STU - Steel & Tube Holdings

[lorraina]

Business Outlook
• Clear focus on strengthening the core and
investing in high value products, services
and segments
• Business growth through organic
expansion and programmatic smaller
M&A
• Further strategic initiatives expected to be
reflected in results from FY24 onwards
• Goal to continue to deliver sustainable
double-digit ROFE

[Shareguy]

I have been talking to a few people in the industry who confirm that demand has not changed and more importantly are forecasting an even better year than 2022.

I'm thinking FY23 will be close to FY22 as far as earnings

So my forecast is

EPS    18 cents
Divi.  14 cents fully imputed

[Left Field]

Feeling ... 'well positioned.' 

[Arbroath]

I hope you're right Shareguy. It's my biggest position and 14 cents imputed would be about a 16% yield on cost. 

[Shareguy]

Based on last years announcements we should have an earnings update soon.

[Shareguy]

TRADING UPDATE
The strong demand for steel we have seen over the last two years has continued into the first half of our FY23 financial year, despite challenging macro trends, including higher interest rates, increased labour costs and elevated steel pricing.


https://steelandtube.co.nz/sites/default/files/attachments/Steel%20%26%20Tube%20-%20Shareholder%20Newsletter%20December%202022.pdf

[Ferg]

Steel prices ex Korea are coming back to more realistic prices which can be a double edged sword depending on stocks and contracts.

[Hectorplains]

FY23 interim results to be announced on 15 Feb

I've sold up and moved on...having enjoyed my time with Ol' STU. Too many of these kind of headlines for me.   

https://www.stuff.co.nz/business/300780622/residential-building-cost-increases-slowing-as-consents-drop

[winner (n)]

FY23 interim results to be announced on 15 Feb

I've sold up and moved on...having enjoyed my time with Ol' STU. Too many of these kind of headlines for me.   

https://www.stuff.co.nz/business/300780622/residential-building-cost-increases-slowing-as-consents-drop

But then there's headlines like this in the NBR yesterday

Apartments drive building consent growth

Who do you believe

[Perky]

FY23 interim results to be announced on 15 Feb

I've sold up and moved on...having enjoyed my time with Ol' STU. Too many of these kind of headlines for me.   

https://www.stuff.co.nz/business/300780622/residential-building-cost-increases-slowing-as-consents-drop

 thought about trimming my holding in Stu but decided to hold.
It's one of a few shares paying dividend above inflation and for sure they will get slowdown from residential sector but they are pretty diversified in revenue streams.
Shareguy rates them and I think there fair value at present but not without some risk. I think next report will be good but it's the forward projections if given will determine where these go in near term imho.
Happy to hold and review after next report.

[lorraina]

With logistics improving STU should be able to reduce their stock holding to a more "normal" figure.
From their last newsletter;
We remain focused on our growth pathways -
continuing to strengthen our core foundation
and investing in higher value products,
services and sectors to drive gross margin
improvement. The investments we made
in the past six months in expanded plate
processing and the acquisition of Kiwi Pipe
and Fittings are delivering value, with robust
demand for these new offerings.
I therefore am expecting a solid result with a strong outlook.

[BlackPeter]

One of my sons is working in the steel industry (not for STU, but for one of the competitors). When I mentioned recently the slow down of the housing market to him, he said ... no problem - climate change will always make sure we have enough work. One needs lots of steel to rebuild bridges and stabilise roads after landslips ...

On top of that ... our water infrastructure is thoroughly broken, and we will need lots of tubes to fix that.

I recon the future for this industry is safe, no matter whether housing might have a temporary dip.

[Basil]

A different perspective

https://steelandtube.co.nz/sites/default/files/report/1993_AR.pdf

30 years ago they were making 28 cps, (54 cps in 2023 money, source RBNZ inflation calculator) 
This year people are getting excited about the prospect of making just one third of that in today's money, 18 cps. No wonder this has been a serial underperformer, share price was ~ $2.10 5 years ago and $5, 18 years ago in 2005!
Maybe shareholders get lucky and FBU revive their scheme of arrangement the board so "wisely" rejected many years ago at $1.90.

[Clearasmud]

A different perspective

https://steelandtube.co.nz/sites/default/files/report/1993_AR.pdf

30 years ago they were making 28 cps, (54 cps in 2023 money, source RBNZ inflation calculator) 
This year people are getting excited about the prospect of making just one third of that in today's money, 18 cps. No wonder this has been a serial underperformer, share price was ~ $2.10 5 years ago and $5, 18 years ago in 2005!
Maybe shareholders get lucky and FBU revive their scheme of arrangement the board so "wisely" rejected many years ago at $1.90.
Thi




It's old like Hlg and with disciplined management now, what's not to like.
They were always great dividend payers.
Can you name a stock with a higher(prospective) dividend yield on the NZX?
BTW  they canceled half the shares in '93.
 

[Basil]

It's old like Hlg and with disciplined management now, what's not to like.
They were always great dividend payers.
Can you name a stock with a higher(prospective) dividend yield on the NZX?
BTW  they canceled half the shares in '93.

For what its worth mate I will always stick with my belief that the best guide to the future is the recent past and they have a very poor dividend track record on average over the last 5 years.

Sure its an old company but you can very easily make the case its best days are behind it, for example they paid dividends of 40 cps for years in the late 1990's and eps was as high as 63 cps in 1995, page 30 of the 1997 annual report https://steelandtube.co.nz/sites/default/files/report/1997_AR.pdf

I believe the building industry has always been historically cyclical and it will always be that way going forward so going fishing in this sector for reliable dividend payers is fraught with significant risk around the cyclicality of the industry. As a semi-retired income investor I am far less concerned with what their prospective yield might be in FY23.  My focus is on what it will average across the economic cycles going forward.

In my view the board made a complete hash of the FBU $1.90 offer several years ago and in the intervening time the NZX50 is up more than 50% so shareholders could have had $1.90 + 50% = $2.85 in value now plus more reliable income since then in other high yield stocks.  Adding that difference back in, let's call it $3 just for the sake of simplicity, (it's probably more), in value now shareholders could have had if the board approved the FBU deal but thanks to the "rocket scientists" on the board they now have only $1.30.  Why would anyone trust a board that did that to them?

I also note they did a 1:1 bonus issue in 2017.

I was a shareholder for a while in early 2022 and bought into the hype on the other forum at the time.  It cost me a few thousand to liquidate that position in May 2022.  My losses would have been four times as much if I was still holding now.  I only post to put some background and realism into this thread so that others can reflect on a counter point of view.

I believe over the medium to long term I will get a higher and more reliable source of retirement income from the likes of HLG and TRA.   Both companies have a 10% prospective yield and a clear plan for growth in the long run that will grow those dividends over time.

If holders believe all STU's past problems are behind them and they're headed back to the former days of glory. good for you and good luck with that.