Shaft Sink Share Discussion Threads

[empirestate] 06/2/2013 11:42

hedgehog, almost forgot about the trading statement in a couple of weeks. Considering the directors were snapping up at just under 40p a few months back and they appear to have taken remedial actions where necessary, we should be geared up for a decent outlook for 2013.

[mg78] 06/2/2013 11:38

Just been put on my radar. Graph beginning to look a tad bottomish. Will keep a watch on this for early signs of recovery. Cheers for now.

[empirestate] 06/2/2013 11:38

that 40k put a spanner in the works on the sp, but better to get rid of it now

[philjeans] 06/2/2013 09:46

Yep - massive potential here for a sustained rise.

As long as current trading continues satisfactorily. the Euro chem thing will just be a write-off in the balance sheet in due course.

[empirestate] 05/2/2013 21:03

looks like it is buy time, price movement on the up against the run of trade signals a seller clearing imo, should see an rns over the next couple of days.

[empirestate] 05/2/2013 09:45

there is some of the overhang clearing today. hopefully we will have a RNS to see who it is and how much, if any they have left. one positive thing is that we have a buyer at this level so this could well be the bottom.

[empirestate] 04/2/2013 15:25

looks like there is a seller here to clear before we have some upward momentum

[muckshifter] 04/2/2013 09:37

TechnoFiend,
"What sort of firm launches an $800m claim against a firm with a market cap of less than 1/10th of that anyway?"

To submit any dispute to arbitration you need two things:

A basis for the case you are making, and a method of valuing your claim.

In the case of the Eurochem dispute, there are a few potential reasons that may form a basis for the claim from Euro's POV, but we don't know enough about the details of the contract to judge which, or their validity.

The $800m claim looks to me like something based on liquidated damages, in other words it would be an estimated daily cost to the client for late delivery of the works, written into the contract, times the expected difference between the old completion date and the new one.

No doubt, if that is the basis, there are plenty of circumstances that an arbitrator would use to pick holes in, and reduce, the claim, and Eurochem would be expecting that. They obviously know that shft couldn't pay if they were awarded $800m, but that just looks like a sum resulting from the basis chosen for the claim, without any acknowledgement of mitigating circumstances.
Regards.

[empirestate] 04/2/2013 09:17

looks like a decent flatline now on the chart. time to pick up a few now imo.
trading statement in a couple of weeks. should be a decent forward statement now the troubles of 2012 are behind them.

[technofiend] 30/1/2013 21:53

I have positions on both SHFT and CAPD.

Both are clearly very undervalued because of external and in my opinion temporary factors.

In CAPD's case it is the travails of their largest customer Centamin.

In SHFT's case it is because of the uncertainty hanging over the firm because of the Eurochem arbitration claim.

I am betting that both these external factors will eventually be resolved positively in the favour of the two firms.

Even if SHFT have to pay out a large sum, the chances are the share price rises significantly anyway because the uncertainty over the potential hit from the arbitration dissipates.

What sort of firm launches an $800m claim against a firm with a market cap of less than 1/10th of that anyway?

[muckshifter] 30/1/2013 18:46

WyleCoyote,
His optimistic view on shft might prove to be OK if he's lucky, but I'm afraid anyone who tries to belittle the views of someone who has seriously studied a company in the sector he has worked in all his life, annoys me. Especially when hedgehog tries to sound knowledgable and certain, about something he clearly knows almost nothing about, ie. heavy civil engineering contracts and contracting, and international arbitration proceedings.

Just as a matter of interest, I've now looked in reasonable detail at a total of 48 companies as a sort of first screening, and I don't think any of them (where the info was easily found - all but one or two) had a directors' shareholding as low as 0.3% or as low in terms of purchase value.

Hope hh learns to treat people's views with a bit more respect in future.
Regards.

[wylecoyote] 30/1/2013 12:43

Muckshifter, I decided not to bother engaging with Hedgehog. Like you earlier comment, he sounds like a politician. In my opinion, a 'wordsmith', whereas in investing you need to keep it simple. A spade is a spade... So i might suggest that you just ignore...lol

[hedgehog 100] 26/1/2013 19:06

Extraordinarily high SHFT volume yesterday (Friday), of 2,426,807 shares traded: that's 5.1% of the company's shares, and more than ten times the daily volume for over a month.

SHFT three-month chart:



Although the shares were half a penny down on the day at 37p, they recovered after the early morning low of 36.5p, and the LSE website shows only buys in about the last three hours of trading:

Time/Date Price Volume Trade value Type
16:09:13 25-Jan-13 37.59 5,000 1,879.50 O
15:30:50 25-Jan-13 37.60 20,000 7,519.50 O
15:22:50 25-Jan-13 37.65 1,500 564.75 O
13:46:29 25-Jan-13 37.68 2,622 987.84 O
13:31:47 25-Jan-13 37.68 2,196 827.34 O




Could this have been the final climactic sell-off before recovery? The value traded would have been about £897K. at the closing price, which certainly suggests institutional investors. While there was both big selling and big buying, people sell for many reasons, but only tend to buy because they think it's a good investment. And I would think that risk-adverse institutional investors would satisfy themselves as to a company's current prospects before buying in big time. Which bodes well for the company's imminent trading statement.

Technically, there looks to be a firm support level at about the current level of 37p.

[muckshifter] 25/1/2013 19:20

Hedghog,
You brought up PVCS, to "prove" your case, not me.

You said
"So, before PVCS's rise, why weren't the other directors filling their boots with PVCS shares? According to your philosophy, the company 'couldn't' have been undervalued, or they 'would' have been doing that.

So you see, you are posting complete nonsense."
Which presumably means that you are confusing me with another poster. I didn't suggest anything at all about what directors should or shouldn't buy, or when they should buy.

And you surely don't really believe that the shft directors couldn't have bought many times more shares than they did just because you see a small "normal market size" when you look at an internet broker.
Goodnight to you.

[hedgehog 100] 25/1/2013 18:58

muckshifter 25 Jan'13 - 07:57 - 22 of 30 0 0
"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."


Muckshifter,

You're being very misleading re PVCS. Most of that ownership is accounted for by just one director who owns about 10%, who has been there for a very long time. Another one owns about 1%.

So, before PVCS's rise, why weren't the other directors filling their boots with PVCS shares? According to your philosophy, the company 'couldn't' have been undervalued, or they 'would' have been doing that.

So you see, you are posting complete nonsense.

It is also fundamentally misleading of you to suggest that the SHFT directors actually had the choice of buying far more shares than they did in the late November / early December, when liquidity would not have allowed it.

For them to have actually bought far more might also have been concerning, as it could suggest that some sort of share price support operation was deemed necessary.

I know from a long time investing that the sort of director cluster buying that has occurred at SHFT is an excellent predictor of future great share price preformance. In any one of those case you could have argued: 'why aren't they buying more?'


P.S. Empirestate - your recent very premature PVCS sale suggests that your 'crystal ball' is rather foggy!! -
empirestate - 13 Dec 2012 - 08:22:57 - 4724 of 4780
"have sold the majority of my holding this morn and left a few in the back pocket...."

[muckshifter] 25/1/2013 18:55

Sigala,
Best of luck with your investment!
When I looked initially at shft, there were a number of things which kept me out, but by far the most serious was the looming problem at Eurochem (this look was before the termination announcement). I looked very carefully at the small amount of information provided to shareholders by way of the prospectus, ARs and RNSs, and decided that there was almost certainly going to be a major court or arbitration dust up, and in due course, it came.

Since then, I've been of the opinion that there has been an attempt by shft to convince shareholders that all is well. For example, one of the RNSs announced a piffling amount of new work and even suggested that variation payments constituted "new work", and of course the directors bought a few shares.

The big contract that they announced (and of course the contractual terms for that remain secret) should be very good news provided shft get it right, but this is the highest risk type of contracting (apart perhaps from muckshifting which has similar risks). It should help the cash position while they overcome difficulties on I think it's three bad jobs, and in due course make a good profit - if they get it right. But if they get it wrong, it's similar to Eurochem in that it is a critical element of a multi billion investment, which might be painful.

One RNS that did impress me was the one where they won the contract for the next 1000 feet (or something like that) of a shaft that they are sinking. Either the client, or shft seems to have designed that contract sensibly.
Regards.

[hedgehog 100] 25/1/2013 18:38

Muckshifter,

I WAS addressing your first point when I said that SHFT were trying to solve the project problems, because changing the contract would help them to do that.

Refer to SHFT's standard terms posted by Sigala on his ValueGrowth Investing thread: Sigala 20 Jan'13 - 17:36 - 264 of 268

One extract: "Common variations include provisions relating to over-runs, liability limitations, cost escalation (for wage increases, raw materials price increases, poor ground conditions ... "
SHFT were contracturally protected against the problems of poor ground conditions, but were probably willing to take on more responsibility for that if the contract was adjusted accordingly.

But although SHFT are contracturally protected, that doesn't mean that there won't be some costs if the project goes bad, which is why it was in the register of risks.

It's always possible to drag up examples of cases that have been extended and costly.

But many cases are settled fairly quickly and cheaply, e.g.:

* "PV Crystalox Doubles in London on Contract Settlement
By Todd White & Ben Sills - May 18, 2012 4:39 PM GMT+0100 .
...PV Crystalox ... the settlement announced today, which was struck in a deal outside of continuing arbitration, company board Secretary Matthew Wethey said in an interview."


* In the first half of November Lord McAlpine was subjected to false allegations, and his resultant claims for compensation against the BBC and ITV were settled almost immediately:



If both parties want a quick settlement, then that is very possible. In this case, a deal could be agreed bewteen EuroChem and SHFT ahead of the actual arbitration meeting(s) themselves.

Perhaps that is how SHFT's broker expects early settlement of the issue; as reported in the Citywire tip of SHFT on 3 January -



In conclusion, I am not ignoring important points at all, it is you who is posting stuff that is largely irrelevant.

In my opinion Muckshifter you are a 'wolf in sheep's clothing'. You may fool some people but you do not fool me.

[sigala] 25/1/2013 18:09

Hi HH100 and Muckshifter,

Reading your discussion with interest.

You make some very good points Muckshifter and it is interesting to hear your perspective on arbitration procedures from your working life.

I think your points are all things that investors should consider carefully before deciding to invest in SHFT.

From the research that I did - I was left with the impression that the Eurochem project was a big part of that company's plans - they had invested a LOT of money there. It seems to have now been completely derailed - so you would expect quite a lot of "heat" around the situation. Eurochem are a big company with deep pockets - so they will probably be more able to pursue this arbitration if it drags on.

I am not an expert in these sort of matters - and I can well believe you muckshifter when you say that things can get complex and exepensive.

Another good point that you make is the drain on the time and energies of senior management - the longer this drags on.

On the face of it SHFT's share price looks pretty bombed out - for a company of their size with their expertise and order book - they should be multiples of where they are.

A lot of investors will stay away until there is clarity over the Eurochem situation - and that's a perfectly sensible decision to make I think.

On balance I have decided to take a small initial stake in SHFT - whilst conscious that it is a potentially high risk situation. That is my choice.

I value the alternative points as presented by muckshifter - we have to consider all things when we invest - we owe it to our wallets!!

Good discussion!

Regards,

Sigala

[muckshifter] 25/1/2013 17:40

Hedgehog,
You seem to almost always give a "politicians" answer to my points, ie. you answer a point that I didn't make.

"The fact that SHFT tried hard to solve the project problems is what any good contractor would do, and helps to explain why they now have a strong case." is nothing to do with my point.
Any contractor has an obligation to solve contract problems - ie. do the job. But that was nothing to do with the point I made, which was that while doing their best, no doubt, to do the contracted work, they were also trying for at least nine months to negotiate changes to the terms of the contract - a very big difference. If those terms left them completely free of risk in terms of consequences in the event that they failed to perform, there would have been no point to those negotiations.

"The project was risky, which is why it was in the register of risks. But that's different from saying that SHFT now don't have a strong case."
How was the project risky then? You are saying that the job was cost plus and that shft had no responsibility for the costs incurred when it went badly wrong. So why on earth would they mention it (and it was the only actual contract they mentioned in the long risk register revealed in the prospectus).

"You don't appear to understand the difference between arbitration and litigation. Arbitration is simply negotiation with a mediator (arbitrator); it's not about 'winning and losing', it's about negotiating an agreement. The costs are far less than legal action, and as there's no 'loser' your point about costs is wrong."
That made me smile. I've worked for contractors for decades at senior levels and been involved in two arbitrations and one major litigation, so I can assure you that I do understand the difference and the likely cost of each. I think you are talking about mediation - which is not arbitration. Arbitration, except on the simplest of issues, is often as expensive as litigation, and may use more staff time. Also, we have not been told whether or not it is contractually binding in this case. Normally it is, but not always - if not, it may be followed by court action. One of the arbitrations I know all about was very expensive and time consuming - we (the company I worked for) won and had all expenses and outstanding payments made to us, the only difference from a court case that I noticed was that the arbitrator made the award conditional on our silence - we were not allowed to tell anyone the details of the settlement, to spare some civil servants blushes, no doubt.

For an idea of the cost of international arbitration, which this is, have a look at the case in London between the Ugandan Government and Heritage Oil. The arbitrator has so far, imho, been working for something like a year on the question of whether or not the grievance submitted for arbitration falls within his remit. The Ugandan Government has had angry debates in parliament about the £millions the arbitration is costing - and I suspect it hasn't really started yet.

I'm not attacking shft at all, but when I see someone pushing a view which is in my opinion ignoring important points, I respond if I'm not busy.
For your sake, and for other shareholders, I hope the Eurochem situation is resolved without too much bloodshed and soon, but I wouldn't bank on it.
Regards.

[hedgehog 100] 25/1/2013 16:45

Muckshifter,

Thank you for highlighting the fears held by many investors regarding the EuroChem-SHFT dispute. They help to explain why the SHFT share price is so depressed.

The fact that such fears are prevelant I regard as a GOOD thing, because it means that when they are aleviated by a resolution, as I believe they will be, then there will be a massive rebound in SHFT's share price.

Close examination of your points though shows that they are a bit silly:
* The fact that SHFT tried hard to solve the project problems is what any good contractor would do, and helps to explain why they now have a strong case.
* The project was risky, which is why it was in the register of risks. But that's different from saying that SHFT now don't have a strong case.
* You don't appear to understand the difference between arbitration and litigation. Arbitration is simply negotiation with a mediator (arbitrator); it's not about 'winning and losing', it's about negotiating an agreement. The costs are far less than legal action, and as there's no 'loser' your point about costs is wrong.
* Some execs in EuroChem are probably desperate to try to cover their backs by passing the buck to SHFT. And the fact that the project is worth £billions means that the arbitration costs will be a tiny fraction of that.

And read more of Sigala's excellent posts on his ValueGrowth Investing thread:
Sigala 23 Jan'13 - 18:35 - 267 of 268
Sigala 23 Jan'13 - 22:16 - 268 of 268


In addition, EuroChem's management haven't made any reference to legal advice supporting their case, unlike SHFT who have.


To be honest Muckshifter, you remind me a bit of a poster called THE DART who spent much time and energy attacking PVCS in the late summer, trying to sew fears with silly nonsense. He was proven to be completely wrong.