SCT - Scott Tech

[percy]

I just hope management aren't setting shareholders up for a fall come annual result time Percy. I note no announcement has been made on the appliance production line side of the business. That division still accounts for 50% of SCT's work. I can't see much good news from production line arm of the business looking into 2013. Bracing myself for the bomb to be dropped, although I do expect a decent final dividend from this years work to cushion any blow!

SNOOPY

Yes you are most probably right,however being too dependent on the appliance production line side is not good for the company.The expansion of new areas should help smooth out earnings/cash flow.SCT will then be able to grow any of these new areas should they see potential.
These announcements have me looking at SCT again.

[Under Surveillance]

I just hope management aren't setting shareholders up for a fall come annual result time Percy. I note no announcement has been made on the appliance production line side of the business. That division still accounts for 50% of SCT's work. I can't see much good news from production line arm of the business looking into 2013. Bracing myself for the bomb to be dropped, although I do expect a decent final dividend from this years work to cushion any blow!

SNOOPY

Appliance manufacturing systems amounted to 29% of group sales in FY 2011 (page 11 of 2011 annual report). "All areas of the business remain fully engaged with forward work extending toward 2013." (page 2 of H1 2012 report).
Given the SCT dividend policy is to pay out 50% of NPAT, the final dividend for 2012 will increase from 5cps to 6 cps if your forecast of NPAT of $7M is met.

[Snoopy]

Appliance manufacturing systems amounted to 29% of group sales in FY 2011 (page 11 of 2011 annual report).

Of course I keep forgetting how fast Rocklabs has developed. However, taking a five year (backward) view I still stick to Appliance Line Manufacturing making up 50% of SCTs business, or more specifically profits. Remember the Appliance line manufacturing is lumpy (p7 of the AR2011 notes they had a challenging year). Going forwards you may be right - 30% work (profit) share may be a more realistic view.

"All areas of the business remain fully engaged with forward work extending toward 2013." (page 2 of H1 2012 report).

I hate to say it, but we are getting towards 2013!

Given the SCT dividend policy is to pay out 50% of NPAT, the final dividend for 2012 will increase from 5cps to 6 cps if your forecast of NPAT of $7M is met.

First I have heard of that dividend policy. Traditionally SCT has paid out something like 90% of profits as dividends. Of course this is not taking into account the DRP.

I wonder if you are thinking about last year U.S.? The nominal profit was $5.217m. But half of that was unrepeatable foreign exchange gains. Underlying profit was only $2.679m or 6.7c per share. The dividend was 6cps in keeping with the 90% payout ratio history.

Meanwhile onwards and upwards for SCT. Trading at $1.97 today.

SNOOPY

[Under Surveillance]

First I have heard of that dividend policy. Traditionally SCT has paid out something like 90% of profits as dividends. Of course this is not taking into account the DRP.

I wonder if you are thinking about last year U.S.? The nominal profit was $5.217m. But half of that was unrepeatable foreign exchange gains. Underlying profit was only $2.679m or 6.7c per share. The dividend was 6cps in keeping with the 90% payout ratio history.SNOOPY

I concede, I can't find any SCT statement of the current dividend policy. The dividends paid in relation to 2009/10 (5.25 cps, paid also on new shares under a 1:10 bonus issue) amounted to 59% of audited NPA. The dividends paid in respect of 2010/11 (7.0 cps) totalled 49% of audited NPAT.

[Snoopy]

Meanwhile onwards and upwards for SCT. Trading at $1.97 today.

The good news continues for SCT shareholders with the price up another 7% today to $2.12. Volume was very thin though (only 1000 shares), and buyers have now retreated back to $2.05. This is a low liquidity share so we can expect some buffeting along the way. But now signs of it yet! Existing shareholders I suspect are holding out for that annual result due in a few days time.

SNOOPY

[Snoopy]

There are 40.3 million shares out, Snoopy, which upsets your arithmetic. 200 by christmas would represent a PE of 11.4 (with 40.3 million shares issued). However, shares issued under the current DRP, and an assumed full year DRP, could take the December towards 42 million, with which the PE would be close to 12.
For mine 12 would be a fully appropriate PE for a company with SCT's record over the last few years, assuming the $7 million is in the bag.

As all SCT holders know, Christmas has come early this year. SCT trading at about $2.20 as I write this. That equates to an FY2012 PE of about 13.2, assuming my $7m profit prediction comes to fruition.

I am still a little nervous about the outlook for FY2013. With the SCT share price at its highest point for several years, I took a few more profits yesterday at $2.25. Taking a layer of profit off the top is a strategy I call "peeling the onion" - taking off just the top layer doesn't make that much difference to the weight of your overall holding. Even though it may produce a few tears! I have a gut feeling the SCT share price has run up a little too hard too quickly. Plus the rather frothy press release on meat line automation struck me as a mostly head and little body brew up. My average acquisition price is now down to 90c as a result of my 'peel'.

I have no plans to sell out of the company completely of course. But I just felt my position was getting a little overweight again. And the way to put this right is to sell into market strength. Phaedrus's disastrous result of selling SCT into market weakness some years ago is laid out earlier in this thread (post 41)!

SNOOPY

[Under Surveillance]

I concede, I can't find any SCT statement of the current dividend policy. The dividends paid in relation to 2009/10 (5.25 cps, paid also on new shares under a 1:10 bonus issue) amounted to 59% of audited NPA. The dividends paid in respect of 2010/11 (7.0 cps) totalled 49% of audited NPAT.

They're paying out 48% this year, Snoopy, 8.0c/16.7c. The gross dividend yield is 5.1%, @ yesterday's close of 224, more than a little underwhelming for those seeking income. You'll be feeling smug about selling recently @ 225?

[Snoopy]

They're paying out 48% this year, Snoopy, 8.0c/16.7c. The gross dividend yield is 5.1%, @ yesterday's close of 224, more than a little underwhelming for those seeking income. You'll be feeling smug about selling recently @ 225?

U.S., although I am an 'income investor', I am happy for the company to retain capital if it means if it means a higher income earning base that will lead to higher dividends in future years. Even so a 5.1% is still higher than you would get at the bank!

Smug selling a few at $2.25? I still think it was the right thing to do from a portfolio risk perspective. But as I said peeling one layer off the onion was really an adjustment, not a trading coup!

SNOOPY

[Snoopy]

I just hope management aren't setting shareholders up for a fall come annual result time Percy. I note no announcement has been made on the appliance production line side of the business. That division still accounts for 50% of SCT's work. I can't see much good news from production line arm of the business looking into 2013. Bracing myself for the bomb to be dropped, although I do expect a decent final dividend from this years work to cushion any blow!

Looks like some problems with the appliance production line arm of the business. The page I always turn to first is the segmental results. Net profit for automated systems was a mere $34,000 in FY2012, down from $3.442m last year! Revenue was only slightly down, from $32,150m in FY2011 to $29,499m in FY2012. So perhaps there were technical problems that caused cost overruns? Also no evidence of any sales to China, despite the head of Appliances spending a year up there. I was looking for hedges in yuan which would mean confirmed business on the Chinese mainland. However, these kind of deals do take time. So it is probably too early to judge the success of more investment in China. If Haeir take over FPA it will not be good for SCT. FPA have their own production line engineering division!

Moving on to the industry segmentation, from $2.334m (FY2011) to $3.113m (FY2012) represents a 50% rise in revenues for the superconductor magnets - very encouraging. Of course it is still early days, so probably this division is still loss making.

Despite the recent bullish outlook, meat processing robot revenue was down from $6.376m (FY2011) to $5.371m (FY2012). The disappointment here continues from a profit perspective, even if technically from a production perspective it is all very successful.

But look at the mining equipment revenue! $34.046m, up from $28.407m! Most of that equipment is standardized so this is where the profit is coming from.

The headline after tax profit of $6.110m, I am disappointed with. But if the Appliance Line side of the business had turned in even an average year, the result would have well exceeded my expectations. I think this result was better than the headline figure suggests.

SNOOPY

[Snoopy]

I think this result was better than the headline figure suggests.

An investor presentation was made today to try and convince others of the above.

http://www.scottech.co.nz/investor-r...esentation.pdf

Only real news, not announced before, is that they have sold a meat processing robot into Brazil. Maybe the market expected more? SCT share price down to $2 on the usual light volume.

SNOOPY