SCT - Scott Tech

[Under Surveillance]

Being a SKL SH this comment amused me. Not sure of your definition of growth stock but Skellerup is definitely not one. If you want to be generous an extended 5yr historical graph would illustrate the point.

I agree.

Snoopy loves to get up to his armpits in detail, and is very generous in posting the products of his diligent work. Whether the downside is loss of perspective is a matter of opinion.

Last September, in his post #549, he told us he had trimmed his SCT holding at an average of 210 to remove risk from the table. Now, on no company announcements of substance, but a rising share price, he thinks 260 is about right.

Snoopy bagged HBL all the way down to 43, and all the way up to 163. Meantime, as well as applying tests to HBL, he posted extensive comparisons between HBL and ANZ, HBL and TNR, etc. For all of that work he has rigidly failed to see value in HBL.

I hold SCT, SKL, HBL and TNR (and others).

[Snoopy]

Being a SKL SH this comment amused me. Not sure of your definition of growth stock but Skellerup is definitely not one. If you want to be generous an extended 5yr historical graph would illustrate the point.

If you look back in the SKL thread, I did quite a bit of work before I bought in a couple of years ago and decided it was a 'growth share'. Then after last years somewhat disappointing result I decided it was a 'dividend share'. This flip flop had no financial implication for me as I only paid 'dividend share' prices for SKL and figured the growth would be free. As it has turned out (so far), the reason for the growth being 'free' was because there wasn't any! However, when I said SKL was a 'growth share', all of this was not what I was referring to. I was referrig to my reading of ten yeras of SKL annual reports, understanding where they had been and understanding where they want to get to. In my assessment the transformational SKL 'growth plan' is still credible. Of course, if you only looked at what has happened to the SKL share price you would not see this. What you would you see is the result of big slumps in the dairy and iron ore markets, two key sectors where SKL operate. But the fundamental strategy of relocating production of mature products to low cost Vietnam, and rebuilding the factory that makes the high tech stuff at Wigram in Christchuch remains. Commodity markets cycle and dairy and iron ore are coming back. So I expect demand for the SKL products to eventually turn and the share price, in the end, to reflect that.

Eighteen months ago you could have looked at the SCT share price chart, seen it was at five year lows and walked away. As it turned out, that turned out to be a strategically catestrophic decision, as the share price has subsequently risen about 80%. I don't believe that the SKL share price will rise 80%. I do expect it to be rerated though. Effectively I am calling it a 'growth share' in advance of the share price rise, just as I did with SCT.

SNOOPY

[Baa_Baa]

Who cares about SKL here, take it to the appropriate thread.

SCT on the other hand has had a boomer past 12-18 months after a sustained bad patch since Feb 2013. Might be a bit toppy now though.

[Snoopy]

Last September, in his post #549, he told us he had trimmed his SCT holding at an average of 210 to remove risk from the table.
Now, on no company announcements of substance, but a rising share price, he thinks 260 is about right.

I usually don't post definitive valuations in the sense that I always qualify those with the assumptions behind them. The $2.10 valuation assumed no growth in 'Robotworx' since acquisition and no profit from 'MAR' (my post 548). I changed the earnings forecasts for both of those divisions to come up with the $2.60 valuation. Depending on which assumptions you think are correct, depends on what valuation you accept as better.

Just to clarify the sequence of events....

The rising SCT share price to $2.60 was a catalyst for me to look further, as it could be a sign that 'Mr Market' knew more than I did. It was after this that I discovered the inconsistent information of the profitability of MAR, and the information of the general growth profile of the industrial robotics market. I decided a higher SCT valuation could be justified after that. I did not consider the mere fact that the SCT share price had risen to $2.60 as sufficient in itself to change my own valuation to about $2.60.

Far from trying to hide my change of valuation, I emphasised it by quoting the first valuation, and the building blocks that made it, as the quoted text in my second valuation (post 597). So the changes are right there for all to see.

SNOOPY

PS I don't regret taking some risk capital off the table at $2.10.

[percy]

Fascinating reading.......lol.

[Baa_Baa]

I usually don't post definitive valuations in the sense that I always qualify those with the assumptions behind them. The $2.10 valuation assumed no growth in 'Robotworx' since acquisition and no profit from 'MAR' (my post 548). I changed the earnings forecasts for both of those divisions to come up with the $2.60 valuation. Depending on which assumptions you think are correct, depends on what valuation you accept as better.

Just to clarify the sequence of events....

The rising SCT share price to $2.60 was a catalyst for me to look further, as it could be a sign that 'Mr Market' knew more than I did. It was after this that I discovered the inconsistent information of the profitability of MAR, and the information of the general growth profile of the industrial robotics market. I decided a higher SCT valuation could be justified after that. I did not consider the mere fact that the SCT share price had risen to $2.60 as sufficient in itself to change my own valuation to about $2.60.

Far from trying to hide my change of valuation, I emphasised it by quoting the first valuation, and the building blocks that made it, as the quoted text in my second valuation (post 597). So the changes are right there for all to see.

SNOOPY

PS I don't regret taking some risk capital off the table at $2.10.

From a TA perspective, which I know you're not into, but nevertheless, SCT has over shot the 12 month uprising trend line by quite a few clicks and faltered at 2.60, so 2.20 would be a baseline TA viewpoint for a retrace, which is a smidge above your FA. It depends only on what the market thinks, in terms of capital value, 2.25 looks like decent buyer support as well.

[sb9]

For what its worth, I think Snoopy's input and analysis is invaluable. You just have to use it in the manner that's right for you...

[Schrodinger]

If you look back in the SKL thread, I did quite a bit of work before I bought in a couple of years ago and decided it was a 'growth share'. Then after last years somewhat disappointing result I decided it was a 'dividend share'. This flip flop had no financial implication for me as I only paid 'dividend share' prices for SKL and figured the growth would be free. As it has turned out (so far), the reason for the growth being 'free' was because there wasn't any! However, when I said SKL was a 'growth share', all of this was not what I was referring to. I was referrig to my reading of ten yeras of SKL annual reports, understanding where they had been and understanding where they want to get to. In my assessment the transformational SKL 'growth plan' is still credible. Of course, if you only looked at what has happened to the SKL share price you would not see this. What you would you see is the result of big slumps in the dairy and iron ore markets, two key sectors where SKL operate. But the fundamental strategy of relocating production of mature products to low cost Vietnam, and rebuilding the factory that makes the high tech stuff at Wigram in Christchuch remains. Commodity markets cycle and dairy and iron ore are coming back. So I expect demand for the SKL products to eventually turn and the share price, in the end, to reflect that.

Eighteen months ago you could have looked at the SCT share price chart, seen it was at five year lows and walked away. As it turned out, that turned out to be a strategically catestrophic decision, as the share price has subsequently risen about 80%. I don't believe that the SKL share price will rise 80%. I do expect it to be rerated though. Effectively I am calling it a 'growth share' in advance of the share price rise, just as I did with SCT.

SNOOPY

Yes agree thanks for the reply. I know its not easy but SKL has to further diversity its product line so the dairy/ore cycles dont impact it like it currently does. There are dairy booms going on outside NZ which should counter the NZ side but I am thinking they are buying from other companies. I wont derail this thread anymore=).

[sb9]

More accumulation today in decent chunks...

1	3	4:03:36 pm	255	50,000	$127,500	Off Market
2	2	2:29:59 pm	250	100,000	$250,000
3	1	10:03:04 am	255	150,000	$382,500	Off Market

[Snoopy]

SCT has had a boomer past 12-18 months after a sustained bad patch since Feb 2013. Might be a bit toppy now though.

Sold some more of my shares today at $2.60. The problem was I have been 'too successful' and SCT became my third biggest NZX holding and worth a ridiculous amont in dollar terms (given the typically low trading volumes). Given this normally difficult liquidity (although there has been much buying interest in recent days), I have decided to 'sell into strength' and, in the process, reduce my average SCT holding price to just 33c. This makes SCT near enough to an 'eight bagger' for me in just capital terms at today's $2.60 closing price. Add in the dividends over the years and my returns are significantly greater than that. I am now back to holding the same number of shares I did nine years ago, so even though pleasing, the exercise was hardly an overnight success.

So how did I do it? Not with buy and hold. My main method was to support all the capital raisings at depressed prices (and then some) over the years. Then when the share price recovered and the dividend yields correspondingly reduced I sold down back to the level I had before the capital raising. I repeated that exercise two or three times. I have never been out of SCT completely in nearly twenty years (for the first ten years my holding was quite small) and have recovered from an early position where on paper I had lost half my capital. Coming back from that, for SCT to be - I think - my biggest NZX success (in percentage terms) is very satisfying.

I can see the SCT share price rising above $2.60 in the medium term. I said in post 597, I thought that SCT was 'fair value' at $2.60. But if you read through that valuation, there are some quite aggressive assumptions which by selling today I will bank. Expanding that meat industry robotics division, I believe, is now limited by personnel. And the fact that the 'fullly automated beef boning room' (the holy grail) is still a development project means profits from that are not there. This is despite the fact that SCT's controlling shareholder has a ten year pipeline of work, just in Australia, when the technical hurdles are overcome. I am not sure that all shareholders realise this 'meat industry growth engine' is short term limited. The rest of the business is notoriously cyclical and I think in the medium term better dividend returns will be found for me elsewhere.

There is still the possibility of a game changing acquisition too. But SCT have a mixed record with acquisitions, so I wouldn't (and never have) banked on those.

My problem is, even after my share sale today, SCT is still my third biggest NZX holding (shows how overweight I had become)! So if the share price continues to improve I may yet have to sell some more :-(.

SNOOPY

discl: Hold SCT and disappointed, yet relieved, to have sold some down.