SCT - Scott Tech

[sb9]

Nice one snoops, good on ya for locking in some profits. I probably would've done the same if I'm in that situation as well. Hey but am happy with my 70% odd gain since mid last year or so, not too shabby isn't it... however my holding is bit modest compared to your oversized position.

I'm probably in a similar situation re my other investment ATM (not your favourite I know with your own valuation, guess that's different matter)...holding since 58c, topped thro' SPP and added plenty along the way...never made any paper or real loss on any of those holdings. Have no plans to sell in the next few years or so. Few important milestones for me on this stock are for them to achieve CFDA approval/registration, pending court case with Lion, US and U.K. ramping up in sales. Along the way there's an outing chance of a takeover by a MNC, which I personally don't like, but would be happy if they pay good premium for the stock.

Anyway, sorrry to digress from SCT but thought it would be nice to share few good stories of mine.

Well done again on your nice gains....you deserve them

[Marilyn Munroe]

SCT substantial shareholder JBS entangled in meat quality scandal back in home country Brazil.

http://www.economist.com/news/busine...scandal-brazil

Boop boop de do
Marilyn

[Snoopy]

Nice one snoops, good on ya for locking in some profits. I probably would've done the same if I'm in that situation as well. Hey but am happy with my 70% odd gain since mid last year or so, not too shabby isn't it... however my holding is bit modest compared to your oversized position.

<snip>

Anyway, sorrry to digress from SCT but thought it would be nice to share few good stories of mine.

Well done again on your nice gains....you deserve them

Investors are always quick to let you know of their success, but are often not so forthcoming about their losses. Here is my less happy prequel to my SCT success story. The capital that formed most of my investment in SCT came when I sold some Air New Zealand Shares around the time that Ansett collapsed. I think it was just before Helen Clark and Michael Cullen bailed Air NZ out. That little exercise cost me half my capital that I had invested in Air New Zealand. So when I eventually reinvested what was left in SCT and it halved again, I began to entertain the theory that maybe it was 'cursed capital' that I was doomed to lose. I had lost 3/4 of my 'Air NZ' capital at that point!

Ultimately the 'capital curse' must have lifted as over the next ten years or so my formerly cursed rump multiplied eight times over. But the net result of all of this was that my capital multiplied four times over twenty years (plus dividends). That is still a good result, but nothing like the outperformance of eight times over ten years, which is the impression I gave from reading only the Scott Technology chapter of this investment story!

SNOOPY

[Snoopy]

SCT substantial shareholder JBS entangled in meat quality scandal back in home country Brazil.

http://www.economist.com/news/busine...scandal-brazil

JBS parent owns JBS USA
JBS USA owns JBS Australia
JBS Australia majority owns Scott Technology

I hope this means that SCT is far enough away from the JBS axis of troble in Brazil for things here to carry on as normal.

What is of more concern to me is the ever present cloud of 'excess capital' at SCT (the indirect result of JBS insisting on a 50.1% controlling stake as a condition of the capital raising) and the directors at SCT looking to deploy that money by making an acquisition that demonstrates how clever they are. While Mark Waller is on the board, I don't think this will happen. But maybe with JBS's latest attempt to rasie funds (the partial float of JBS USA) derailed by the Brazilian beef scandal, at least for now, JBS might push SCT to make a pro-rata capital return to all shareholders. If that happened it would finally put to bed any 'game changing grand scheme' the current board might have. Then the board could get on with managing the promising portfolio of businesses that they already have! And that IMO would be no bad thing.

SNOOPY

[sb9]

1

6

10:32:16 am

265

433,411

$1,148,539

Off Market

[winner69]

Solid half year result
https://www.nzx.com/files/attachments/256226.pdf


'Well positioned' / 'positions' us mentioned 3 times - that's good and should add a few cents to the share price

No mention of 'profit after tax' - that's bad on will raise the ire of Roger

All those new shares saw EPS fall from 4.5 cents last year to 3.3 cents this year - that's OK

[Snoopy]

Solid half year result
https://www.nzx.com/files/attachments/256226.pdf

'Well positioned' / 'positions' us mentioned 3 times - that's good and should add a few cents to the share price

It did. Shares up 7c today.

No mention of 'profit after tax' - that's bad on will raise the ire of Roger

It may not have been mentioned in the press release, but it was in the accounts:

Net profit after tax was $2.887m for HY2017, up 48% from the $1.948m HY2016 figure. I guess a 50% rise in earnings before tax sounds better than a 48% rise in earnings after tax?

All those new shares saw EPS fall from 4.5 cents last year to 3.3 cents this year - that's OK

We have to allow things to bed in to the new capital structure.

SCT earnings certainly do tend to be lumpy. There is lumpiness from year to year. And there is lumpiness within each FY. In each of the last 8 FYs, the biggest lumps within the year have fallen in H2. Indeed over the 8 years the average ratio of NPAT H2:H1 is 2.6:1. In FY 2016 the ratio was 3.2:1, and in FY 2015 4.3:1. The lowest ratio was 1.3:1, in FY2013. I offer no explanation as to why H2s are relatively so profitable year in year out (and I'm not sure that it matters for long term holders so long as the auditors are satisfied).

If we use U.S's eight year average 'half year on half' year adjustment, then we can estimate the full year profit as:

$2.887m + (2.6 x $2.887m)= $10.393m

$10.393m / 74.680m shares = 13.9c full year eps

At $2.87, SCT is on a projected PE ratio of:

287/ 13.9 = 20.6

Value? You be the judge.

SNOOPY

[Snoopy]

More information is available subsequent to the FY2016 result being declared. I will add to that my own sleuthing on likely contributions from RobotWorx and MAR earlier this month. So what is my best guess for the outlook for SCT over FY2017 now?

	Divisional Profit (NPAT)	Explanation
Superconductor Magnets	$0m	(Increased sales offset by costly new HQ)
Meat Industry Robots	$6.400m	(20% NPAT margin on $32m sales, equiv 4 big installations)
Appliance Production Lines	$2.099m	(Mirror of FY2013 segment result based on $16.3m turnover)
Mining Services	$2.981m	(Adjusted from FY2014 segment result based on $17m turnover)
RobotWorx USA	$1.309m	(From my post 593)
MAR Australia	$0.845m	(From my post 595)
Interest From Cash Balance	$0.739m	(based on 3.0% of $34.244m taxed at 28%)
less Head Office Costs	($3.515m)	(Unallocated FY2015 costs)
Total	$10.858m	(addition)

(Note: I have used FY2015 heads office costs are these are not corrupted by the JBS takeover one off effects.)

With 74.680m shares on issue this gives a projected 'eps' of:

$10.858m / 74.680m shares = 14.5cps

At $2.60, SCT is on a projected PE ratio for FY2017 of:

$2.60 / $0.145 = 17.9

If we use U.S's eight year average 'half year on half' year adjustment, then we can estimate the full year profit as:

$2.887m + (2.6 x $2.887m)= $10.393m

$10.393m / 74.680m shares = 13.9c full year eps

At $2.87, SCT is on a projected PE ratio of:

287/ 13.9 = 20.6

Value? You be the judge.

It is always a useful exercise to stack two valuations up 'side by side', especially when they come from different angles. My 'ground up' profit prediction is more generous. But I wonder if the U.S. half year factor method is more realistic? [Edit: Since correcting my incorrect interpretation of the the 'Under Surveillence' figures, the difference between each valuation is only 5%]

"There continues to be a significant trend toward automation and robotics around the world; at the same time the international markets we operate in remain volatile and unpredictable."

I think that is code for "a pretty disappointing performance from robotics in general, even though this is meant to be the main growth area going forwards".

"Economies of scale gained through a series of repeat builds for the food and industrial automation industries, together with a closer sharing of skills and resources on projects between Australia and New Zealand, resulted in the company’s Australasian sales being up 34%."

This translates to

"But the repeat meat industry robotics projects rescued some robotics credibility to the result."

What happened to the projected US upturn?

Did Trump say: "Make America great again", or "Make America grate again?" I didn't quite catch it.

SNOOPY

[Under Surveillance]

If we use U.S's eight year average 'half year on half' year adjustment, then we can estimate the full year profit as:

2.6 x $2.887m = $7.506m

$7.506m / 56.123m shares = 13.4c full year eps

At $2.87, SCT is on a projected PE ratio of:

287/ 13.4 = 21.4

Value? You be the judge.

SNOOPY

The current number of shares issued is 74,680,754. Has been so since 14 April 2016.

[sb9]

https://www.nbr.co.nz/article/scott-...pkins-b-201612