Shaft Sink Share Discussion Threads

[muckshifter] 25/1/2013 14:03

Hedgehog,
Not so busy this morning, so I followed your link to the other site and read the posts there.
I would ask you to give serious consideration to several questions, and if you are still as supremely confident of the outcome as you seem to be.. well best of luck and I hope you're right.

First question: Have you ever seen any company when faced with litigation / dispute procedures say anything other than "not to worry our case will prevail, we are confident"? - I haven't, and by definition 50% of them were losers.

Second question: If, as you say, SHFT have the contract sewn up and are not liable in any way for the failure at Eurochem, why did they spend 9 months trying to negotiate changes to the contract terms, or a negotiated termination, before unilaterally terminating?

Third question: Again, if shft have things sewn up, why did they actually put the outcome of just one contract, Eurochem, in the register of risks in their flotation prospectus?

Q4. Arbitration procedures are very expensive (if you lose) and consume a huge amount of senior staff time. Do you really believe Eurochem would waste the time of senior staff working on a project worth £billions, which is running at least a year behind schedule, not to mention the cost of the arbitration, if they didn't have a decent case?
Regards.

[gleach23] 25/1/2013 11:55

had this on my watchlist for a while after holding early last year

just had a nibble...can actually buy slightly cheaper online than sell (36.82 vs 36.84). it's also showing as a sell on advfn

plan is to nibble now and accept the risk, then wait for IMS before deciding whether to top up (or sell out!)

[balcony] 25/1/2013 08:44

Also watching this with interest

[empirestate] 25/1/2013 08:04

looking rather unloved again here, a tad too earlier for entry yet imo but should be worth a punt if it hits a crystal ball figure of 30p

[muckshifter] 25/1/2013 07:57

Yes Hedgehog, but I don't think he is a director, and the main directors hold well in excess of 10% of the company, as well as options etc. (as opposed to 0.3% at SHFT).

Not convincing to me.
Regards.

[hedgehog 100] 24/1/2013 22:05

Shaft Sinkers' pre-tax profit for the last three reported years has been consistently large:-
2009: £12.46M.;
2010: £16.71M. (incl. exceptional £3.8M.: £12.91M. after this);
2011: £13.51M.
And also pretty similar excluding the exceptional credit in 2010, with modest year-on-year growth excluding that exceptional credit.
The 2011 result equated to earnings per share of slightly over eighteen pence.

Viewed in this context, the disappointing result in the first half of 2012 (i.e. eps of 1.6p) may be seen as an aberration, with a return to the norm meaning a return to eps of about 9p per half year, and growing modestly.

Moreover, the company has taken steps to address the first half disappointment, with a the new Chief Operations Officer looking very good in this respect.

From 30.8.12 interims:-
"Management has identified the causes of operational underperformance and is implementing changes to personnel and working methods to improve efficiencies."


Combined with the company's high turnover of about £200M p.a., then the forecast eps of 20.22p for the current year looks very achievable.


In addition, the company's financial position is strong, with net debt of £8.6 million at the interim stage (31 December 2011 : net cash £6.1 million) being improved post period-end by £16.3 million cash inflows. The dividend therefore looks very safe (the interim dividend last Autumn was maintained despite the disappointing first half), and indeed is forecast to increase this year by 12.5% to 8.1p: presumably 5.4p after the full year results, and 2.7p after the interim results, on the basis of the same 2:1 split as previously.

[hedgehog 100] 24/1/2013 21:08

One of my recent successes has been PVCS, but despite its stellar rise recently there was only one insider share buy in advance of this, and a small one at that:

08/11/2011 13:16 UKREG Director/PDMR Shareholding LSE:PVCS PV Crystalox
30,000 0.007%
7.9829p


Compare and contrast that above PVCS buy, with SHFT's recent director share buying:

The SHFT buying amounted to 0.31% of the company: as a percentage of the company, that amounts to more that FORTY TIMES the size of the PVCS buy.
The SHFT buying amounted to about £58,400: in financial terms, that amounts to about that TWENTY FOUR TIMES the size of the PVCS buy (about £2.4K).

And yet at 13p, PVCS is now about 63% higher than at the level of that small insider buy.

I rest my case.

[hedgehog 100] 24/1/2013 17:51

muckshifter 23 Jan'13 - 18:14 - 16 of 19 0 0
"...We'd better just agree to differ and not waste any more time on the subject.
Regards."

WyleCoyote,

I had hoped to do what Muckshifter requested and move on from this subject, agreeing to disagree!

I think that the director cluster share buying is a good sign; you don't; apparently we're not going to agree.

But let me just try to list a few key points.

* You state that the directors "have inside knowledge": well, there are legal restrictions on directors buying in that situation.

* In an illiquid share like SHFT it wouldn't be helpful for the liquidity to be reduced even further by insiders taking too many more of the shares; it could put off institutional investors. That's why insiders sometimes sell shares, which is regarded as a good sign.

* Even if the buys were token, which I don't accept with a buy of about £30K, why bother making even a token gesture if you don't care about the share price performance, or don't think that the share is undervalued?

* "...they should be pulling out all the stops to get as much stock as they can (I know I would)." Not everyone is driven by greed; they already have a lot of options, and have now added to those by sharebuying; I don't see why that shouldn't satisfy most people. You can also reverse your argument: if the stock is high-yielding and underpriced, then they don't need so much as otherwise in order to make decent money.


PS. Re your comment that: " ... you seem to imply that directors who have holdings in the company that they run, they will be distracted by the share price performance and not running the business".
When what I actually said was: "They're probably busy running the company rather than monitoring its share price and sharedealing, which I also find reassuring, and which is what I would prefer."
So please don't misrepresent what I said: firstly, I wasn't talking about share holdings per se at all, but rather share price monitoring and trading: it is actually possible to own shares and not even look at the price for years, let alone trade in them.
And secondly, I didn't even say that share price monitoring and trading is a problem for directors if not done to excess.

[hectorp] 24/1/2013 12:21

the NMX oil and gas producers chart in hedgehog's header, shows it to be at a one year resistance.
but, there is an interesting 5 year rising support line too. Putting it all together I suggest it more than likely these oil and gas producers are close to breaking back upside ( have probably already started to).
Not sure if it has much bearing on SHFT though.

[wylecoyote] 23/1/2013 19:23

Hedgehog, what an astonishing perspective you have on Director purchases, re your comments 23 Jan'13 - 17:55 - 15 of 17. If I understand you correctly, you seem to imply that directors who have holdings in the company that they run, they will be distracted by the share price performance and not running the business?

It is only average joes such as me and you who are distracted by the share price movements, as we want to make our millions....lol.

Yes, I'd have to agree with Muckshifter, they are token gestures by the directors and doesn't reassure me that they think the underlying business is undervalued by the market. When I first looked at this, not soon after the placing I wasn't happy with what they had been awarded(quite a considerable sum), just for getting the company listed on the stock exchange.

A directors main responsibility is to develop shareholder value, as that is who they are accountable to. Therefore, there interests should be aligned with those of the shareholders. Also, they would have a longer term view of the business and have inside knowledge. Why would they be distracted by the short term movements of the SP, when they know that the company will increase it earnings over the next 10 years or so?

Any investor(or director for that matter) should know what drives share price performance, that is growth, valuation and Income. So if the yield is currently 20%(that i have seen bandied around) and the directors know that this will be maintained they should be pulling out all the stops to get as much stock as they can(I know I would).

In my opinion, just paying them a good wage is not a good incentive for driving shareholder value in the medium to long run.

There are many incentives given to directors in the city that i think erode shareholder value as they are very short term in nature and are poor value. So your reasoning just to pay directors a salary has some merit, but not that much. To summarise i think if directors are buying stock, have options based of company performance they can be a good incentive to keep the organisation growing and giving dividends. Actually, I think directors getting bonuses through their dividends have a tax advantage? I could be wrong, but they can house at portion of their shares in their partners name,etc.

[hedgehog 100] 23/1/2013 18:47

Anyone seeking further reassurance regarding the EuroChem-SHFT dispute, from SHFT's perspective, please refer to the following helpful posts on this subject by Sigala on his 'ValueGrowth' thread:

ValueGrowth Investing (VLG)
Sigala 20 Jan'13 - 17:36 - 264 of 267
Sigala 20 Jan'13 - 17:46 - 265 of 267

[muckshifter] 23/1/2013 18:14

Sorry Hedgehog,
but now you are into imagining insinuations. At no time have I insinuated that they "don't care about the company", or that "they don't give a damn". In fact if I was paid the sort of salaries these guys get, I would care a great deal about the health of the company.

So I'm not contradicting myself. And I've worked with a few "non founding" directors of relatively small companies who invested proportionately considerably more of their income in the company they worked for.

We'd better just agree to differ and not waste any more time on the subject.
Regards.

[hedgehog 100] 23/1/2013 17:55

Muckshifter,

Where directors have a larger stake in the business, it's usually because they have been involved in founding the company, or buying it out.

That's not the case here, and Shaft Sinkers has been going for many decades:
"The Group's original operating company, Rossal (then known as Shaft Sinkers (Pty) Limited), was incorporated in 1961 as a subsidiary of Anglo American Limited."


The directors were employed on high salaries to run the company, because the company wanted to get the very best - I find that reassuring. The fact that they don't have a large amount of control as shareholders shows that it's not just a case of controlling shareholders awarding themselves high salaries - they're being paid on merit.

They're probably busy running the company rather than monitoring its share price and sharedealing, which I also find reassuring, and which is what I would prefer. And with the restrictions on directors sharedealing, combined with the limited liquidity of SHFT's shares, it may simply not have been possible for them to easily buy more.

£30K. could have been about a month's salary after deductions, and maybe the rest is tied up? There's also the issue of transferring funds from South Africa to London to buy shares, which if nothing else could perhaps be frowned upon if done to excess.

Finally, if they don't care about the company, which seems to be your insinuation, then why would they be concerned about making any sort of "gesture" at all? If they 'didn't give a damn', then they simply wouldn't do anything. You therefore appear to be contradicting yourself.

[muckshifter] 23/1/2013 17:14

Hedgehog,
To make a "gesture" by buying £3K worth of shares when you are paid £600K per year, would perhaps have been construed by many as the wrong sort of gesture!

But buying £30K worth has obviously impressed some here as a significant act, ie. about 3% of his income from the company in 2011, invested in the shares. I've frequently invested many times that percentage of my annual income in a share, as well as often more than £30K in any one company, and I don't earn anything like half a million / year. In fact, my very first investment was approx 30% of my salary at that time in the company I worked for, despite the advice I received from Mr Broadbent, the B of BWD the brokers, as the company was on its knees at the time.

So I'm afraid I'm not convinced. I would guess that if you hold a few small company shares, you would find that a holding of 0.3% of the shares between the main operating directors, is unusually low.

But I wish you all the best with your investments.
Regards.

[hedgehog 100] 23/1/2013 16:15

Muckshifter,

Why buy any at all?

You say because they are token buys, but your analysis is flawed. As I have said:

"They don't look like token buys to me at all: Alon Davidov's buy alone was about £30K - he could have invested a tenth of that if he just wanted to make a 'gesture'."

So if they're larger than token buys, and they have lots of options already, why buy the excess? The obvious reason is that they think it's too good a bargain to miss. But as they have lots of options already there is no real need for them to buy more than they did.

And it would have been hard for them to buy more quickly because of SHFT's limited liquidity, and probably not permissable at all now to buy because of the restrictions on directors dealing when they have inside information.

But even if they were buying just to help confidence, that would still be a good sign, because it would show that they think a 'statement of confidence' in the company is justified in view of the problems it had experienced. Why is that a problem? Would you prefer that they had not issued such a statement of confidence?

[muckshifter] 21/1/2013 15:34

Good point Hedgehog!
Why buy any at all?
Unless it's "a token buy to help confidence in the face of a number of problems"?
0.3% total holding between the main directors does not inspire confidence in me, but it seems to have worked with you, and probably many others.
Regards.

[hedgehog 100] 21/1/2013 15:13

Muckshifter,

Good point: why buy more shares than they did (or indeed any at all) if you have "lots of options"?

Also, bear in mind the limited liquidy in SHFT shares ... how many could the directors actually buy easily? The market size here is just 4,000 shares - Alon Davidov bought nearly twenty times that much.

[muckshifter] 21/1/2013 15:06

Sorry Hedgehog,
but I still think £30K worth of shares in the context of total remuneration of £598,000 (excluding IPO bonus which raised it to 883,000) in the 2011AR, does constitute a "gesture", particularly when also considered in the light of lots of options that he can take up in due course if the company succeeds.

My expectation in terms of the arbitration would be at least another six months, but we'll see in due course no doubt.
Regards.

[hedgehog 100] 21/1/2013 14:45

Muckshifter,

Director cluster buying of the nature of SHFT's recently has consistently been a fantastic predictor of good future share price performance.

They don't look like token buys to me at all: Alon Davidov's buy alone was about £30K - he could have invested a tenth of that if he just wanted to make a 'gesture'.

The SHFT-EuroChem dispute has been dragging on for quite a long time now, so settlement soon wouldn't be particularly quick: and I'm very confident that the arbitration will settle the dispute, which would be in the interests of both parties.

But even if it didn't, SHFT is still massively oversold and should rebound strongly with the coming update and results. An expected dividend yield of over 20% for the current year at the current share price shows the deep value here.

[muckshifter] 21/1/2013 11:07

Hedgehog,
Do you really think that ownership of 0.3% of the company's shares between 3 directors represents heavy commitment. The amount spent in each case was surely a tiny fraction of their annual income from the company - in other words it looks like a token set of buys to help confidence in the face of a number of problems.

When the Eurochem contract was terminated, there were loads of people on the shft board predicting that it was good news. Not me though as I was suggesting something precisely on the lines of what has happened. And I will be very surprised if there is a quick settlement.
Regards.

[bill-e] 21/1/2013 08:23

Trades shown as sells are buys?

[hedgehog 100] 20/1/2013 14:10

Thanks for the positive responses to this new thread.


SHFT's EuroChem update shortly before the recent SHFT directors' share buying sounded very confident of SHFT's case, and the fact that the case is going to arbitration is more positive than legal action -

15/11/2012 07:01 UKREG Shaft Sinkers Holdings Plc Interim Management Statement
"EuroChem Update
On 5 October 2012 the Company responded to the announcement by EuroChem that it had filed a claim against Shaft Sinkers (Pty) Ltd in relation to its project with EuroChem which was terminated with effect from 20 April 2012. The Company has reviewed the arbitration claims, and after consultation with legal counsel, continues to believe that the claims are without merit, and will contest them robustly. A claim for a net amount of $15 million has been submitted to EuroChem for amounts still owing under the contract."


Similarly, a Citywire tip of SHFT on 3 January suggested that SHFT's broker expected early settlement of the issue -



But actions speak louder than words, and in this respect the SHFT directors have put their money where their mouth is by buying heavily into their own company at the current depressed share price.

Here are the details of that recent SHFT director share buying:

05/12/2012 15:10 UKREG Shaft Sinkers Holdings Plc Director/PDMR Shareholding
"Shaft Sinkers was informed that today, Mr Louis Germishuys, Chief Operating Officer of the Company,acquired 34,115 ordinary shares in the Company at a price of 43.75 pence per share. Louis Germishuys had not previously held any shares in the Company.
Accordingly, Louis Germishuys' resultant beneficial interest comprises 34,115 ordinary shares, representing 0.07 per cent. of the issued ordinary share capital of the Company."


28/11/2012 09:54 UKREG Shaft Sinkers Holdings Plc Director/PDMR Shareholding
"Shaft Sinkers was informed that today, Mr Christopher Hall, Chief Financial Officer of the Company, acquired 13,000 ordinary shares in the Company at a price of 42.5 pence per share.
Accordingly, Christopher Hall's resultant beneficial interest comprises 23,000 ordinary shares, representing 0.05 per cent. of the issued ordinary share capital of the Company."


23/11/2012 07:00 UKREG Shaft Sinkers Holdings Plc Director/PDMR Shareholding
"Shaft Sinkers was informed on 22 November 2012 that on that day, Mr Christopher Hall, Chief Financial Officer of the Company, had acquired 10,000 ordinary shares ("Shares") in the Company at a price of 38.5 pence per share. Christopher Hall had not previously held any Shares in the Company.
Accordingly, Christopher Hall's resultant beneficial interest comprises 10,000 ordinary shares, representing 0.02 per cent. of the issued ordinary share capital of the Company."


22/11/2012 11:11 UKREG Shaft Sinkers Holdings Plc Director/PDMR Shareholding
"Shaft Sinkers was informed on 21 November 2012 that on that day, Mr Alon Davidov, Chief Executive of the Company, had acquired 78,554 ordinary shares ("Shares") in the Company at a price of 38 pence per share. Alon Davidov had not previously held any Shares in the Company.
Accordingly, Alon Davidov's resultant beneficial interest comprises 78,554 ordinary shares, representing 0.17 per cent. of the issued ordinary share capital of the Company."


These are fairly sizeable investments, and suggest strongly that the directors are confident in SHFT's prospects, including re. the current dispute with EuroChem.


As far as I am aware SHFT is not involved in any other arbitration or legal disputes, so when this is settled there should be no such overhang of concern, and the shares should rebound strongly.

[thread perry] 20/1/2013 12:09

Hedgehog a good idea for such a thread and will add to my favourites

Hope to be a regular viewer and contributor :-) TP

[affc21] 19/1/2013 12:29

Hi Hedgehog, I have added your "Mining Services Companies: 'Picks & Shovels' Plays" thread to my favourites list. I am sure it will make good reading for investing within this sector.
I am invested in two mining service companies at present, CAPD of which you are aware of and GDL (Greka Drilling).

----------------------

GDL (Greka Drilling) is a specialized unconventional gas drilling company in China. Coal bed methane is the most significant contributor to unconventional gas resources in China, with a total estimated undeveloped resource base of 1,300 Tcf. GDL has a first mover advantage in the application of specialist LiFaBriC horizontal drilling methodology in the exploitation of Coal bed methane in China. Of most interest are two recent contract wins, which is in addition to their workload with GDG (Green Dragon Gas).

11 December 2012 RNS - Greka Drilling signs contract to drill 100 wells in Sinopec's Ordos Basin:


28 December 2012 RNS - Greka Drilling signs drilling contract with CNPC:



GDG (Green Dragon Gas),
16 January 2013 - Operations Update:
-- As at 31 December 2012, 51 LiFaBriC wells had been drilled at the Company's production block in Shizhuang South (GSS), representing a 96% increase on the year earlier.
-- There are an additional 11 LiFaBriC wells across the Company's 5 exploration blocks.
-- The total number of LiFaBriC wells across all blocks was 62, an increase of 88% year on year. These drilled wells are at various stages of completion, including establishing pipeline connections and de-watering:


Note: LiFaBriC horizontal drilling methodology is solely used by GDL in China.

Edit: GDL is a AIM listed company.

----------------------

SHFT - I am not invested in due to EuroChem files $800 million claim against Shaft Sinkers

05 October 2012 RNS - Statement re EuroChem:




15 November 2012 RNS - Interim Management Statement:
EuroChem Update

On 5 October 2012 the Company responded to the announcement by EuroChem that it had filed a claim against Shaft Sinkers (Pty) Ltd in relation to its project with EuroChem which was terminated with effect from 20 April 2012. The Company has reviewed the arbitration claims, and after consultation with legal counsel, continues to believe that the claims are without merit, and will contest them robustly. A claim for a net amount of $15 million has been submitted to EuroChem for amounts still owing under the contract.





Noticed the SHFT Director buying since the Interim Management Statement.

Would appreciate your/others thoughts as to this litigation with Eurochem...

[hedgehog 100] 18/1/2013 20:47

With SHFT's close today steady at 39p after the morning rise, more indication this evening that its chart has bottomed -

"SHFT BUY-IF

Daily Commentary

Our system posted a BUY-IF today. ...

A bullish pattern has developed and a BUY-IF alert is issued today. ..."




SHFT hit the low 30s in October when some work stopped at two of its projects.
(At Moab (AngloGold Ashanti), 5.10 - 30.10. And at Saffy (Lonmin), 17.10 - 30.10.)

These operational problems now look to have been sorted, and indeed mining major Lonmin is up about 25% since its Autumn lows, and its chart looks strong.

And CAPD suffered from a similar operational problem to SHFT in December with a temporary work stoppage in Egypt, since when it has doubled from its lows.

And yet at 39p SHFT is up barely a quarter from its low of 31p, which was hit when the stoppages were ongoing and fear of them continuing was rife.

But since then, just a few days in the 'upper mid' 30s in mid Nov. has been the low. And there has been good support at about the current price since latter November, when the first of the SHFT director 'cluster' share buying was announced.


P.S. Please note that I started a thread two days ago for the mining services sector:
"Mining Services Companies: 'Picks & Shovels' Plays"

It's for foreign-listed mining services stocks as well as the UK-listed ones (CAPD and SHFT).
Contributions from other posters would be gratefully appreciated.