Skellerup (SKL) Fundamentals

[LAC]

https://www.nzx.com/companies/SKL/announcements/281481

Not looking good.

[Beagle]

Anything with meaningful exposure to dairy will face similar strong headwinds so this shouldn't be a surprise to anyone. Perhaps a warning for other companies exposed to the severe dairy downturn ?, banks and PGW spring readily to mind.

[winner69]

It doesn't auger well. Now two full years of low dairy prices with many farmers struggling to come anywhere near breakeven. Pretty clear they're trimming...no slashing costs wherever they can.
Not even the faintest sign of a glimmer of any price recovery on the horizon and with the supply demand imbalance on a global basis this suggests dairy will be extremely challenging for the foreseeable future.
You can't get blood out of a stone...

Roger - SKL making about 10% less than last no surprise to you after this warning not that long ago

Reckon there will be more downgrades?

You did say you might get interested again in SKL at $1.20 - still on the agenda

[winner69]

I didn't realise this not first profit down grade this financial year

When announcing FY15 profit $21.9m they said well placed to further grow profits

At ASM before excited shareholders on 29 Oct it was going to be $24m-$26m

H1 results nit looking too good and on Feb 18 still ahead of last and guided $23m

And now jeez $20m-$21m

So from $26m to $20m in a few months

Wonder what next announcement in July will be like

Skellerup - always gunna to do great things

[Beagle]

The guys at the London School of Economics would love the responses to todays announcement. I will point them to this.

Skellerup long term company performance is nicely summed up in a long term share price chart (below)

Skellerup is always gunna be a great company - but never delivers

Anything changed -- nah, nothing

Good for the occasional medium/long term trade but then again they only coincide when the whole market is going up anyway. Good for dividends - maybe

A growth company - come on tell me another one

If share price follows earnings the chart says all the previous changes to 'baseline' over the years have come to nought ...and there has been several. What's different this time around?

Forget about telling me how great an investment it has been since 2010 - nearly everything has been (inc Nuplex) and that's more market action than great Skellerup performance.

Glad you see that probably not a hod forever - so let the trader in you loose and trade the inevitable ups and downs between 130 and 180

Like Nuplex best outcome for Skellerup might be for them to be taken over

I didn't realise this not first profit down grade this financial year

When announcing FY15 profit $21.9m they said well placed to further grow profits

At ASM before excited shareholders on 29 Oct it was going to be $24m-$26m

H1 results nit looking too good and on Feb 18 still ahead of last and guided $23m

And now jeez $20m-$21m

So from $26m to $20m in a few monthsWonder what next announcement in July will be like

Skellerup - always gunna to do great things

Roger - SKL making about 10% less than last no surprise to you after this warning not that long ago

Reckon there will be more downgrades?

You did say you might get interested again in SKL at $1.20 - still on the agenda

I think you've summed this company up extremely well mate. I think shareholders have every right to expect better forecasting than they've received and the trend is definitely down so maybe as you suggest the actual result will be below even the most recent disappointing guidance, assuming there isn't yet another downgrade before then, which is by no means a safe assumption. The currency hasn't been helpful either in the last month or two tracking back up towards 70 cents U.S. Headwinds remain for the foreseeable future and with the currency above the 20 year average it doesn't have any appeal to me anymore even at $1.20.

[Snoopy]

Year	Dividends	Dividend Total
2011	2.5c+2.0c	4.5c
2012	4.0c+3.0c	7.0c
2013	5.0c+3.0c	8.0c
2014	5.0c+3.5c	8.5c
2015	5.0c+3.5c	8.5c
Total		36.5c

Averaged over 5 years, the dividend works out at 36.5/5 = 7.3c (fully imputed).

So based on a 7.5% gross yield, fair value for SKL is:

7.3 / (0.075 x 0.72) = $1.35

Thanks snooper but I think the resident beagle is better off thinking about the next dividend feeds. My old beagle always seemed to be thinking about her next feed so if it was good for her, then may I suggest you follow suit
Pretty clear to me the tailwind of lower currency and the way the company is headed suggests dividends will grow from here and judging from Director and senior management purchases they agree.
My view is that dividends going forward of 10 cps fully imputed appear sustainable based on best known current information so I have them on a gross forward dividend yield of 10.0 / 0.72 = 13.89 / 146 = 9.51%.

I managed to salt away a few more of these at $1.28 today.

If profit for the year is only $20m, followimng recent downgrades, then based on the 192.8m shares on issue, I get eps of 10.4c. So it is probably too early to say that last years fully imputed total dividend of 8.5c is under threat. It will depend on the capital expenditure requirements and outlook. The brand new Wigram factory is almost ready, so hpefully most capex is done. Given a bottoming oulook for milk and iron ore, I am guessing the board will try and hold the dividend steady.

I don't need the current level of dividend to make my investment case stack up though.

My five year average dividend yield, I am forecasting to be 8.1c (down 0.4c from last years actual).

So at $1.28 SKL is on a 5 year modelled yield of:

8.1/ 128 = 6.3% net, or 8.75% gross

A very nice little dividend earner to put away. 'Worth it's salt' some might say :-) Roger unfortunately has recently scared himself off from this bargain!

SNOOPY

[Beagle]

Funny thing is Snoopy me ol mate, whenever I would take my old beagle Kelly to the beach she always seemed to make better progress swimming with the tide than against it. This silly old dog took notes and has recently decided to follow suit

[Snoopy]

Funny thing is Snoopy me ol mate, whenever I would take my old beagle Kelly to the beach she always seemed to make better progress swimming with the tide than against it. This silly old dog took notes and has recently decided to follow suit

When you are in for the long haul Roger, it matters not one jot which way the tide is flowing, provided you are not at risk of drowning in the meantime! SKL has low debt, so I have no doubt that it will be around when the tide turns. And it is very likely that those who prefer to swim with the tide will be paying more than I am today. Of course SKL may get cheaper. But if that has happened around results time, I will buy more shares to take advantage of it.

Take advantage of the clouded outlook for dairy and iron ore (you didn't really expect that SKL would be unscathed did you?), take advantage of the profit downgrade that knocked 10c off the share price, take advantage of a less than successful dairy auction overnight and transfer some of by 2% call money to a "7.5% bond" (and counting) in the meantime.

Another 'risk' is SKL falling out of the NZX50, due to newcomers like Tegal. But that just provides an opportunity that has nothing to do with the operations of the company. Nuplex and Coates will shortly be departing the NZX50. So SKL should be safe inside the NZX50 for now.

SNOOPY

[Beagle]

One needs to "weigh" up carefully who might get added to the NZX50 instead, (big hint there) and not discount the effect an exit or entry to the NZX50 has on a company's SP, good recent example the bounce in CVT.

Its management's inability to forecast with any degree of accuracy that surprises me the most mate. Surely they should have been the best placed to sniff the breeze earlier in the year ?

I guess like my late and much loved Beagle if I can't smell a feed coming in a reasonable time frame, I "weigh" up my options and go sniffing elsewhere Beagle's by their very nature usually have a poor attention span and lousy stamina when swimming, you must be the exception to the rule mate.

[Snoopy]

Ms Coutts adds more today (being last day before ex-div) another 50,000 @1.36 a piece.

I see director Liz Coutts has bought 40,000 more shares from May 6th to May 10th. I am a little surprised, as surely these purchases are well outside the normal purchase window for director. Is not now between reporting periods? Not surprised at her support for the company though!

SNOOPY