HST - Hastie Group

[kingkev]

I thought that we would of already seen some upward movement in the sp but that might now only occur later in the year. I bought in at 17c and will get my share of the 14c issue and HOLD

Holding for 12 months on this unless further company degradation

 

[skc]

If the market is really generous and price them as a going concern, 6x EBIT for enterprise value would be a starting point (since they are still highly leveraged). This year's EBIT of $50m was impacted by a lot of things that hopefully won't be repeated, so let's say they trunaround somewhat and achieve $60-70m EBIT. This brings EV to $360 to $420m, less debt ~$300m. So $60 to $120m of equity over 240m shares = 25 to 50c. It's big range but that's what happens when the company is teetering on bankruptcy - the equity value swings widely on small change in assumptions.

If they raise capital say $200m @ 20c a pop that's 1B new shares. The market might say OK, we can do 8x EBIT and this bring enterprise value to $480 to $560m. Debt is down to $100m, so equity value = $380 to $460m. But spread that over 1.24B shares and you get 31 to 37c.

If in 3 years they recover their EBIT to $120m, then 60-70c (in the post cap raising scenario) is possible. Or if they somehow don't need the cap raising, then all the way back up to $1 is possible as if nothing happened. But that's like saying a patient who's yet to recover from a heart attack may run and win the New York marathron one day... not impoosible but you wouldn't bet too big on it.

If they are to survive the cap raising route is the most likely. 20c raising price is probably generous given where they are trading. I certainly wouldn't double down if I was a holder - you can throw more money in during the cap raising when that comes.

They raised less money at a lower price than my guesstimates...

Post-capital raising and assuming there is full uptake of the SPP, they will have ~1,535m shares on issue and $140m debt. Management is forecasting $58m EBIT for FY12. At 8x EBIT, share price is worth ~ ((8 x $58)-$140)/1,535m = 21c. Discount it at 20% you are looking at ~17c. Another way of looking at it, at 14c they are trading at 6x FY12 EBIT.

The directly comparable NFK is only trading at 6.5x EBIT for FY10. On that note, NFK is probably a lower risk proposition for exposure to the sector. However, HST's EBIT is based on 3% margin, while NFK is operating on 3.5%... so you can argue that HST's EBIT has slightly better upside.

 

[kingkev]

I wonder if Comm Bank would have pumped so much into this if they did the same calculation or do they see things very different to us.

 

[skc]

I wonder if Comm Bank would have pumped so much into this if they did the same calculation or do they see things very different to us.

The upside in HST lies in increasing margin (they historically enjoy ~5%) and increasing earning multiples (Well the market is not in generous mood these days). I am sure 10x EBIT would not be a stretch in a bull market. Personally I think NFK @ 6.5x is quite cheap.

Change those 2 input variables and you can easily price an upside target of 35c+. Those who are bullish on the share price recovery is not without reason but are certainly more optimistic than others.

 

[Country Lad]

The upside in HST lies in increasing margin (they historically enjoy ~5%) and increasing earning multiples (Well the market is not in generous mood these days). I am sure 10x EBIT would not be a stretch in a bull market. Personally I think NFK @ 6.5x is quite cheap.

Agree with NFK looking cheap but unfortunately the market and I have a different view at the moment. I think that HST will have some difficulty in achieving their traditional EBIT margin in the short term from the current 2.5%. They still have some low margin work in hand and in the order book. NFK has managed the downturn better with a lower margin drop from 4% to 3.5% and at the same time increasing revenue by 19%. I think they will be quite happy to stay at the 3.5% while increasing the turnover at the expense of HST.

Because of my background I have a far greater interest in what will be an interesting battle in the marketplace than what happens to the share price. With HST reputation being a bit tarnished and needing to get the margin up compared to NFK progressively increasing their turnover possibly at the expense of HST so able to put up with a lower margin.

If NFK are aggressive enough and HST stumble a bit, then HST could be in trouble. Conversely, HST will know NFK's strategy, has made serious changes to management and staff, tightened controls and know they need to get it right every time. It will be an interesting battle to follow.

HST had taken their eye off the ball but should be able to turn it around. I suspect the turnaround will not take effect for another half year. It could take only one large project at a strong margin to do that.

Cheers
Country Lad

 

[kingkev]

Getting in lower than the sp offer is on the cards now as sellers are offloading today

 

[skc]

Another downgrade. These guys are basically still in business because of the drip from the banks.

EBIT ~$10-15m before re-structuring cost of $10m they barely have enough money to pay the interest on their $150m debt pile.

Market cap today is ~$25m. They were worth a couple $B back in 2008.

I can't see them surviving.. may be a trade sale for bits and pieces if there are any hard assets...

 

[lucifuge]

uh oh...........trading haltski

 

[MAKING MUSTARD]

Hasties Austral refrigeration is on the block ....

Buyer possibly Hills Phoneix for the case making division
and Woolworths for the service arm in a mirror of the Coles/CityFM joint venture

 

[skc]

I can't see them surviving.. may be a trade sale for bits and pieces if there are any hard assets...

Accounting irregularities... $20m charge to profit this year.

That's got to kill it now - if there was any doubt before.

 

[skc]

Accounting irregularities... $20m charge to profit this year.

That's got to kill it now - if there was any doubt before.

RIP, Hastie.

All the best to the employees in these difficult times.

http://www.smh.com.au/business/hasties-collapse-to-hit-banks-20120527-1zd1a.html