Bateman Engineering Share Discussion Threads

[wiganer] 30/3/2009 15:11

I just love Huey & The News

[vision88] 23/3/2009 17:33

Its getting closer to its real value 7p now to buy 4p to sell

[broshm] 09/1/2009 16:31

This is quite a high risk business ,but I dont think share prices reflect this kind of thinking .Trading ahares is the thing to do , problems are being greedy and feeling you like the Company . Hope the upward trend continues .

[value viper] 05/1/2009 11:10

anyone else enjoying this ?

[value viper] 17/12/2008 10:22

small punt taken - update not too bad imv - resultant cash balance vs current mkt cap looks silly and IF we can believe them re: review thus far and the fwd outlook...then looks cheap. this co has 400k plus revs and capped at peanuts

[goldenshare888] 26/11/2008 11:10

What a basket case this is...........

[stegrego] 21/11/2008 00:08

This really is a piece of junk - possible bust on the cards if they dont pull their fingers out.

[mikey34] 05/8/2008 14:52

Simon G,

Some excellent posts.Thanks.

[simon gordon] 21/7/2008 13:08

This article in the Investors Chronicle 'hits the nail on the head' as to one of the reasons why I'm moving from Investing to Trading:

Equities As Bets

Created: 10 July 2008 Written by: Chris Dillow

What is an equity? This isn't an abstruse philosophical question. It might help us understand better the market's current troubles.

The standard answer is that a share price is the discounted present value of all future cashflows the shareholder can expect.

However, this view - the dividend discount model - doesn't get us far. It gives us a single equation with not one or two but three unknowns.

The model implies that the dividend yield on a share should be equal to the risk-free discount rate, plus a risk premium to compensate for the riskiness of future cashflows, minus expected annual growth in cashflows from now to infinity.

The trouble is, we cannot directly observe either the risk-free rate, or the risk premium, or expected cashflow growth.

You'd think the risk-free rate would be easy. It should be just the index-linked gilt yield. But here's the problem. This yield has fallen by two percentage points since early 1998. Other things equal, this should have cut the dividend yield on the All-Share by two percentage points, with growth stocks benefiting more than value stocks because they offer more cashflows in the distant future and so get a bigger kick from a fall in discount rates.

But neither of these things have happened. The All-Share's yield is almost two percentage points higher than it was in early 1998, and value stocks - despite their recent slump - have actually outperformed growth ones.

Now, we can reconcile these facts with the dividend discount model. Maybe shares are being priced off of a 'shadow' risk-free rate which has risen in the past 10 years. Or maybe the risk premium has risen four percentage points. Or expected growth fallen by four percentage points. Or some combination of the three.

However, none of these possibilities is directly observable.

What's more, when the market falls, it's often impossible to tell whether it's done so because expected cashflow growth has fallen, or because the risk premium has risen. But the distinction matters enormously. The latter implies that expected returns have risen, meaning there's a good chance of the market rising. The former doesn't.

Sure, it's a useful rule of thumb that big moves in shares - up or down - are usually more due to changes in expected returns. But rules of thumb aren't hard knowledge.

So, there's a lot wrong with the standard view. Luckily, though, there's an alternative. Don't think of shares as the discounted present value of future cashflows at all. Think of them instead as state-contingent securities that pay off different amounts in different states of the world.

The simplest state-contingent security is a bet. Financial services provider Paddy Power is offering seven-to-four on John McCain becoming the next US president. If you hold £1 of this asset, you get £2.75 in states of the world in which McCain becomes president, and nothing in other states.

You can think of the All-Share in a similar way, except - we hope - that zero pay-offs are less likely.

For example, imagine two states. In one, the All-Share yields 5 per cent, as it often did until the early 1990s. This implies an index value of around 2300. Think of this as a world in which economic volatility keeps shares cheaper than we have been used to in recent years. In the other state, the index yields 3 per cent - giving a level of just under 3900. This could be what we would get if the 'nice' decade returns.

You can now imagine the index's current value as signalling that we have a 70 per cent chance of entering state one, and a 30 per cent chance of entering state two. That is: (0.7 x 2300) + (0.3 x 3900) = 2780, which is roughly where we are as I write.

Now, imagine that the probability of entering state one - our bad state - were to rise by just one percentage point. Then, the price of the All-Share would become: (0.71 x 2300) + (0.29 x 3900) = 2764. This is a drop of 0.7 per cent.

In other words, tiny, reasonable changes in the probability we attach to differing but plausible states of the world can produce quite large moves in the index.

Regarding the market as a state-contingent security, therefore, shows that volatility is normal and rational. Indeed, David Meenagh of Cardiff Business School has shown that market volatility since 1963 is quite easily explained if we think of prices as reflecting varying probabilities of different states of the world. This contrasts to the dividend discount model which - as Yale University's Robert Shiller famously pointed out in 1981 - implies that volatility should be only around one-tenth what we actually see, and that only irrational investors can generate such high volatility.

Now, my example is over-simplified. In practice, there are countless different possible states: catastrophe, slump, recession, slowdown, normal growth, boom, exhilaration and Kurzweilian singularity, and all degrees in between.

Recognizing this renders otherwise bizarre behaviour explicable. Why does volatility rise in recession? Because investors begin to attach small and varying probabilities to catastrophe and slump. Why did we have a tech boom and bust earlier this decade? Because the probability of exhilarating growth rose and then fell.

Of course, it's not just the index that we should regard as a state-contingent security. We should regard sub-sets of the market, and individual shares, in the same way. Value stocks pay off badly in recession states but well in boom states. High-beta stocks pay off well in states in which investors have high appetite for risk, and badly in other states. Commodity stocks have a good pay-off in states where Bretton Woods II holds and the global economy grows nicely, but low pay-offs in other states.

And surely it makes more sense to regard Bradford & Bingley's price as depending upon the probability of its re-re-re-financing going well than it does upon a forecast for its earnings in 2011.

What this means is that most investors should change the way they think about shares. Stop thinking of them as having a 'fair value' of x, depending upon your forecast for earnings and assumptions about discount rates. This is just plucking numbers out of the sky.

Instead, ask the questions: in what states of the world would this pay off, and by how much? What reason do I have to think good states more likely than the market believes? Am I more or less worried than the market by the probability of bad states?

You might object that this method doesn't give us precise valuations, because we can't define possible states of the world, still less attach probabilities to them.

This is true. But such imprecision is an unavoidable consequence of the fact that the future is inherently unknowable. To hide from this fact, and pretend that future cashflows and discount rates can be predicted and shares precisely valued, is mere pseudo-science which gives us a false comfort that there's such a thing as 'value'.

But maybe it's false comfort you want.

[simon gordon] 17/7/2008 18:39

"You don't get any profits from fundamental analysis; you get profit from buying and selling."

Richard Dennis in Trend Following.

-----

My experience of being an ex-shareholder in BATE has opened my mind to this and I am no longer a fundamentalist. I have had a conversion: from an investor to a trader. My 1 year to 3 year horizon is now 1 week to 6 months+ and then to run with the trend if it continues to rise.

I now realise that being a fundamentalist is not practical as the bulk of the listed companies are economical with the truth. The City boys are closer to the stock and have greater detail as to what has, and is, happening operationally at the coalface. They have more chance to get past the spin.

The internet has made it easier for the PI but still we are cut off from all the Broker Notes.

If the company is spinning bullsh*t then the dice are loaded, and the chances of losing are much higher.

I am now going to study Trend Following more deeply.

-----

*If I had known about the IFL furnace (c.$9m hit) I would not have bought BATE.

-----

'Losing an illusion makes you wiser than finding a truth.'
Ludwig Borne

[stegrego] 17/7/2008 11:03

Is the first of the disasters IFL furnaces?

[stegrego] 14/7/2008 08:35

Looks like people starting to notice - talk about efficient markets!

[nickcduk] 14/7/2008 08:20

Market does seem to have missed out on Friday's news. On the other hand buyers could be waiting in the background. Ive sold out my position hoping that the shares do tank later on today with a view to buying it back. Still think it will prove an excellent investment once operational problems have been sorted out.

[stegrego] 14/7/2008 08:05

I actually dont think anyone has noticed because the price isnt down at all.

Billy Bonus and thats me out a lot higher than i though i might!

Watch it get up to 3 quid now within 6 months!

Good luck all holders

[simon gordon] 13/7/2008 12:38

IPO - late-2005: Shares in Issue = 38.7m @ £2.00 Market Cap. was £77m.

Results:
6/06 - PBT = £7m
6/07 - PBT = £10m
6/08 - PBT = £5m; forecast was for £14m.
6/09 - PBT = £19m forecast.

There are now 43.7m shares in issue at a £1.00 = £43.7m.

If Global Minerals take it private for a £1.00+ then Eddie Du Rand can turn it round - he recently appointed another manager from his previous company. It looks like he is changing all the top managers who deal with projects. In private he could accelerate the re-modelling and then re-float the story on the JSE in two years time. The new top guys need a strong financial incentive and with a bombed out share price it will be difficult to hold onto in demand engineers. They need to act quickly or they could lose important talent. The Chairman and CFO should be replaced with fresh blood.

[nickcduk] 11/7/2008 23:19

I think your being a bit pessimistic about where it might open on Monday. The share price has already been trashed this week. Company definitely needs to move away from the kind of projects it has signed upto. Difficult to understand why mining contractors seem to do so poorly in terms of profitability when the sector is coining it in. Contrast that with oil service companies who find it much easier to make supernormal profits. Hope once and for all the operational problems are now behind us. A couple of reporting periods to prove that should be enough to regain confidence in the company. It may be a far way off yet but hopefully patience should be rewarded.

I continue to find it amusing how the company won a PR award from investors.

[stegrego] 11/7/2008 22:27

What you reckon this will open at on Monday?

Im thinking maybe 60p? Bloody travesty

[simon gordon] 11/7/2008 20:25

It was obvious the $10m was coming but the $8m from Moma Sands is the biggest blow for the share price.

They will make $10m for 2008 = 9p eps.

Net Current Assets will probably fall from $40m to $30m.

If they can do $20m in 2009 (eps 18p) then there is still value for Global Minerals. The forecast was for $38m (eps 34p) but how can anyone believe they will do that?

What might Global Minerals pay:

£15m Net Current Assets
£8m PAT for 2009 x 4 = £32m

Total = £47m

That equals £1.07 per share.

Maybe they could offer between 70p and a quid for the 38% they don't own.

Otherwise it is death by a thousand cuts.

[simon gordon] 11/7/2008 19:18

The only hope is for Global Minerals to buy the company and re-model the business in private with Eddie Du Rand.

They will have to act quickly or the top staff will leave.

[theblackprince] 11/7/2008 18:43

no position here but the timing of that release is just plain criminal but then bad news is bad news no matter when it's released.

unfortunate for holders :(

[stegrego] 11/7/2008 17:51

This company clearly cannot be trusted at all to actually do a job right.

Reason for fire probably their shoddy bloody work.

Bound to lose well over 50% of my investment here come Monday - a great start to the week.

Oh and lets sneak it out on a Friday after hours and hope no one sees it... I HOPE NO ONE DOES BLOODY SEE IT!!