STU - Steel & Tube Holdings

[nztx]

Need 2 dollars to break even.
Bring on the divis!

A good time to consider buying more to average your per share cost downwards
& maybe benefit from a further SP swing upwards ?

I did this with an expensive parcel of BGR bought pre Covid & now it's well in the money ..
after many middle year months in notional deficit territory ..

[SailorRob]

15% to 31% upgrade - a good start to restoring the credibility of the company.

Resumption of dividends in 2021 a certainty imo.

They should be buying back stock hand over fist here. Dividends will be a massive destroyer of Shareholder returns.

[Balance]

They should be buying back stock hand over fist here. Dividends will be a massive destroyer of Shareholder returns.

STU could do both - cash position is very strong and getting better by the month.

SP powering ahead past 90c, now at 92c.

Market waking up to just how good yesterday's update really is :

"The improved earnings coupled with ongoing working capital discipline has enabled Steel & Tube to deliver robust operating cashflows. At the end of November 2020, the Group held cash of approximately $24m (up from $7m net cash at 30 June 2020) with zero debt. Some working capital impact is expected in December to support seasonal inventory holdings, however the Group expects to report a strong cash position for the half year ending 31 December 2020."

[Snow Leopard]

STU Outperforming my expectations. I like it when I am this sort of wrong.

Mr Market expecting great things in the future. Hopefully they will deliver.

[Balance]

STU Outperforming my expectations. I like it when I am this sort of wrong.

Mr Market expecting great things in the future. Hopefully they will deliver.

Logic says that STU should follow the sp performances of MPG & FBU - and it is starting to and still some way to go imo.

[winner69]

At this rate they’ll just have to resurrect those presentations about achieving $35m-$40m EBIT .....save them coming up with new ones

[Entrep]

Cost out driven earnings lift. No signs of rational industry margins: STU provided a trading update showing earnings improvement over the first five months of FY21 and provided 1H21 normalised EBIT guidance of $6.5-7.5m, up 23% at the mid-point relative to the pcp. This was largely driven by cost out (FY21 c$10m guided due to staff redundancies) and sub-leasing property. Revenue for the first five months of FY21 is tracking slightly lower relative to the pcp (albeit November in line with pcp), below expectations given a soft 1H20 and elevated NZ building activity. No guidance has been provided for FY21 as STU remain cautious on the outlook for 2H21. STU had been aggressive on pricing to start FY21 and we are yet to see any signs of the industry becoming more rational on margins. As a result, it is difficult to see value. Due to limited downside to current share price, we retain our neutral recommendation.

Cost containment ahead of expectations. CIP FY21 EBIT +48%: We lift our FY21 EBIT forecast by $5m to $16m. Assuming STU achieves the mid-point of guided $6.5-7.5m 1H EBIT range, our forecast implies a $2m improvement in 2H due to the labour cost reduction being weighted to the 2H. While STU has materially improved its near-term EBIT, revenue fell with cost containment the key driver. The indicated revenue decline was contrary to our expectations given FBU's recent positive trading update.

Zero debt on balance sheet. Potential for earnings payout lift: STU’s net cash position improved over the past five months from $7m as at June 2020 to $24m currently. In the final month of the half some working capital impact is expected to support seasonal inventory holdings and STU is negotiating the sale of its remaining property as part of its property divestment programme. The current dividend policy is to payout 60-80% of normalised net earnings. With zero debt on the balance sheet there is potential for a lift or top end earnings payout. We have a FY21 NPAT expectation of $7m, this translates to a FY21 dividend of 3.5cps (top of range payout), a yield of 4.1%. STU is on a PE of 18X (1BF), not cheap rel. to peers.

Target price increased, Neutral rating retained: Our DCF derived 12-month TP (WACC 7.8% and TGR of 1.5%) is $0.80 (from $0.67). Key risks included domestic competition, volatility in steel prices and change programme execution

From Craigs

[nztx]

At this rate they’ll just have to resurrect those presentations about achieving $35m-$40m EBIT .....save them coming up with new ones

And the best part of the lot - barring any Inventory impairment - there's stuff all major other bits on the balance sheet
remaining for further impairment provisioning ..

[artemis]

I have followed STU for a while, including following it down :>( , and even turned up to some of the annual shareholder meetings. Despite recent results my overall impression is of a hardworking team now managing a thought-through strategy and an intelligent turnaround. Slow to start maybe but they have not pasted on a positive spin as some companies (and governments) do but have been upfront about problems and issues.

The company will benefit from the upcoming focus on infrastructure.

[macduffy]

The company will benefit from the upcoming focus on infrastructure.

Let's hope so! But remember we thought that FBU was going to make big bucks after the Christchurch earthquake.

Disc: Recently back in after a lengthy absence from the register!