Quote Originally Posted by Snoopy View Post
----------

Maintaining a strong balance sheet and good cash flows

A good forward work position

Prospects in all markets improving

----------

Since those comments the NZD/USD exchange rate has come back substantially. I am not blind to the problems facing this company. The principal risk is the loss of key personnel during the downturn, leaving SCT scrambling for human capital as fortunes improve. However, this risk appears minimal with SCT quoting a 'good forward work position'. SCT may not be making much money on current jobs, although this will surely change as new orders come in at much lower exchange rates.

Debt issues? Not really. The company debt facilities have only just been negotiated and the level of profitability required to service the new debt is minimal. Problems getting paid if a big customer goes bust? That is covered by the NZ governments letter of credit guarantees.

Yet the share price is at an all time low! I know there are many other companies in this market that have been 'beaten down'. But really, how much lower can this company go? I put a silly bid into the market last week, not really thinking that I pick up any shares and it was filled at 91c.
Just finished buying yet another tranche of SCT shares. That makes me sound like a big boy doesn't it? In fact the parcel of shares that I bought was the smallest I could without incurring excess brokerage charges.

I have stated before that I usually take about a month to make any share transaction. In this case it took me two days to make up my mind that I wanted more SCT shares and 30 days for my order in the market to be executed. When I first put in my order at 85c, I was within a couple of days overtrumped at 86c, then again at 87c. From that time the share price moved up to 90c, took an almighty leap up to $1 (on a 'massive' volume of something like 1500 shares) before the share price gradually dripped back to 95c, 90c, 87c until finally my order was filled yesterday. This is the kind of stress you need to go through to purchase even a minimal number of shares in this company. Today the share price has slammed through my self created 'support' level (which had been in the market for a month, and was taken out when I finally bought) and someone today picked up 10000 shares at 75c. Good for them.

So what does all this mean? I would argue absolutely nothing. Even this high (for SCT) volume of shares traded today is only one three thousandths of the total shares on issue. I guess everyone has their own reasons for selling. But it is hard to fathom why someone who I suppose is a seasoned investor (only 317 people hold 10,000 or more SCT shares) would choose *now* to sell at 75c, just as the directors were buying back in at 90c. One reason could be that the world recession looks to be getting deeper and longer. That means the time for SCT to be getting back to a normal level of orders is being pushed out. The longer the recovery takes the longer SCT shareholders will need to hang on for their reward. But with the exchange rate going even more in exporters favour, when the recovery does come we can expect the share price bounce back to be big. Even now I regard my position in SCT as 'underweight'. So I will certainly be in the market for some more SCT shares in the future. In the meantime I will just let the share price bonce up and down a bit and move onto other things.

SNOOPY

discl: hold SCT