STU - Steel & Tube Holdings

[winner (n)]

I asked this on investor call some time ago regarding the margin comparison.

Mark said

The margin comparison is a little misleading. Stu includes freight and labour costs in there gm. Vulcan does not. Mark said that as a comparison stu would be in the high 30"s excluding the freight. So still a difference but a lot closer. A lot of the difference is down to Vulcans downstream plate and coil processing which is at high margin. Stu are planning on addressing that with some investment in this area.

Even so I still reckon  GM% in low 20s isn't very good ....... Jeez even Metro Glass manages 40% odd (and I'm sure they include labour etc)

[winner (n)]

Slide on Page 5 from their latest preso ...says all looking good for the future

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/STU/426451/412902.pdf

Can't post image as screen dump too big ha ha ...but found a way around the restriction and now you have it twice

They must see the indicators shown on Page 5 as being meaningful ......probably use the data as inputs into a model forecasting future market demand.

They say macro trends are positive .......suppose they couldn't really say 'when we input the indicators into our market size forecast model it indicates declining volumes through calendar 2024 and well into 2025'

Anyway nobody can predict the future eh ....not even Yogi Berra .......so Mark saying soothing optimistic things using words like macro is just as good a guess as Yogi would come up ......and one punters want to believe.


You cannot view this attachment.You cannot view this attachment.

[winner (n)]

Chris Bishop says he is going to fix housing supply in NZ ...... and really going to push infrastructure ahead

All good for STU if you believe government rhetoric

[Shareguy]

Good to see Jardens latest note is outperform.
 
Looking at 6-12 M and A opportunities

Balance sheet strengthened: Net cash increased from NZ$6.5m at the FY23 results to NZ$26.3m as at 1H24, driven by working capital improvement by c. NZ$21m and in particular a continued reduction in inventory levels. No M&A was announced with this update except a loan commitment to a small steel and road barrier supplier (ROBOS), with an option for STU to take equity in the business. STU is still looking at c. 6-12 M&A opportunities at any one time on both horizontal and vertical adjacencies.

[winner (n)]

Good to see Jardens latest note is outperform.
 
Looking at 6-12 M and A opportunities

Balance sheet strengthened: Net cash increased from NZ$6.5m at the FY23 results to NZ$26.3m as at 1H24, driven by working capital improvement by c. NZ$21m and in particular a continued reduction in inventory levels. No M&A was announced with this update except a loan commitment to a small steel and road barrier supplier (ROBOS), with an option for STU to take equity in the business. STU is still looking at c. 6-12 M&A opportunities at any one time on both horizontal and vertical adjacencies.

is OUTPERFORM outperforming peers or outperforming market ...or is it code for BUY without the conviction of screaming out BUY

Always good for brokersvto be +ve

[LoungeLizard]

is OUTPERFORM outperforming peers or outperforming market ...or is it code for BUY without the conviction of screaming out BUY

Always good for brokersvto be +ve

I take it as outperform where the market assesses it to be ie. a buy at this level. I'd have to agree in this case.

[winner (n)]

Tony Alexander views differ from brokers I think

Tony says -

Business investment prospects for 2024 look munted. That is bad for productivity growth and will limit the extent of interest rate declines through this year

And

House building is also - guess what - munted for 2024 with developers becoming increasingly desperate to offload stock.

[Shareguy]

Tony Alexander views differ from brokers I think

Tony says -

Business investment prospects for 2024 look munted. That is bad for productivity growth and will limit the extent of interest rate declines through this year

And

House building is also - guess what - munted for 2024 with developers becoming increasingly desperate to offload stock.

Is this the same Tony Alexander who said that house prices were going to decline big time at the start of covid when in fact they went up plenty.............

[winner (n)]

Is this the same Tony Alexander who said that house prices were going to decline big time at the start of covid when in fact they went up plenty.............

If you say so.

If you saw my comment re Mark Malpas I'm very sorry

But ignore Tony at your peril

[winner (n)]

Stats NZ building consents January

Westpac notes -

Consent issuance fell sharply in January. Weakness has been widespread with tight financial conditions putting the brakes on new development.

and

The downturn in residential construction is deepening.

and

Non-residential consent numbers did rise in January, but the longer-term trend remains down. The amount of non-residential floor space being consented fell 10% over the past year. Developers have highlighted higher financing costs and concerns about slowing economic growth as key factors that are putting the brakes on new projects.

[Shareguy]

If you say so.

If you saw my comment re Mark Malpas I'm very sorry

But ignore Tony at your peril

No am on a plane using free wifi travelling back to Auck. You and Tony may well be right. I just read that John Key thinks property will double in next ten years.....

[winner (n)]

Metro Glass outlook copied from a Mark rave?

Metroglass expects demand for glass to be flat for at least the next 12 months in New Zealand. The business has resized to meet expected demand whilst ensuring customer service and quality is not compromised.

I'd stay both are optimistic about the flat bit

[BlackPeter]

Metro Glass outlook copied from a Mark rave?

Metroglass expects demand for glass to be flat for at least the next 12 months in New Zealand. The business has resized to meet expected demand whilst ensuring customer service and quality is not compromised.

I'd stay both are optimistic about the flat bit

Actually - I remember that Mark used to hold MPG shares (well, that is what he told me anyway), and he was at that stage (some years ago) not that stoked about their performance. Can't really imagine that he is now more enthusiastic about them.

But anyway - it sounds like you see the future of housing and infrastructure in a quite dim light.

Would be interesting to learn where you see the bottom - later this year, next year, 2026 - or still later (like after the next elections - surely there must be some government able to run the country and the economy)?

How do you see housing and infrastructure to play out and what would you expect to trigger the trend change?

[winner (n)]

Actually - I remember that Mark used to hold MPG shares (well, that is what he told me anyway), and he was at that stage (some years ago) not that stoked about their performance. Can't really imagine that he is now more enthusiastic about them.

But anyway - it sounds like you see the future of housing and infrastructure in a quite dim light.

Would be interesting to learn where you see the bottom - later this year, next year, 2026 - or still later (like after the next elections - surely there must be some government able to run the country and the economy)?

How do you see housing and infrastructure to play out and what would you expect to trigger the trend change?

BlackPeter ...here's how I see it playing out. Just my view ...laugh if you want, I won't be offended.

Most of optimism about forthcoming growth in construction activity is based on the billions to be spent on infrastructure over the next few years.

Probably just rhetoric.....full of good intentions ...saying what they think some punters want to hear.

This infrastructure growth and other construction growth won't happen because -

1 No cash- fiscally government buggered for many years and private sector not inclined to do much capex spend at moment

2 Talk doesn't always lead to action in this country.

3 Capability and resource issues ....the country has got no big tap to turn on to do heaps more ......industry stretched now ....if new things are started other work put on hold etc.....about the same amount of work is done

So my reading of things is that construction activity will chug along at current rates ....but  a danger of declining further through 2025/2026

My forecast total activity in 2027/2028 will still be less than what it was last year.

[BlackPeter]

BlackPeter ...here's how I see it playing out. Just my view ...laugh if you want, I won't be offended.

Most of optimism about forthcoming growth in construction activity is based on the billions to be spent on infrastructure over the next few years.

Probably just rhetoric.....full of good intentions ...saying what they think some punters want to hear.

This infrastructure growth and other construction growth won't happen because -

1 No cash- fiscally government buggered for many years and private sector not inclined to do much capex spend at moment

2 Talk doesn't always lead to action in this country.

3 Capability and resource issues ....the country has got no big tap to turn on to do heaps more ......industry stretched now ....if new things are started other work put on hold etc.....about the same amount of work is done

So my reading of things is that construction activity will chug along at current rates ....but  a danger of declining further through 2025/2026

My forecast total activity in 2027/2028 will still be less than what it was last year.

Cheers for responding, and no reason to laugh about ... while I don't share this viewpoint, it is certainly a valid view and could (with a certain likelihood) happen.

Personally I am a bit more optimistic.

Debts: While NZ carries currently historically seen a very high debt load, compared on a per capita basis has NZ compared to all (or nearly all?) other OECD countries a very low debt load. Just have a look at the attached stats - our per capita government debt is minimal compared to most other countries. Admittedly - Japan, Europe and the US do show us what might happen when you have a (too) high debt burden, but somehow they still seem to do economically better than we do (and this is not a political statement ;

You cannot view this attachment.

So - if there is a political will we can afford to fix our infrastructure, and I think it would not be too hard to even make a solid business case for that. The spoiler might be - our previous government was happy to spend, but they didn't invest, they just wasted (most of) the money. Our current government seems to have an austerity tendency - i.e. there is a risk that they prefer to starve the cash cow instead of feeding it. So difficult to get politicians who know what they are doing (no matter which colour), and as larger countries like the US demonstrate, this problem has nothing to do with the size of the talent pool, it just appears that politics tends to float everywhere mediocracy, populism and ineptness ... so - yes, this is a risk for our economic development which might support your view of the future.

On the other hand - we (and this is basically humanity and specifically todays western world) came so far a long way with quite mediocre leadership, interrupted by a very small number (and far apart) of talented leaders. If you look at the economic waves over the last 150 years (including already two world wars) - the midterm tendency was always upwards.

I believe that the current bunch of political inepts will just float on the economic wave which is currently shaping up in the leading markets (as they always did ...). If the Fed reduces interest rates (as no doubt it will), the US economy will flourish and with that our little market. If Xi tries to keep China growing (hey, he might be a tyrant, but he still wants to survive) we will keep selling our agricultural products and school Chinese children - and maybe still more important Australia (thanks to all the mining) will do well, which means, Australia can buy more from us.

As long as the world lives in uncertain times (and I am sure, political conflicts as well as climate change will make sure that it stays this way for longer than any of us will hang around) people will want to come to our safe haven. While the climate will deteriorate here as well, we feature no climate extremes, we have enough water and can produce enough food for anybody here (unless we behave really dumb, which is a possibility) and an environment which, while deteriorating, is compared to the rest of the world still cleaner and in some parts even still nearly pristine. And yes, these people will bring money and need houses and infrastructure.

I am optimistic unless the populists take over - and in that case we might have still more urgent problems than just worrying about the economy ;

The future will be great ;