Hastie Group Ltd ("HST") - Delivering!

[steve fleming]

i bought some of these last week for my superfund as a long-term hold - any body else hold??

sorry...being lazy...this is cut and paste from Huntley's:


Last Price $ 1.58
Market Cap $ 160 (million)
52 Week High/Low $ 2.09 - $ 1.39
Sector: Capital Goods
intrinsic Valuation $1.95

"Hastie Group (HST) is the largest air conditioning and refrigeration company in Australasia. Growth comes mainly from acquisitions and the highly fragmented market offers numerous attractive targets. Competitive pressures subdue margins, though less so in maintenance. The underlying industry is mature and cyclical - primarily dependent on the non-residential building cycle. HST is a good business making headway in a difficult industry. Suitable for growth oriented investors comfortable with above-average risk."

"Demand for air conditioning services is expected to remain solid for the remainder of FY06 in Australia and NZ. Refrigeration orders should steadily pick up but the full year contribution will be down on last year. HST anticipates the continuation of favourable market conditions into FY07. Further acquisitions are expected and should drive earnings higher. Our forecasts remain unchanged. At current prices HST is an Accumulate"

[Lizard]

Have bought a few too Steve (ca $1.68). Prospectus for the Mar 05 float was weak, but looks like they listed lower than planned and have made some good acquisitions. My valuation $2.16 - possibly higher than Huntleys as they have had another good acquisition since you posted. Upside to that if they don't deliver any bad news in the next 12 months.

[steve fleming]

$1.45....whats going on here???

Huntley has upgaded to buy again noting no change to fundamentals....surely too late in the year for a downgrade???

Div yield of 7%

PE (07) of 7.8

[Lizard]

Happy now Steve? Confirms 2006 forecast and forecasts eps of 16-18cps for 2007 - 30% increase on normalised 2006. 2007 P/E of 8.5 at the mid-range, though my figures say the top of range is a fair pick. On this basis, would expect the sp to clear $2 and be heading to $2.50 within 9 months.

Cheers, Liz

[steve fleming]

Hi Liz!....yes....today's HST action ( and a few other good rises today) has put a smile on my face!...

HST's strategy makes lots of sense - buy private company's on cheap multiples then benefit both from synergies/improved efficiencies and also the multiple re-rating..(ie BOL type strategy)...plus they seem to have the management experienced enough to pull it off....

Nicely bid up all day to finish on highs...wouldn't surprise me to see some more small/mid cap funds accumulating...HST is going to be a great medium/long term growth story

[Lizard]

Nice move today - currently $1.81 and could finish higher. Announcement today re Dubai JV might not add much to NPAT until 2008, but has at least reinforced that HST makes it as a "growth" possibility as well as a "value" play. [8D]

[Lizard]

Result out of $18.7m NPAT - normalised, about $14.0m or P/E of 13.0 on sp of $1.75. Final dividend of 5.3cps to give annual 10.6cps or yield of 6.1% plus franking. Based on this result and previous forecast for 2007, I value at $2.38.

New acquisition of Heyday group announced which will increase the size of the group by about 25%. Equity raising of $15m should increase shares by about 8.5 - 9.0m or an 8.6% increase. Allowing for debt, I calculate the acquisition as still adding to NPAT by around $2.5m in 2007, so should work out eps positive and increases valuation to $2.50.

Currently, HST look comfortable carrying relatively high debt levels, and I assume the DRP remains underwritten to help with debt management.

Edit: further to above, I estimate 2007 NPAT at $23.6m. Allowing for equity raising and underwritten DRP, shares of 116.6m, so eps of 20.3cps - towards the top of the guidance given by HST of 18.5-20.5cps. Forward P/E of 8.6 at price of $1.75. Assuming they can achieve this, will look cheap for a company of $200m market cap and attractive buying for instos. However, some risk still in the high debt levels and appears to be some margin pressure, which needs watching.

[steve fleming]

Hi Lizard,

Results as expected but at least help in establishing managements credibility in the market.

It is all looking very positive, certainly the debt levels is an issue (and the subsequent to year end Heyday Group purchase is 50% debt funded)...but management must be reasonably comfortable given that the capital raising is relatively light, and the dividend appears on the generous side.

Interesting strategy to diversify into electrical installation–an admission of the perhaps limited growth in the a/c market but it certainly represents a great opportunity for HST and the ability of the 2 divisions to feed off each other

Looking forward to an exciting 2007, and a decent re-rating as the mid-cap funds look to get on board this very good news story

[Lizard]

Good to see the cap raising heavily oversubscribed, with 8.4m shares issued at $1.85 - the top of the book-build range of $1.70 - $1.85. Should open nicely

[Lizard]

Got that nice break through $2 today with current price at $2.03. Hope it can stay here!