STU - Steel & Tube Holdings

[Scrunch]

This investment case only requires that they continue to mess up everything they touch in order for it to be a great investment. The possibilities with any improvements from here and very different again.

Show me a better company on the NZX which is a good investment at current price even if it has no future growth and the board continues to be hopeless.

The problem with long-term historical modelling like this is that the market can permanently change meaning historical profitability never returns. For instance a chain of VHS video stores could have looked great through a similar calculation, but...

If a long-term horizon like 13 years is used, companies like CAV are also likely screen very well on your criteria. Across 2007 to 2011 CAV was paying a dividend of circa $12m/yr. Its current market cap is $23m. In the case of CAV their market cap/balance sheet had debt of $60-$80m appearing sensible. Then the market changed, profitability collapsed and this debt was a huge issue. CAV went down the no-capital raise, no dividends route so there is no $80m of new capital as per STU. Its taken years and years but good progress has been made on reducing debt. Progress on returning to good levels of profitability has been terrible. If however they successfully execute their new strategy, CAV could be a great investment.

[RTM]

Infrastructure will be to the fore when the country tries to recover economically. I think that will use quite a bit of steel and concrete and so there should be some down wind sailing for SailorRob and STU, perhaps FBU as well. Surely they can’t screw it up again.

[nztx]

The problem with long-term historical modelling like this is that the market can permanently change meaning historical profitability never returns. For instance a chain of VHS video stores could have looked great through a similar calculation, but...

If a long-term horizon like 13 years is used, companies like CAV are also likely screen very well on your criteria. Across 2007 to 2011 CAV was paying a dividend of circa $12m/yr. Its current market cap is $23m. In the case of CAV their market cap/balance sheet had debt of $60-$80m appearing sensible. Then the market changed, profitability collapsed and this debt was a huge issue. CAV went down the no-capital raise, no dividends route so there is no $80m of new capital as per STU. Its taken years and years but good progress has been made on reducing debt. Progress on returning to good levels of profitability has been terrible. If however they successfully execute their new strategy, CAV could be a great investment.

Here is the last Cap Raise by STU to get them out of the Cactus repaying Wholesale Debt at the time:

https://www.nzx.com/announcements/322841


27/8/2018, 9:25 am GENERAL

Steel & Tube Reminder to Shareholders about Rights Offer

Steel & Tube Holdings Limited has today reminded shareholders about the closing date of the $60.1 million, pro rata, 1 for 1.9 rights offer, which closes at 5.00pm on Monday 3 September 2018.


That done, the favourite beancounter's new creative exercise on 'Right to Use' Assets & liabilities
went a significant way to going back towards the original position before the CR ,stuffing relevant ratios
with meaningless inflating gumpf in process & RTU Term Liability of near the same amount as repaid created


Give or take $5 mil, the Cap Raise in the 2019 First Half (6m to 31.12.18)appears to have been all but completely obliterated
within just the next three reporting periods, looking at closing SHF's totals

[nztx]

Not much left in Intangibles / Goodwill to write off / impair @ FY 2020

That cant be a bad thing & seems to have starred in Writedowns in 2018 FY as well

All up in recent 3 FY Reports - a mere $78 m expensed in Impairment & Restructuring charges

In itself, that may limit S&T's future focus to fine tuning Inventory, Plant & Equipment instead

It looks like half the Real Estate remaining was hocked off in 2020 Year as well (at what appears to
be write down on values after previous revaluation upwards)

Just so long as they dont impair the Legs on the Boardroom Table - then there may be
hope when storm clouds start clearing ..

Cashflow, Debtors & Closing balances appear consistant with 20-25% T/o downturn
2H - nevertheless continuing the recent roughly period on period T/o deterioration pattern.
Let's face it subsidised with effectively part Employee costs, some may have expected
slightly better cash retention than $17 mil closing FY on a $73m FY Employee Bill,
but it could have been worse, with the S&T scalpels being so active during the year.

Obviously the Scalpel bearing Teams are well paid, as for the sizey decrease in heads on Payroll,
a mere $5 million was shaved off the bill for Employees and benefits over 2019.

Barring the obvious NTA sticking out from the S&T burrow like a periscope searching for
the next storm, there must be some good bones buried somewhere, it's just difficult to see where
they lurk or who may be attracted to them .. IMO

With the Storm blamed for the Vast Carnage and seeing much mention - C-19, many may be
left wondering what things may have looked like without the brief distraction of C-19 in roughly
just the last quarter.

The good news presumably is that the Capitains of the S&T Fleet made it through the choppy
straights with Red Flags still somewhat aloft & intact, and get to sail a few more voyages.
Alas the missions didn't bring home much of a payload for more months when waters were calmer.

Of course, if STU were to talk FBU into coming back with $1.75 + some more, then hopefully
Bluescope decide to play ball nicely as well .. there may be lots of smiles all round .. and the
troubled S&T fleet may no longer have to sail the choppy straits all on their own ..

[macduffy]

If only STU were a fleet of ships instead of being a poorly performing listed company!

[GR8DAY]

If only STU were a fleet of ships instead of being a poorly performing listed company!

.....let's hope the operative word is WERE macD. Remaining hopeful on this one, surely they will get this reset right this time.

[SailorRob]

The problem with long-term historical modelling like this is that the market can permanently change meaning historical profitability never returns. For instance a chain of VHS video stores could have looked great through a similar calculation, but...

If a long-term horizon like 13 years is used, companies like CAV are also likely screen very well on your criteria. Across 2007 to 2011 CAV was paying a dividend of circa $12m/yr. Its current market cap is $23m. In the case of CAV their market cap/balance sheet had debt of $60-$80m appearing sensible. Then the market changed, profitability collapsed and this debt was a huge issue. CAV went down the no-capital raise, no dividends route so there is no $80m of new capital as per STU. Its taken years and years but good progress has been made on reducing debt. Progress on returning to good levels of profitability has been terrible. If however they successfully execute their new strategy, CAV could be a great investment.

Correct Scrunch, as I posted above;

'Usually the case is the market cap has fallen off the planet due to inability to produce that cash going forward which makes comparing it VS historical cash flow generation irrelevant'.

A chain of VHS stores faced with technological disruption is very different from a Steel manufacturing distributing and retailing company that has a duopoly market in a young sparsely developed country lacking in infrastructure with a massive population runway and a pack of rabid money printing socialists at the helm who think they can allocate capital into infrastructure better than the private sector.

With STU it's not a matter of screening on criteria, the only screen I have done is a Net working capital screen for comparative value across the world, not on STU itself.

It's a matter of reading the annual reports over 13 years, starting on the last page not the first, studying the capital allocation decisions and following exactly what happened to ever cent of retained earnings, seeing the sustained cash flow generation and then making a call on whether anything has happened that will change things for the worse going forward.

All I need is for them to improve nothing at all. They can even make things worse and it will be a great investment. Just not too much worse.

Again all this requires a purchase at 55c. At $1 all bets are off.

This company was a market darling when it was expensive and they were making all the mistakes, now it's cheap nobody wants to know.

[SailorRob]

.....let's hope the operative word is WERE macD. Remaining hopeful on this one, surely they will get this reset right this time.

They don't need to get anything right.

Carrying on with all the same mistakes will be great.

Just keep repeating the last 13 years and I will be a very happy investor.

[SailorRob]

Here is the last Cap Raise by STU to get them out of the Cactus repaying Wholesale Debt at the time:

https://www.nzx.com/announcements/322841


27/8/2018, 9:25 am GENERAL

Steel & Tube Reminder to Shareholders about Rights Offer

Steel & Tube Holdings Limited has today reminded shareholders about the closing date of the $60.1 million, pro rata, 1 for 1.9 rights offer, which closes at 5.00pm on Monday 3 September 2018.


That done, the favourite beancounter's new creative exercise on 'Right to Use' Assets & liabilities
went a significant way to going back towards the original position before the CR ,stuffing relevant ratios
with meaningless inflating gumpf in process & RTU Term Liability of near the same amount as repaid created


Give or take $5 mil, the Cap Raise in the 2019 First Half (6m to 31.12.18)appears to have been all but completely obliterated
within just the next three reporting periods, looking at closing SHF's totals

All just accounting nonsense, asset created to match liability. Nothing changes with this.

Net working capital covers the entire market cap and then some, rest of company for free.

[peat]

yeh Jenny Ruth wrote a good piece about Stu this morning in BusinessDesk. entitled Green shoots for Steel & Tube despite its $60m annual loss

(Paywalled)

https://businessdesk.co.nz/article/i...0m-annual-loss