Pressure Technologies Share Discussion Threads

[apad] 19/5/2015 11:52

m
Like PRES, GDWN was massively oversold, but you might have missed the boat as it's back to around the £30 mark. PER of 11. I had it marked as an increase at £25 but it didn't make it. Great company - one of my stalwarts (even visited it in the past - FWIW, steel castings are an art form and GDWN are artists who very difficult to compete with). Richard Beddard's analysis is very well worth a read. They are relatively illiquid and prone to large price excursions so you may well get in at a lower price, Declaration - 5% of my portfolio.
c
I agree about the management's track record and sold too early on the way up - same reason as I am twitchy now - because of a small caps ability to cope with inevitable setbacks.
Now sitting on 25% profit and trying not to repeat the mistake.
June interims I believe.
apad

[cockerhoop] 19/5/2015 11:27

Apad,

Perhaps but John Hayward doesn't appear to ever overpay for his purchases so ok he's blown a couple of million to attempt to gain a foot hold in the transport of excess fracking produced gas but earlier acquisitions Almet and Hydratron have already paid back the purchase price in profits and over the cycle Roota and Quadscot i'm sure will do the same.

Greenlane is harder to quantify but have some interesting technology outside of their methane cleaning technology that wasn't exploited by the previous owners because of lack of investment.

Agree with your comment regards shareprice and think it was way oversold on the way down and is now only modestly correcting to fair value.

[apad] 19/5/2015 11:09

As an aside, and I normally hate comments like this, but….
I have been comparing PRES' recent price rise with other oil-sensitive service companies and its one month outperformance in no way makes up for its 6 month underperformance, so I reckon this recent price rise is nothing special.
apad

[meijiman] 19/5/2015 10:57

Thanks -very interesting. Many small UK companies have come badly unstuck on US acquisitions-hopefully any issues here will be small. appreciate replies.

[apad] 19/5/2015 10:51

You're very forgiving, folks.
I could go along with these arguments if PRES was a larger cap and if Kelly wasn't such a young company ("part of the Kelly family").
BTW accessing the Kelly website returns a database error, so perhaps it has written itself off already.
apad

[cockerhoop] 19/5/2015 10:42

Meijiman,

You are correct that the deal was done before the oil price crash and specifically Kelly's addressable market of gas produced as a by product North American fracking.

With the reduction in the price of diesel (the competing fuel to Kelly's gas for generators) the business model for the cylinders has been eroded. They are not going to invest further and suspect the amount invested so far will be written off.

But as RCT says it's not particularly material and the structure of the investment was pretty cautious as I'd expect from JH.

[rcturner2] 19/5/2015 10:37

meji - the structure of the deal (40% with an option over another 40%) shows caution, the total exposure is quite small, some deals in business are punts that don't come off. Not great if it fails I agree, but I don't think it is that big an issue.

[apad] 19/5/2015 10:32

The problem I have with the KGTM acquisition is that they are up against Worthington Industries, who offer TYPES 1/2/3 cylinders for a wide range of applications. So, I don't know why the management at PRES went for this company.
Given that they are no fools I presume that they had/have a reason why this was a good buy, but too many UK companies have failed in the US.
So, I reckon I side with meij here (except for the excuse argument).
I am prepared to accept that it might take time for the purchase to come good, but if it doesn't….
Having held in the past I bought back in after the fall when they announced the freehold purchase so am catching up and KGTM is a concern.
apad

[brummy_git] 19/5/2015 10:04

It looks as though somebody knows something given the recent share price bounce

[gucci] 19/5/2015 10:03

400p seems like a short term target

[meijiman] 19/5/2015 09:56

Agree but if it is not performing it reflects badly on management.The rights are raised from shareholders -the owners of the business. They do not expect it to be thrown away on poor acquisitions. In defence it seems like this deal was done before the oil price collapse so maybe management has some excuse.

[rcturner2] 19/5/2015 09:20

The problems at that unit are quite clearly spelled out in last years final results and there will no doubt be a further update in the interim results. It was a cash purchase paid for from the rights issue and is quite a small part of the business. I personally do not think it is material. The wider effect of the downturn of the oil price on the remainder of the business is far more important.

[opodio] 18/5/2015 21:36

the rate of conversion of these into firm orders has, to date, been behind expectations.

[rcturner2] 18/5/2015 15:04

In January 2014, the Group took a 40% stake in Kelley GTM ("KGTM") a manufacturer of packaged, type II composite, welded ultra-large cylinders known as GTMs (Gas Transportation Modules). This start-up business is focused on the sale of GTMs into the onshore oil and gas market, for the delivery of CNG to displace diesel fuel on drilling rigs and for the capture of gas currently burned in flares at oil wells. US environmental legislation will eventually lead to a total ban of flaring at oil wells. That said, development of the market has been slower than anticipated and the Group has taken a cautious approach to the valuation of its GBP2.4 million investment in KGTM.
The Group has the option in 2015 to increase its stake in the business to 80%. The decision to exercise and the cost of doing so is dependent on the performance of KGTM in calendar years 2014 and 2015.
In December the Group announced that it would, effective from 1 January 2014, be making a strategic investment to acquire a 40% stake in KGTM at a cost of US$0.5 million (GBP0.3 million). As part of the investment package the Group also agreed to provide a working capital loan of US$3.5 million (GBP2.1 million) and was granted an option to acquire a further 40% stake. Pressure Technologies has a "one off" ability to exercise this option within a period of 90 days from receipt of the audited results for 2014.
The price of exercising the option is dependent on the level of profitability in calendar years 2014 and 2015 with a minimum exercise price of US$5 million and maximum of US$16 million if key profitability targets are met. As detailed below, the target for 2014 will not be met so the maximum exercise price, based on hitting the performance target for 2015, is now US$11 million.
KGTM is a leading manufacturer of gas transportation modules ("GTMs") which utilise a standard 20 foot ISO container to transport gas cost effectively. The business is based in Amarillo, Texas. Whilst the rate of order enquiries is steadily increasing, the rate of conversion of these into firm orders has, to date, been behind expectations. The Group's share of KGTM's losses for the nine months to the end of September of GBP0.2 million is included within the Group's Consolidated Statement of Comprehensive Income.
In light of the above trading performance and the knock on effect on future year's profitability from the delay in building up production levels, the Board has taken a cautious view in assessing the carrying value of its investment in KGTM. A provision of GBP0.4 million has been made against the value placed on the option at inception and a provision of GBP0.3 million has been made against the carrying value of the loan provided to KGTM. These provisions, which in aggregate total GBP0.7 million, represent one third of the total value of the loan provided to KGTM. In addition, no credit has been taken for any interest receivable on the loans made.

[steveo18] 18/5/2015 13:21

Big write off coming on the American business they bought imho

GTM Manufacturing has turned out to be a complete basket case. No orders. Wears a lead and barks.

[saj3] 15/5/2015 11:43

Tjbird that will do me

[tjbird] 15/5/2015 11:39

indeed, could be worth a fiver

[brummy_git] 15/5/2015 10:01

Share price rise indicates that there may be some good news coming out soon

[opodio] 15/5/2015 09:17

Bowling upwards

[rcturner2] 13/5/2015 19:44

No point in guessing, half year results due in June.

[sundance 13] 13/5/2015 18:50

Wrong - oil prices are recovering which will boost sentiment in the sector and hopefully improved investment horizon.

[opodio] 13/5/2015 13:26

No reason for share price rise and trading remains weak