers, Rob.

[Waikaka]

Hi Beagle,

Always value your opinion. I know shes a dog... but at .80 the market cap is less than working capital minus total liabilities. A Benjamin Graham net-net.

The balance sheet is pristine now, very little chance of solvency issues in the foreseeable future. Insider buying in reasonable volumes. Not much has happened to change the intrinsic value that was expressed in the offer just over a year ago at twice todays market cap.

I've been over 6 years of cash-flows 84 million has been paid out in dividends and there has always been positive cash flow from operations and generally been free cash flow. Yes the cycle is old and construction may be rolling over but also may not be. In the long term this country is young and popular and is going to need a lot of Steel.

Yes there are many problems and I've been through the thread back to 2018. But surely the price now reflects all of this and more and if investing for the medium/long term the upside potential is decent with protection on the downside from the balance sheet and lack of debt.

What am I missing apart from all the things already noted in this forum? This looks like a classic Walter Schloss/Ben Graham cigar butt situation.

Cheers, Rob.

Ill wade in here.

STU net debt 15 million

STU on the asset side has:

1. $9 million in cash
2. $90 million in trade receivables (goods sent out but invoices not paid yet)
3. $113 million in inventory
4. $52 million in property and plant (not sure how much of this is property)

Hopefully most bills get paid, I am a bit ruthless in inventory/property and plant so maybe fire sale might be 50%, 75% receivables, intangibles are 0.

So assets = 9+67.5+56.5+26 take off $15 million in debt =$144 million

Market cap is $134 million.

If you liquidated the business now you would get 86c a share. Currently about 80c a share so a little margin of safety.

Been a while since I read the intelligent investor but I think Ben Graham then applied a discount?

Any way I am buying at these prices. About 1% of the portfolio so not high conviction but happy to accumulate around these prices.

[SailorRob]

Thanks Waikaka,

Looking at their annual report they seem to be conservative on the inventories and playables numbers already, but agreed more margin should be applied.

The Cigar Butts of Buffetts early days were often awful companies too, STU is not, just needs a few tweaks.
Thanks for your input, was wondering if I'd missed something big but doesn't look like it. The upside is huge and downside limited.

[macduffy]

You may well be on to something here, Rob. Technically, though, STU needs to break that weak trend to get me back in the register. Meanwhile, added to my watchlist.

Thanks.

[GR8DAY]

Ill wade in here.

STU net debt 15 million

STU on the asset side has:

1. $9 million in cash
2. $90 million in trade receivables (goods sent out but invoices not paid yet)
3. $113 million in inventory
4. $52 million in property and plant (not sure how much of this is property)

Hopefully most bills get paid, I am a bit ruthless in inventory/property and plant so maybe fire sale might be 50%, 75% receivables, intangibles are 0.

So assets = 9+67.5+56.5+26 take off $15 million in debt =$144 million

Market cap is $134 million.

If you liquidated the business now you would get 86c a share. Currently about 80c a share so a little margin of safety.

Been a while since I read the intelligent investor but I think Ben Graham then applied a discount?

Any way I am buying at these prices. About 1% of the portfolio so not high conviction but happy to accumulate around these prices.

.....nice analysis Waikaka (and Rob), thanks for the effort in crunching those numbers. I've been accumulating small parcels of late whilst thinking the same........ie STU has largely been derisked to the point of the SP having settled around the 80/82c mark. Just need them to release some encouraging forecasts now to see it rebound to the $1 mark (for starters).....always the optimist.

[percy]

Their last announcement was certainly not where they said they would be.
I prefer people who do what they say they will do.