AGM 2012 - (1) Appliance Production Lines
I would whole heartedly recommend the SCT AGM to fellow shareholders. Next year is the big one with the centennial of the business. The 29th and 30th of November 2013 has been set aside for a two day celebration in Dunedin culminating in the AGM. So if you ever thought about attending an SCT AGM, this would be the one to plan for.
I was impressed with the shareholder numbers who had driven up from Dunedin to attend this year's meeting in Christchurch. SCT make a habit of showing off a current production project. So much more can be gained from seeing it 'in the flesh' and talking to the switched on employees that make it happen, rather than just seeing the finished object on a printed page as in the annual report.
This year we got to see a cooktop manufacturing plant destined for the USA. This was ordered in April designed by October. And the plan is to ship it before the end of the year. The factory was on double shift to meet the tight deadline. If everything goes according to plan this will be one production line out of two for the same customer.
No specific mention was made of China in the AGM market releases. A supplementary question asked about this, and in particular how the Haier takeover of Fisher and Paykel Appliances might affect future work with Haier. For those who do not know FPA has a subsidiary PML which produces in house production lines and there was some concern that with Haier now owning this, they may choose to 'go it alone' in the future. Chairman Mclaughlan answered that sub contracting work on lathe tooling was going well and that he saw increased opportunities for SCT to work in partnership with PML on future projects.
SNOOPY
AGM 2012 - (3) Milking Technology
Milking shed technology is already significantly automated. I am taking here about rotary milking sheds, and the automatic release of the udder suction devices at the end of the milking session.
What SCT are doing is putting the udder sucker attachments on the cows by purely robotic means. Management now have a promotional video that was being continuously shown at the AGM. The Rangatata dairy farm, where this system is in final trials, has achieved a 95% deployment success rate to date (success being defined as hooking up with four teats per cow). The mechanism is to first use visualization technology to 'eye up' the udder. Then move in your six degrees of freedom industrial robot connector to make the mechanical-biological link, before the pumping starts. Currently hooking up one cow takes 14-20 seconds. The target time for production units is 12 seconds per cow.
I was at the AGM two years ago where is was announced that 'everything going according to plan' commercialization would begin within six months. Obviously everything didn't go according to plan. But now it does seem we are here. Payback time it is suggested will be three years for farmers who want to shell out the cash to get this system retrofitted to their existing milking sheds. The aim of the technology is to allow farmers to spend their time more productively on other farm management jobs. That doesn't include sleeping in, in the mornings!
Unlike other SCT projects -normally direct company to company sales-, SCT envisages hooking up with an existing industry player to promote automated milking. I do see this as an execution risk for shareholders, as SCT will not have full control of their marketing channel. And presumably there will be a cut to the merchant. Ultimately that will come from shareholders pockets. Nevertheless although sales are forecast for calendar year 2013, this is very much the new income stream for the year. Shareholders should not expect any 'bottom line' return from this division soon.
SNOOPY
AGM 2012 - (4) Mining Industry Support
My fears that the inevitable downturn in mining would see what has become the 'golden goose' for Scotts slow down have proved unwarranted. Some 80% of sales of sample reference material (as an aside SCT has some 85% of this market in Russia, courtesy of an on the ball Russian agent!) are sold to gold explorers. While the price of gold remains high, this is set to continue!
The annual report noted that some of the increased workload from the Rocklabs mining division had been farmed out to other Scott business units around the country. At the AGM we saw two automated sample analysis units that had been built in Christchurch. I had visions of these things requiring a truck to take them away. In practice you could fit a unit inside a large van. So perhaps all profits would not evaporate if you had to ship these things around the country after all! Also on display was one of the new liquid oxygen manufacturing machines, complete with the cryogenic unit from the Wellington superconductor division. Similar technology can be used to produce liquid nitrogen on a reliable industrial scale.
The meeting clarified for me how the Scott Technology relationship with XRF Scientific in Australia works. Scotts (Rocklabs) were supplying the sample analysis equipment. That spews out heaps of data that must be interpreted. Who better to do that than the university boffins at XRF scientific? So with Rocklabs and XRF Scientific working together, what SCT have is a turnkey package solution for the mining industry. Clever!
SNOOPY
Anatomy of a Successful Investment
Quote:
Originally Posted by
Phaedrus
Here you are, invested in a stock that you have held for 11 years, one that has recently doubled in price, and you report that you are "at last" in profit"! To me, this is a spectacularly damning indictment of the methods you have been using. Eleven years of "investment", most of that time during the biggest Bull run we have ever had, for........nothing! (it's about here you start talking about dividends, right? I can but continue to marvel at your fortitude and dogged perseverance. Don't you have any doubts? Have you ever wondered if your approach might perhaps be improved upon? Ever entertained a sneaking suspicion that market sentiment just might be worth taking into account?
I'm not knocking SCT as a stock. You had in fact tripled your capital at one point, but in the absence of any discernable exit strategy, coupled with a dogged refusal to sell at any price, you gave all your profits back to the market. It seems to be a point of honour for you to ignore prevailing market sentiment - indeed you take a perverse pride in acting contrary to it. This approach has cost you very, very dearly. A quick easy example of this is where you were buying "value", adding to your SCT holdings when it was in a very clear downtrend. Brave - but foolish.
Here is what Phaedrus said about my SCT investment five years ago. Interestingly although my total holding time for SCT is now 16 years, my median holding time is only 5.25 years. This is because most of my buying (and selling) has been done since 2008. I may have achieved 'nothing' in terms of share price improvement for 11 years, but look how I have used that experience and made things turn around. Average buy in price 43.4c. Current market price $2.20.
43.4(1+i)^5.25=220
Return over the term my median capital has been invested is 'i', and that works out at 36% compounding, for over five years. Add in the dividends received along the way (over the past five years) and that return equates to 38% compounding. There wouldn't be many companies on the NZX paying dividends that have produced a sweeter return than that! And all over that difficult time that the GFC unfolded when many traders left the market. All my share purchases were in downtrends and all my share sales were in uptrends. Sell into strength, buy into weakness! With a low liquidity share IMO, this is the only way to go, because with SCT selling even a minimal economic parcel to keep brokerage to a minimum can see you flood the market and change the supply demand balance for shares. It sounds crazy but more than once selling a minimally sized parcel of shares took several weeks at the price I wanted. Average sale price since the cash issue was $2.25, with the best sale price I achieved on a small parcel $2.70. Of course for most chartists such a process would be far too painful. But for someone like me who barely uses charts it was very doable.
Of course a pure chartist might say my return is still theoretical because I haven't fully sold out. But this highlights a philosophical difference between traders and investors. The investors goal is to stay invested. The traders goal is to sell out. I have no plans to sell out of SCT, because I get a far better dividend return by staying in that I would ever get at the bank.
SNOOPY
What's happening at Rocklabs?
Quote:
Originally Posted by
percy
I do not fully understand SCT, so am more inclined to look at the figures, rather than the business.
Entirely understandable Percy and may I say I would do exactly the same thing with a company that I am not well acquainted with [ like HNZ for example ;-) ]
However, I do appreciate being challenged on my views of SCT. My instinctive line of defence is to behave as a management parrot. But on further reflection I do get around to double checking that management rhetoric just to see that what they are telling me is really true. I have done a bit more homework on the 'standard equipment' side of the business (mainly Rocklabs). Here are the half yearly profit and revenue figures as far back as they are quoted:
1HY2010: $0.372m, $6.073m
2HY2010: $1.468m, $9.716m
1HY2011: $1.766m, $2.538m
2HY2011: $2.538m, $11.739m
1HY2012: $4.304m, $9.714m
2HY2012: $4.252m, $24.565m
2HY2013: $2.644m, $14.425m
2HY2013: $2.708m, $13.270m
That shows me that FY2012 was a bit of a blip in sales and profits. I think much of that time was a boom time for gold producers which is apparently the main industry that Rocklabs sells to. I guess it is no surprise that eventually the 'end of the golden weather' (sic) is upon us. Whether the gold producer market will recover, or whether Rocklabs will be able to recalibrate their equipment to better suit analysis of other metals will be interesting to see. However, it does seem for the moment that the substantial growth engine that was driving the SCT share price (Rocklabs) has been derailed.
The other half of the business that makes profits, 'Automated Production Systems for Appliances' fortunately for we shareholders is undergoing a good revival. So despite the derailing of Rocklabs from its recent stellar trajectory, my feeling is that we already holding SCT will be OK. If I didn't hold any SCT shares though, I think I would be tempted to sit on the sidelines just in case the share price got a bit cheaper!
SNOOPY
What is going on in Asia?
Quote:
Originally Posted by
Snoopy
The other half of the business that makes profits, 'Automated Production Systems for Appliances' fortunately for we shareholders is undergoing a good revival.
The one jarring statistic from the segmental results is the decline in sales to Asia
FY2013: $1.624m
FY2012: $4.155m
Yet didn't Scott's relocate their head of appliances to China only two short years ago? Has he frightened off the Chinese customers!
SNOOPY
Will your next MRI be on a machine with a Scott logo?
I too was at the AGM.
During the factory tour following the meeting I had the chance to chat with the big pooh-bar from their joint venture into superconducting magnets.
The most impressive thing he told me is that these magnets are likely a disruptive technology in magnetic resonance imaging machines(MRI).
Current MRI machines require super cooling to operate. The only means of doing this currently is to use liquid helium. This creates several problems.
Helium is an expensive gas, supplies are becoming constrained and source countries are beginning to regard it as a strategic material.
When helium escapes containment it reacts in a manner that resembles an explosive. This means means MRI machines must be housed in expensive specialised buildings.
You can not turn off MRI machines even if they are not being used.
The magnets being developed by the Scott joint venture can be cooled with liquid nitrogen, This has several advantages;
Liquid nitrogen is cheap and abundant. just suck if from the air around you.
It behaves in a less vigorous manner when it escapes containment so the building housing it need not be as specialised or expensive.
When you are not using it it can be turned off.
The technology is not yet sufficiently advanced to enable it to be used in the full scale MRI machines which you are probably familiar where the patient is feed through the hole in the do-nut shaped machine for a full body scan. They are currently developing a prototype machine which can perform an MRI on hand sized parts of the body. When they are able to scale up this technology I beleave they will be on to a winner.
Boop boop de do
Marilyn