alphatracker
29 Apr 2016
Re: IC View I am obviously not happy with the price rise today, but quite relieved this is retail money. IC got burned a few tines on this one - always on the back of the Mgt's"cautious" view that things may have stabilised.We'll see if the Directors buy some shares, although even that may not be a reliable indicator if history may be any guide.Have a good extended week-end.
nk1999
29 Apr 2016
IC View Investor Chronicle upgrade from SELL to HOLD."Fenner confident it can withstand further commodity headwindsFenner's (FENR) reliance on troubled commodity markets continued to cause it a great deal of pain in the first half of its 2016 financial year. Demand for its plastic seals, bearings and pipes was hammered by the plummeting value of crude oil, while appetite for its conveyor belts was negatively impacted by weak coal, iron ore and copper prices. The upshot was underlying operating profit nearly halving to £15m in the period, which was hardly a surprising outcome for a company facing such a vast array of headwinds. In fact, these depressing numbers were in line with expectations and, aside from the 75 per cent cut to the half-year dividend, could even be perceived as encouraging. Management has spent the past year restructuring operations to better protect Fenner during the downturn. Chairman Mark Abrahams voiced his confidence that these measures are now sufficient to offset ongoing market volume declines. Forecasts for the full year are unchanged. Broker N+1 Singer expects adjusted pre-tax profit of £23.3m for the year to August 2016, giving EPS of 8.6p, down from £42.5m and 15.5p in FY2015.FENNER (FENR)ORD PRICE: 131p MARKET VALUE: £252m TOUCH: 130-132p 12-MONTH HIGH: 237p LOW: 95p DIVIDEND YIELD: 6.9% PE RATIO: na NET ASSET VALUE: 142p* NET DEBT: 54% Half-year to 29 FebTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)2015 348 -5.1 -3.9 4.0 2016 277 -23.1 -9.8 1.0 % change -20 - - -75 Ex-div: 28 JulPayment: 7 Sep*Includes intangible assets of £183m, or 94p a share IC VIEW:Fenner's shares have fallen 36 per cent since we downgraded them to sell at the beginning of last year. Plunging EPS forecasts mean they still offer little value on 15 times forward earnings, although with most of the bad news now out the way we'd argue that another major sell-off is unlikely. While trading doesn't look likely to pick up any time soon, management seems to have a decent grip on the issues it faces. Upgrade to hold. Hold.Last IC view: Sell, 146p, 11 Nov 2015 "
Our Haven
28 Apr 2016
Re: Results I think the market has faith in the managements ability to cut costs. Don't get me wrong this is a high risk stock with plenty of upside and downside so plenty of opportunity to make and lose but I am on the long side for now.
alphatracker
28 Apr 2016
Re: Results A lot depends on the big Australian coal miners now, whom FENR has good relations with. A lot of the coal operations of these Oz miners depends on the Chinese steel makers now. China has peaked/is peaking in term of steel production, so will the associated consumption of metalurgical coal. Sales of OEMs is a function of the derivative of the volume extracted, not the volume extracted, which at constant growth means flat turnover for OEMs.Luckily, FENR is heavily positionned on the retrofit / maintenance, so less of a blow.Don't get me wrong, there was a lot of positives in yesterday's conference call and the Mgt is doing a tremendous job at cutting cost out. But the tide they are facing is huge.That may suit indeed a smallish short position I have.
seadoc
28 Apr 2016
Re: Results I am not a great reader of tealeaves but 100p looks very possible, and if it were to close below 98p the next stop is 50p. I mistimed my buy at the end 2008 paying 89p but did get out in the mini rally end Aug 2014. FENR (and WEIR) have recently had a useful rally from "bottoms" in Feb. I think both have further to fall.Regards,Seadoc
Our Haven
28 Apr 2016
Re: Results Okay so opposite views then. PG has a 100 price view on their short.
alphatracker
27 Apr 2016
Re: Results After a strong run based on hot-air, the results are in line with the downbeat expectations set by the management which will disappoint the long holders but good for the shorters, whom are very few on this stock.
Our Haven
27 Apr 2016
Results The results are in line with the expectations set by the management which will disappoint the shorters but good for the long holders.
seadoc
14 Apr 2016
Peabody Energy files for Chapter 11 [link] me to whom do we sell most of the belts made in US of A?I have been watching FENR and WEIR to move when the energy market problems have resolved, or at least is assumed by Mr Market to have resolved. Oil price has come back ahead of coal price but sp WEIR was lagging that of FENR which was odd. I can only hope that we do not have too many invoices outstanding? Though according to Bloomberg there is an overdue interest payment on outstanding bonds that needs paying tomorrow and this is their explanation of the timing of Chapter 11. note only US and not Auz mines affected by Chapter 11. Locally (NZ) and iIt has only a tiny, and just NZ domestic market for thermal coal but Solid Energy in NZ have just closed another mine. It is not over until the Fat Lady Sings.The 8% rise in sp of FENR yesterday was interesting, I cannot look back over the days trades but can see that the spike in sp was not matched with spike in volume, indeed it was a very quiet day in volume terms. I wonder if there has been a series of multiple small buys and at the same time some surreptitious sells to open of call options over the day? It should become clear round 0800 in the morning. I do not do shorting but if I was long FENR I might review my position.Regards,Seadoc
Hardboy
01 Mar 2016
Re: Update We will get an update next week (10th) which should give us a better view.
Our Haven
01 Mar 2016
Re: Update I agree with you Hardboy. Good results this morning from Rotork which has been in a simular situation regarding oversold, also related to the mining sector.Be interesting to see where both settle as price still rising.
Hardboy
29 Feb 2016
Re: Update When we were discussing the prospects for the mining sector a month ago, I would not have predicted Fenner's share price would end February 30% up from where it started (not without a takeover bid coming in at least.) I think there are tentative indications that we may be at the bottom of the big drop in the mining sector (by share price) but I would not be brave enough to call it just yet.I think in Fenner's case, the move is more to do with a realisation that even with a depressed mining sector, the shares were slightly oversold.
Hardboy
29 Jan 2016
Re: Update Excellent post seadog.I was looking at the mining sector rather than Fenner. Your points are all very valid.My feeling is when results from miners improve sentiment to their suppliers will improve ahead of the suppliers' figures improving; but your strategy looks very sensible.
seadoc
28 Jan 2016
Re: Update Hardboy,Interesting thoughts, your logic is impeccable in relation to, say, copper or even steel. But what proportion of belting is for stockpileable products and how much for primary ingredients? Manufacturing/production belts in China are probably home made but for those FENR made I suspect the major use is thermal coal, It takes a ton of coal to make 5 tons concrete, coal mostly mined in Auz. 41% of belting is thermal coal and 70% is replacement belting. Headcount reduced by 300 (800 eventually). I would guess most mines/ports have replacement belts on site and if the decision is made to replace a belt the process is order new spare, when it arrives or shipping, put spare into use and await new spare. I am guessing they are a bit like bicycle inner tubes, can be patches a couple of times but eventually fail big time and need replacement. Manufacturing sites halved in US and closed down in Brazil. AGM presentation stressed success of (new) medical business but only 16% of AEP at end August 2015 and remember ECS is about twice AEP so less than 10% was highlight of presentation. And from final slide, recovery but not until FY 2017, by AGM in Jan 2018, two years away.Yes it will be a matter of months, but more like 24? Keeping my powder dry for at least 12, perhaps 18? Might get a bit of heads up from WEIR, at least in respect of AEP third of business? Just my take on it.Regards,Seadoc
Hardboy
28 Jan 2016
Re: Update My simplified understanding of why miners have been hit so hard & for so long is everyone has been producing at full capacity (which should actually have been good for Fenner) so supply > demand. The Chinese, especially, began stock piling minerals, so not only was supply > demand, but fluctuations in demand could be met from stock.The miners are now cutting back the supply side; but everyone still thinks Chinese demand will be weak because 1) they have stocks 2) their economy is slowing. 1 is true. 2. Is a fabrication (assuming we believe Chinese statistics) because no one in the financial media or fund managers understands the difference between acceleration & velocity; not how to interpret %s. Acceleration is reducing (no one in their right mind would use the term "slowing" when velocity is still increasing) in % terms; but in real terms it is still increasing. The latest GDP growth figures from China were 6.9% per annum. That means 6.9% more was produced in 2015 than 2014. The previous year was 7.3% per annum, That means 7.3% more was produced in 2014 than 2013. If we take absolute units and assume a base of 100 units (whatever GDP is measured in) 2014 grew by 7.3 units. 2015 grew by 7.4 units (107.3 x.069) which means 2015 grew quicker than 2014. No one seems to realise this; but demand in China is still accelerating. I know GDP covers more than just production using minerals, but one assumes there is some correlation. So my guess is China are already eating into their stock piles, demand is increasing (in China) supply is reducing. My guess is it's a matter of months before the mining sector (& its suppliers) finally begins its reversal.
