SCT - Scott Tech

[Snoopy]

On 13th September2010, Ian Urquhart second largest shareholder in SCT with 15.1% of shares on issue (source 2009 Annual Report) passed away. He was 76. The death notice in the Press named no living family, but Ian seemed to have been a bit of a mentor to younger investors in his last few years according to the article in Saturday 25ths Press. Looks like he will be sadly missed. Perhaps this represents the start of a real passing of the baton to a younger generation of investor at SCT? In any event I will be watching with interest to see what happens to Ian's strategic stake.

SNOOPY

[percy]

On 13th September2010, Ian Urquhart second largest shareholder in SCT with 15.1% of shares on issue (source 2009 Annual Report) passed away. He was 76. The death notice in the Press named no living family, but Ian seemed to have been a bit of a mentor to younger investors in his last few years according to the article in Saturday 25ths Press. Looks like he will be sadly missed. Perhaps this represents the start of a real passing of the baton to a younger generation of investor at SCT? In any event I will be watching with interest to see what happens to Ian's strategic stake.

SNOOPY

I first met Ian at Ebos AGM in approx 1991.About 10 shareholders present.The Chairman Jamie maddren past round the afternoon tea.Mark Waller and forget his name {was canty cricket captain and went to manage EBO in aussie ] were having Ian on.Wanted to know where he got his shoes from?.Were taking bets either Salvation Army or Methodis Misson,as they had not seen him wear shoes before,and both knowing Ian well knew he would not have paid full price at a shop.!!!! EBO at the time had a market cap of just over $2 mil.I had cause to ring him over something I was unsure of about EBO.He was very easy to speak to,and made sure I understood what he was telling me. At that time Ian had a lot of EBO shares.Maurice Ryan was the cricket guy,just remembered.Ian worked for the National Bank,made a lot of money on Brierly investments,NZ Cement company,and Nuplex.I last saw him a couple of years ago at a Postie Plus AGM.A character,who was always interesting to speak to.Yes Snoopy it will be interesting to see what happens to Ian's SCT holding,and I am pleased you posted Ian's vale.He was single and looked after his parents for a number of years.He had good advice from Geoff Wilkinson at Hamilton Hinden and Green before Geoff retired a few years ago.

[Snoopy]

Meanwhile "back on the market" the SCT share price rose 5c to $1.25 today, but buyers were there at $1.27 at the end (equivalent to $1.40 pre bonus issue) which means a real rise of 5.8% today.

Been a long time at $1.25. But todays result $5m NPAT or 17.6cps (one off depreciation tax adjustment on buildings taken out) - the third best since listing in 1996 in eps terms- makes SCT look conservative after being so long 'apparently overvalued'. At $1.25 the PE is now only 7.1 (if you can get any shares)! Even at the 1.30 sell side, the PE is only 7.4. Once the market digests that result, I think it might be enough to get some of those fundamentalists Scott hunting, I mean Stock Hunting again.

SNOOPY

discl: hold SCT

[Snoopy]

Even at the 1.30 sell side, the PE is only 7.4. Once the market digests that result, I think it might be enough to get some of those fundamentalists Scott hunting, I mean Stock Hunting again.

SCT the fast mover on market opening today. Buy siders prepared to pay $1.37, a PE of 7.8 (excluding building depreciation tax effect). Even those sell siders at a PE of 8.5 ($1.50) look like they are giving their shares away cheaply. More details of the result will be fascinating as previously high exchange rates have spelt difficulty for SCT. How have they overcome that? If SCT were trading on the same PE as FPA, the share price would now be $1.94. No surprise from me if the SCT share price gets there by dividend payout time. Meanwhile the announced dividend reinvestment plan signals SCT are keen on banking capital. Since their bank debt is minimal, I wonder why?

SNOOPY

[Snoopy]

Buy siders prepared to pay $1.37, a PE of 7.8 (excluding building depreciation tax effect). Even those sell siders at a PE of 8.5 ($1.50) look like they are giving their shares away cheaply.

Down the roller coaster to $1.31 (higher low) and back up again to a $1.42 close today (higher high). I guess that means the 'uptrend' for SCT has offically started. Minimal volume though (as per usual) so not much of a traders share this SCT. However for those of us who were allowed to accumulate on the downtrend and in the trading range (the investors), this one is starting to look promising. Promising for the global economy too perhaps. Because as a production line supplier to other manufacturers, SCT is often the first light at the end of the downturn tunnel.

SNOOPY

[Snoopy]

Meanwhile the announced dividend reinvestment plan signals SCT are keen on banking capital. Since their bank debt is minimal, I wonder why?

One possibility. SCT have a very full order book and a lot of capital is tied up "in the workshop" on jobs that take over a year to complete. Those jobs require significant working capital that cannot be fully invoiced. But if that is true, why does 'Daily Sharechat' today think that SCT profit will plunge from a normailised underlying $3.9m+$1.1m=$5m in FY2010:
"Our underlying net profit after tax on operating results for the year was $3.9 million compared to $0.3 million in 2009. The underlying profit in 2010 was reduced by a tax adjustment of $1.1 million for a tax change on building depreciation that accumulates over the next 50 or more years but is required to be adjusted in the current year." down to only $3.6m in FY2011, a massive 38% fall?

SNOOPY

[Snoopy]

In any event I will be watching with interest to see what happens to Ian's strategic stake.

Answer: On 28th October the late Ian's shares were transferred to the J I Urquhart Trust. So that takes away any overhang of SCT shares in the market. Or does it? Perhaps the trustees of the J I Urquhart Trust will be compelled by law to sell down some SCT shares as part of their duties of being 'prudent' (not having too many of their eggs in one basket). Anyone know the legal requirements of this situation?

SNOOPY

[percy]

Answer: On 28th October the late Ian's shares were transferred to the J I Urquhart Trust. So that takes away any overhang of SCT shares in the market. Or does it? Perhaps the trustees of the J I Urquhart Trust will be compelled by law to sell down some SCT shares as part of their duties of being 'prudent' (not having too many of their eggs in one basket). Anyone know the legal requirements of this situation?

SNOOPY

Do not Know.Athough the shares have gone into a trust we do not know if Ian left "special" instructions in his will.If not a trustee would have to be very careful.As well as his "overweight" SCT holding there were some rather large holdings in illiquid shares. I think a trustee would be more worried about them thanSCT which is proving to be a very good investment. I feel sure a trustee would want to have more"balanced" potfolio.I know Ian cashed up a lot of shares a few years ago and put a lot of money with SBS,.so there may not be any hurry to sell or reposition the portfolio.

[Snoopy]

Do not Know.Athough the shares have gone into a trust we do not know if Ian left "special" instructions in his will. If not a trustee would have to be very careful.

Perhaps Ian did leave 'special instructions'. But the trustees would have their own legal requirements to follow. I remember a legal case a few years ago when the trustees were severely criticised by the judicial system for having too many assets in 'safe' fixed interest investments, I think because an interim beneficiary wanted income, which eroded the inflation adjusted value of the portfolio over a decade or so. I remember some discussion in the media at the time about how future trustees could not just ignore the composition of a portfolio in relation to understood prudent investment practice. Can trustees really be directed from beyond the grave? I would love to know!

SNOOPY

[percy]

Perhaps Ian did leave 'special instructions'. But the trustees would have their own legal requirements to follow. I remember a legal case a few years ago when the trustees were severely criticised by the judicial system for having too many assets in 'safe' fixed interest investments, I think because an interim beneficiary wanted income, which eroded the inflation adjusted value of the portfolio over a decade or so. I remember some discussion in the media at the time about how future trustees could not just ignore the composition of a portfolio in relation to understood prudent investment practice. Can trustees really be directed from beyond the grave? I would love to know!

SNOOPY

Yes I remember that case well.You can do anything from the other side.ie leave all your money to cats protection society.You could put in your will your SCT shares can not be sold for 10yearsThat is what a will is.However if no provision is in the will you would have to do as you point out 'prudent investment practice",Ian's portfolio would cause any trustee headaches.{Big large ones!!!}I note Patrick Lee @Craigs mentioned on shareholder notices.Patrick is a very experienced "prudent" broker,so trustees should get good advice.