Southern Bear Share Discussion Threads

[liarspoker] 12/3/2007 08:40

There's probably a larger delayed trade or 2 to come through Equaliser.

[the_equaliser] 12/3/2007 08:39

on small trade a rise,

where as last week on no sells a drop in sp

strange

[egoi] 11/3/2007 12:07

It's the company and the fundamentals that matter. John Pither helped find some excellent companies at St Helen's.

A p/e of about 8 which looks like it is going to be blown away - and surely upcoming broker upgrades - looks like they have found a winner this time.

Not unusual to see a few derampers arrive on a thread though when they think they've spotted a good thing.

[stegrego] 11/3/2007 11:38

Its not so much omens - its the actual quality of the stuff the 3 have floated in the past - seems that they get the bottom of the barrel where floats are concerned

[masurenguy] 11/3/2007 11:15

Well look at the fundamentals rather than the brokers.

Alternatively if you are considering good or bad omens/associations, the current Southern Bear Chairman, John Pither, was also previously Chairman of Tanfield before handing over that role to Roy Stanley in 2005.

[stegrego] 11/3/2007 10:45

Only concerns here are threefold -


Hoodless Brennen
SVS Securities
Williams de Broe


HB - no need to say more
SVS - floated the 2 worst performing floats of 06 (companies escape me but they did cos i saw a table and they had the bottom 2)
WdeB - involved in several dubious floats in the past

Any thoughts - as these 3 really put me off

[kenatbabken] 10/3/2007 13:25

A few of the reasons why I invested in STBR

Operational overheads exc salaries are less than 8% of turnover

Gross Margin is 46% (CFT,s is 25%)

Net cash inflow for 2006 was £1.154m

NAV 3.09p per share for this year

Estimates for this year
Revenue £4.545m GP £2.045M PBT £1.076M
(With the recent RNS these figures likely to increase by 10%)


I enclose below an excerpt from Chieftains last set of annual accounts
which show where they see the potential growth and profit (Notice the £38m
of contracts with 3 Blue chip companies



Engineering

At the beginning of 2005, we set ourselves challenging targets to use our cash
resources in the best interests of shareholders. We decided to target work in
the Engineering Services sector, a natural extension of our pipe fabrication and
general metal fabrication business carried out by R. Blackett Charlton, our
wholly owned subsidiary.

During the year, we recruited a team of experienced personnel in this field led
by Malcolm Oliver who joined the Chieftain Board in February 2005. To date, this
team has secured three major term maintenance contracts with three blue chip
companies with a total value of £38 million. Our aim is to develop long term
relationships with these companies by providing a first class service and
securing extensions to these contracts.

In addition, we are targeting other potential clients in the engineering
services sector to provide growth in this business and to improve our visibility
and quality of earnings.

Fabrication

The pipe fabrication facilities, the second mainstream activity of R. Blackett
Charlton, are presently running at full capacity. We are now tendering to secure
further work to maintain our levels of output in the second half of the year.

[woodcutter] 10/3/2007 09:52

egoi

I think your right, pretty much all my investments are in businesses that i have less knowledge of and i have probably looked at more of the downsides. It's always the same, if you've worked in the industry perhaps you tend to look at more of the negatives.

The important thing is we seem to agree on the quality of the business but for me it doesn't suit my investment style.


Good luck with it egoi

probably see you on other bbs from time to time

[egoi] 10/3/2007 09:25

I can't remember Alexander Pope's nationality to be honest, but hesuggested "a little learning is a dangerous thing?"

It's great you've posted your concerns, and i think it is only right to be aware on any investment of the downside, but perhaps because you have been in the industry you have looked for every pitfall and seen more than you might with your investments elsewhere. You've set even higher standards.

All entirely understandable, but I don't think Tarvail is seeking to become a mid sized company, rather a small steady grower.

And given that I like the sounds from management hitherto, and that trading satatement, overall I think this is considerably lower risk than most similar sized companies.

Having read all your thoughts I understand fully it isn't for you, but it is for me.

[woodcutter] 10/3/2007 08:31

okay chaps i've slept on it and my analysis of the situation is this:

It looks a very good well run small business and it's margins for the sector are very good. The management seem sound as well. I haven't looked in detail at the figures but they also seem good. I think there are difficulties growing organically, just as it's not so easy for others to enter their client markets the same applies for them entering other markets e.g oil ang gas. The capital cost to clients of equipment is not significant compared to the returns generated when the kit is running, the pay back period can be no more than a few years so clients tend to stick with trusted suppliers.


Aquisition may be the best route, welding together (excuse the pun) a series of small enterprises across the uk. Work from the olympics is possible but most of this will go to the big contruction players and they will need to build a relationship withem to get any business.

Whilst the share price might move up i think the upside is limited in the short term and there are risks and of course there are the warrants.

It's not selling a product that is in demand like say, tan or rcg, or even rgo, it has to go out and find business, so i dont see that kind of upside to the share price. So, for me i would only be willing to make a small investment and although this might give a decent return the size of my investment return would not be that big.

If you are prepared to invest big for the upside then it's definately worth doing, so i'm not negative, it just doesn't suit my investing style or my financial reward structure.

So as Duncan Ballatyne might say "It's ey good prooduct but aye carn't invest so eim oot." (apologies to any scots viewers)

Woody

[kenmitch] 10/3/2007 06:50

Great posts on tnis one. Thanks woody.

Agree re Tol. Confident they have further to go - and good chance of a bid at some stage.

Busy for a while from now - so unlikely to post more short term.

[woodcutter] 09/3/2007 22:47

egio and others

Other positives are the management seem to have worked their way up from the shop floor and hopefully educated themselves in the process (without wishing to be patronsing this was my route to chartered engineer status) so they SHOULD be very competant as this is a knowledge based business.

I've pretty much read everything now and it's high on my watch list. I'll mull it over through the weekend

good luck if your holding...........time to decide

egio
i note comments on tanfield, one i missed simply because i seem to recall having doubts about the management, shows we all get it wrong from time to time.

btw i also get the feeling it's a well run little company what perhaps concerns me is can it become a well run mid size company?

ken

tol is one of my mid/smaller holdings so it was a shame not topping up. Funny really if you look at my past posts there i'd thought about selling at 260p as i thought it overvalued, intending to get back in when it dropped. Just goes to show sometimes you must trust your instinct.. Nevertheless it looks like it might have a long way to run so even at it's current level it might be worth a few more, we'll see.

woody

[68steve] 09/3/2007 22:45

I reckon general market will retest 6000 in the next week or 2,data not inspiring peeps to rush back in,no follow thru happening just selling into any strength...The "Ping" factor has dissapeared for the foreseable future...

[james 2] 09/3/2007 22:35

Cheers steve for your cautionary commets.

regards

[egoi] 09/3/2007 22:34

Good........... -:)

Every trade reported (just looked) is an O Trade (Ordinary) therefore I've little doubt buyers outnumbered sellers today - market maker games to shake the tree?

Will be interesting if we see a rebound then on Monday.

Also the (usually forlorn!) hope of the weekend Press picking up on the news meantime, or the rags next week - surely the brokers will have to up their forecasts too..

[68steve] 09/3/2007 22:24

Already hold from 3.5 (thx Liars),added yesterday also but just reading between the lines,all IMHO...

[egoi] 09/3/2007 22:05

Steve your cynicism is noted. While today's trading could have caused some understandable cynicism I think at 4p the risk/reward became too good to miss (people said the same about Tanfield when it was 4p!). A forecast eps of over 0.5p looks like it'll be beaten so a p/e of under 8 appeals to me anyway!

And good news is good news (always amuses me the same names crop up on this site after good news trying to trash it!) -look forward to welcoming you as a shareholder if your negative post has the effect I suspect you hope! -:)

Kenmitch thanks for your comments on TOL; nearly bought when they went back below 200p but was uncertain like you about markets.

[kenmitch] 09/3/2007 21:44

Woodcutter.

I was temtped to buy more TOL but already have more than enough really. Also I worried that the markets could fall further. Not totally convinced about the current rally.

[68steve] 09/3/2007 21:11

Forgive me for sounding cynical but the RNS smacks of trying to inflate the share price for an acquisition,if after say 5 months business was 65% ahead they would be taken more seriously but 2 months is too soon..Hope they can win some nice contracts(olympics)but for the moment i see this as a pure punt but as usual only time will tell...

[egoi] 09/3/2007 20:42

Yes I understand fully your caution however a couple of quotes (below) are to me reassuring from the broker notes and the feel i get (after 25 years of investing!) is that this is a really well run little company - your point about management and its importance appears to be understood - the fact they don't say we are looking at acquisitions, but 'acquisitions with strong management' makes a nice change.

This seems like a soberly run relatively unhyped company so far, (typical of Jon Pither during his years at St Helen's imho):

'Due to Tarvail's established reputation and competitive and visible pricing strategy they expect
strong growth in demand from commercial and industrial sectors for pipe-work systems, as the
company expand from its core pharmaceutical and refrigeration sectors. Particularly targeted
are oil& gas and food & beverage sectors where there are similar characteristics.
Growth is also expected from expanding outside its current geographic area and they will be
looking to tender for increasing business.
As a one-stop-shop approach there are a number of potential acquisitions along the vertical
value chain. The management know of a number of companies with revenue of £1m- £10m
where the owners may be looking to exit. The listed shares would be the currency for
acquisition as the cash flow generated is largely committed to repaying the non-recourse loan.'

And:

'The proposed Board of Southern Bear intends to seek out further acquisition
opportunities with companies that have revenues of £1m to £10m where the
owners are looking to exit from the business. However, there must – as with
Tarvail – be a strong management team in place that will remain in order to
help achieve future growth. Ideally, such companies will be based in technical
sectors, but nevertheless in business areas that are compatible with Tarvail.'

[woodcutter] 09/3/2007 19:07

A cautionary note - From the hb research notes £3m of the £3.6m revenue for 2006 yr end was with, i assume, gsk. Despite having a two year rolling contract for this work which appears to be the schedule of rates work, there is too much dependancy on one client and risk needs spreading more evenly across more clients.

worth checking this! dyor

egoi

i'm not saying don't invest here just be aware of the pitfalls/risks

The upside of this gsk? contract is probably, (but we don't know) that it's all based on schedules of rates in which case it's a no brainer. But i would like to see client diversification. I might invest myself yet! but if i do it will only be a little punt on the basis i might lose the lot.

One other point worth mentioning in having worked with gsk (particularly skb) is they do procrastinate, projects are on/off changed, redefined, depending on where they think their market is going. I recall a particularly changeable time with toothpaste!

This can be both good and bad. Good if mid project as you get extra work. Bad if your waiting for a project to start as you have men standing around with their fingers up their......... and your still paying them.

woody

[egoi] 09/3/2007 18:54

Thanks Woody for a very helpful summary.

I must admit I nearly bought this morning on the markdown - I was actually very surprised to get a second chance as I'd written off another 'missed boat' - but L-2 was very weak and glad i waited!

[woodcutter] 09/3/2007 18:09

The warrants might not be an issue since more often than not they are not exercised but if they are hard to dispose of and the share price of stbr does well then holders may choose to exercise them and they will seriously dilute your holding, by just under 25%.

pleased you found it helpful james

woody

post note from the svs info the Tarvail margins for this type of enterprise are very good!

[woodcutter] 09/3/2007 17:56

i see a number of tol shareholders here ken did you top up on the recent dip?

i was anticipating a furter drop and held off, gone up so will be waiting now.

Anyway on to stbr. My background in this industry sector, capital project work, and i have ran several engineering divisions so i have a little knowledge. I've been invloved in the pharma sector, (GSK) dairies, (Express and Unigate) brewerys (S&N) and nuclear it's many years since i worked but there are some things work noting.

The big players were, and probably still are, GEA and APV which is part of invensys. They tend to do the major design and build. The build is usuaully sub contracted to smaller manufactures. Some of the smaller guys have design capability as well, this sounds like stbr. Sometimes the big boys off load small design and build packages to the little guys and sometimes if the work is too small in capital the client will go direct to the little guy, again this sounds like stbr

One of the main issues is the lack of continuity in work flow and you need to have very good management skills to balance workload workforce demand. When things are good and clients are spending capital they are very good. This carries it's own problems in that you can't find people with the right skills and it's very easy to employ someone who drops a cod and even on projects with reasonable margins they can quickly be eroded. When times get tough it can be very difficult because you have to buy work.One minute you can be running down contracts the next you've got more work than you can cope with.

The good points are the barriers to entry particularly for Pharma work as it's very specialised, it's pretty much all stainless steel, and you need to satisfy all the regulatory requirements. From experience once you have succeeded in developing a relationship with a client and proved yourself your there for life. Not withstanding of course you might not be the only company in this position, they like to keep the tender process healthy.

Another aspect of their work that is very positive is their schedule of rates work. This is easy money in the sense that you have agreed rates for everything from welding an elbow to cutting pipework etc. However you still need to ensure that your men are doing the work quickly and effectively.

The biggest growth for stbr could be working on the olympics but (and i speak from experience) finding the right people to grow with the company will be a big challenge. There are a shortage of GOOD skilled engineering people in this country.

Commercially contract terms can be tough and payments staged based on completion targets with penalties and monies held back for warranty issues. Recognising how revenue is attributed year on year is also important to look out for. It's very tempting to take the profit on a part completion into one year to make the figures look good in the hope that you will get enough work the following year to fill the gap - i've seen it done.

Personally i think i need to do more research, i know how tough this business is particularly growth aspects, it's imperitive that the management is good, very good.

I apoligise to those who know this type of business, it probably seems like a pretty long diatribe but it might be helpful to others who have little knowledge of the sector.

What would be interesting to know, would be how much turnover they could absorb (assuming reasonably spread) with their exisitng workforce, that would give some level of comfort on growth.

I'm also a little nervous about the number of warrants as a percentage of ordinary's and the number of brokers holding just in case they are looking for an exit.

all meant with best intentions

Woody