Hargreaves Services Share Discussion Threads

[castleford tiger] 07/9/2021 22:12

I think 600 looks a touch light now.
At 650 I will review and possibly take another chunk out reducing my position to 50% .what I bought with the odd exception is doing very well.
STAF up 20% since my last purchase

[red ninja] 31/8/2021 09:11

Downing Strategic Micro Cap I.T. Quarterly News Update :-



HARGREAVES SERVICES has enjoyed a fantastically profitable period of trading since we last wrote, with its German JV, Hargreaves Raw Materials Services GmBH (HRMS) driving significant EPS upgrades throughout the year to date. The profitability here has been driven by very strong commodity prices, in particular zinc and pig iron.
The HRMS business is an interesting collection of operations which are worth exploring in more detail. Hargreaves owns 49.9% of the voting equity in HRMS but takes 86% of the economic benefit through additional non‐voting
shares. Ultimately, we think that an exit of HRMS is likely to be the ultimate outcome here, with Hargreaves announcing that it “plans to explore strategic options for HRMS with its professional advisors over the course ofthe next several months.”

The core HRMS operation is the trading business which trades commodities such as pig iron, coal, coke and other carbon products for the steel and refractory industries. Given the (trading) nature of the business, profits can be highly variable and have ranged from €2‐10 million over recent years, with revenue dependent on throughput volume multiplied by a margin. In times of strong commodity prices, the business trades higher volumes and can earn better margins contributing to the current strength in this business. It does not take commodity price risk asit backs‐to‐;back transactions, but it does have to invest working capital to facilitate trading and in the last year, as commodity prices have been very strong, working capital has increased from €38.3 up to €64.6 million, consuming cash in the process when it makes sense to invest more into trading stock. Naturally, this ought to unwind when commodity markets soften.

The Carbon Pulverisation Plant (CPP) is a €28 million investment by HRMS which grinds coal and other carbon products to produce coal dust. This is again used in the steel and refractory industries and is being used in Germany to replace brown lignite coal which produces around twice the carbon footprint of coal dust and has been the backbone of German industry and power generation for decades. The Green agenda in Germany currently is to phase out brown coal by 2038, although emissions regulations likely mean this must be quicker. While the facility is currently ramping up from current break‐even level of c100k tonnes, it has capacity to produce 400k tonnes which ought to generate €3‐4 million of profit. The market is still evolving here, but around 2 million tonnes of brown coal dust are sold in Germany so it seems reasonable to assume that the CPP can find a market for 300k
tonnes to take it to capacity.

The final operation is DK Recycling which HRMS bought in 2019 for €1 when it was generating €130 million of revenue and losing €2 million per annum. Management turned this around to profitability and it now contributes positively to the group. DK recycles waste product – mainly dust containing iron and zinc – from the steel manufacturing process. DK offers a neat environmental and financial solution since its process avoids the landfilling of this material and its gate fees are also lower than those of a landfill.

Competitors do not have the recycling capability and are therefore more exposed to the current commodity price increases. Management’s aim of €4 million of profit from DK over the medium term seems reasonable to us.

The question is then how to value HMRS. We think it is fair to take a reasonable multiple on the trading outcomes of DK Recycling and the CPP plant which in combination might be worth around £50‐60 million based on Hargreaves 86% interest. Recall also that there is significant asset backing in here to support this. The trading business is more volatile and requires a through the cycle view, but we think it could be worth another £10 million or so. Overall, there is considerable value in HRMS. Right now, Hargreaves’ shareholders realise this value through a £3.9 million dividend which is passed straight through to Hargreaves’ shareholders and is supplemented by cash generation from the group.

Adding in the Services and Land value we still believe that the intrinsic value sits comfortably above the current share price and there is considerable scope to generate shareholder value here through numerous catalysts.

[castleford tiger] 11/8/2021 17:49

Ploughed plenty back into
STAF
HFD
LPA
TND
SAGA
SNR
MPAC

Just needed to spread it about
still love HSP and its dividend

[solarno lopez] 11/8/2021 16:29

Well done Tiger having trousered a near £600K

[castleford tiger] 11/8/2021 16:22

we said 600p based on the last news

tiger

[solarno lopez] 11/8/2021 16:08

Sorry I meant the new price increase

[castleford tiger] 11/8/2021 15:56

finished selling sold 30%

tiger

[castleford tiger] 10/8/2021 15:33

sold a few only to balance my books

[solarno lopez] 10/8/2021 11:45

Steady away

[dougmachin] 10/8/2021 07:41

And SCSW too I would imagine.

[solarno lopez] 10/8/2021 07:24

All down to ST in last Friday's IC with a positive and informed write up

[guymarshall2] 09/8/2021 17:43

Any thoughts on the share price movement? Think we're +40p in the last week on some pretty light volumes

[solarno lopez] 06/8/2021 18:40

Well done Castleford Tiger

[castleford tiger] 06/8/2021 16:54

My position in HSP passed the £2 m mark today.

What a turn around and to think these were 200p lower just a few weeks ago.

Tiger

[solarno lopez] 06/8/2021 16:13

By jove that's a rather nice rise

[red ninja] 06/8/2021 10:42

Shares Mag updated rec for HSP :-

THE BASIS OF our buy call in February was
that the firm had reached a strategic turning
point, divesting its coal assets and becoming a
focused, self-financing industrial and property
services group.
The cash received from the sale of inventories
and the reduced working capital requirement
thanks to exiting the coal business have
transformed the firm’s finances, meaning it no
longer has any bank borrowing and can fund itself
from its own cash flows.
At the same time, having kept an 86%
economic interest in its German joint venture
HRMS, the firm cashed in on strong commodity
markets with a significant rise in pre-tax profits in
the year to May, leading to the reinstatement of
the ordinary dividend plus a special dividend.
The service businesses – which comprise
an environmental, logistics and minerals
division, materials handling and mechanical and
electrical engineering, and earthworks and
infrastructure – have continued to deliver reliable
and growing profits.
The land business – which provides sites for
residential and commercial construction in
northern England and Scotland – is benefitting
from strong demand for houses and warehouses.
With the core businesses performing well and
the option to monetise its stake in HRMS and
release further cap

SHARES SAYS: Keep Buying (at 525p ie price at publishing time)

[castleford tiger] 06/8/2021 10:12

looks like it has broken 530

[castleford tiger] 06/8/2021 10:06

I am happy for it to build a firm base here for the next leg up.

[solarno lopez] 05/8/2021 11:52

Will it break through 530p ?

[red ninja] 01/8/2021 13:41

CEO Forward Looking Update :-

[ayl30] 29/7/2021 09:19

More for me this am

[castleford tiger] 29/7/2021 07:54

Bye bye the 4 hundreds today in my opinion.
Tiger