Forum Archive Index - October 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi trader 100,
 
>
>
>After Snoopy's excellent recent analysis of STU I thought a look at
>the technical picture might be of interest.
> 
>STU has been forming an ascending triangle and has closed right on
>resistance today at $3.05 (not shown on chart).  The DMI is looking
>favourable with DI+ above DI- and the ADX starting to turn up from
>below both of these.
> 
>It appears that the next few days will be interesting.
> 
>

As a follow up to my fundamental, analysis, and given that there 
should be some correlation between the fundamental company 
performance and the technical performance I thought it might be worth 
investigating if there is any fundamental reason why STU might go 
substantially higher.  In the earlier report I wrote:

"An eternal curse on STU seems to be the reinforcing
 and fabrication division.  This division requires a 
continuous stream of projects which use 500 tonnes 
of steel or more to generate a decent profit.
There is a constant battle to win such projects
under the competitive tendering process."

There was nothing specific in the 2002 report as to a break down of 
the earnings of the reinforcing division.  However, perhaps it was at 
a cyclical low in 2002?  Perhaps someone who follows Steel and Tube 
more closely might be able to tell us?

Since balance date, Steel and Tube has been awarded the Britomart 
contract.  Although the total project is worth some $200m I would 
doubt that more than 15% of it involves steelwork.  Nevertheless this 
still represents around $30m worth of steel.   Maybe 10% of this or 
$3m might flow directly through to the Steel and Tube bottom line?  
That translates to a 10% profit boost for Steel and Tube, which could 
cause income investors to push the share price 10% higher.  

Secondly the proposed share buyback, while doing nothing for the 
earnings, may indeed boost earnings per share by a further 10%.

Based on the fundamentals these two factors might support a STU share 
price of around $3.60.   For the long term investor I'm not sure 
this sort of share price is sustainable.   Nevertheless, there may be 
a nice little profit of some 20% or so for traders over the coming 
months.

SNOOPY

discl: No STU shares held







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