STU - Steel & Tube Holdings

[Greekwatchdog]

No chance in hell. Board already rejected $1.95. Commerce Commission will also have a say..

[SailorRob]

Liam,

Somehow missed this reply in August but you are bang on my friend. If you're new to investing and you're thinking like this you will go far. Like you this is the only NZX company I'm interested in as well.

As we have both realised, all they need to do is carry on making a complete balls up of everything they touch for this to be a great investment particularly from August prices. Any improvements will be a bonus.

The following sums up how the issues you have identified occur all to frequently.

The management of every company has two basic roles: to run the company and to allocate the capital that it earns. The first task is obvious, but the second one is frequently overlooked by both investors and managements. Managements generally tend to be better at managing companies than allocating capital. These are two completely distinct functions and require different skill sets. A large part of top corporate managers reached their lofty positions by working their way up from lower positions or by specialising in specific fields. Therefore, these people tend to be experts in the fields within which the company does business rather than in capital allocation. It is very typical, therefore, to see managements that run companies well but allocate capital poorly.

Speaking of capital allocation STU should be buying back stock like fiends at these prices, best shareholder return they could ever hope to achieve. An infinitely better use of capital than reinstating dividends or funding another stupid acquisition.

GreekWD it's my understanding they didn't reject any offer, the offer was withdrawn.

[clearasmud]

No chance in hell. Board already rejected $1.95. Commerce Commission will also have a say..

Never say never.
Our board canceled a dividend after the shares had gone ex dividend!

[Greekwatchdog]

Yeah I know, common sense really. Be stink to give shareholders a div then lay off xxx amount of staff.

[SailorRob]

[QUOTE=liam;840448]

Yeah it's where the dividends have come from, are they covered by free cash flow as well as all capital expenditure plus any acquisitions being covered (or have the acquisitions produced additional cash flow that provide a decent ROIC) and have they been clawed back by equity raising. Has there been a material change in the business which will affect the free cash flow generation going forward.

First time posting here, but STU is honestly the only NZX company I'm really interested in at these prices. I believe, after making an excel spreadsheet with financial info going back until 2005, that their biggest downfall was paying TOO much of a dividend. Their policy was to "pay half of net profits" but in the end, cash is king and profits can only pay what cash can back up, and they had to take on debt to fund the rest. From 2005-2010 they had zero cash and borrowings of around 40 mil. By 2017 their borrowings had ballooned to 133 mil and the dividend they paid was 10 times the free cash flow. It was stupid. It wasn't their cash flows that was the problem, it was their return of it to the shareholders which winded up bringing them down a debt and leveraged rabbit hole.

Bit of a young tangent there, but basically, I'm also pretty bloody bullish on it based on a) if they just keep as they are, I'd say there'd comfortably be FCF returns of over 10% per year (adjusting for them currently selling off surplus inventory) and b) the cash flows they have made in the past were without their current cost cutting measures, though I have zero clue about how good these actually are a company's word is never to be trusted, but theoretically if previous years' performances are adjusted for the reduced capital etc might be looking good?

Unfortunately Steel distribution and processing is pretty far from my circle of competence (basically tech) so really just wanting to know about the industry landscape, overseas competition, price war with Fletcher Steel (??) and anything else that may drive them away from ever returning to early performance. Pretty new to investing, but those are my thoughts. Cheers

Liam,

Somehow missed this reply in August but you are bang on my friend. If you're new to investing and you're thinking like this you will go far. Like you this is the only NZX company I'm interested in as well.

As we have both realised, all they need to do is carry on making a complete balls up of everything they touch for this to be a great investment particularly from August prices. Any improvements will be a bonus.

The following sums up how the issues you have identified occur all to frequently.

The management of every company has two basic roles: to run the company and to allocate the capital that it earns. The first task is obvious, but the second one is frequently overlooked by both investors and managements. Managements generally tend to be better at managing companies than allocating capital. These are two completely distinct functions and require different skill sets. A large part of top corporate managers reached their lofty positions by working their way up from lower positions or by specialising in specific fields. Therefore, these people tend to be experts in the fields within which the company does business rather than in capital allocation. It is very typical, therefore, to see managements that run companies well but allocate capital poorly.

Speaking of capital allocation STU should be buying back stock like fiends at these prices, best shareholder return they could ever hope to achieve. An infinitely better use of capital than reinstating dividends or funding another stupid acquisition.

GreekWD it's my understanding they didn't reject any offer, the offer was withdrawn.

[Greekwatchdog]

Board said no to earlier off then FBU increased then withdrew...

[SailorRob]

Board said no to earlier off then FBU increased then withdrew...

Yes sorry they did reject it at $1.70.

[Greekwatchdog]

All good mate. Just hope FBU stay away and hope for shareholders sake the board can walk the talk.

[Balance]

https://www.nzx.com/announcements/364832

Bloody waste of space to appoint another director just because she is female imo.

This company desperately needs real industry & commercial experienced directors.

No happy.

[GR8DAY]

.......she sure has some solid credentials behind her Balance. Maybe she's got bigger #alls too (when it comes to deal making) than some of the male directors so lets give her a chance. If and when the takeover remerges (will be sooner than later at these low SPs IMHO) then her commercial experience could come in very handed to negotiate a deal??