FBU - Fletcher Building Ltd

[utopian201]

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http://www.fletcherbuilding.co.nz

[utopian201]

Originally posted by utopian201 » Thu Jun 12, 2008 12:11 pm

Hit a low of $6.99 today. I've read that the value it will recover to is between $12-14 (its high was around $13).
While residential building is falling, FBU has a huge backlog of infrastructure and commercial projects though (only bidder with enough resources to build the stadium for RWC...?)

Probably good to accumulate these once the property market stabilises? Don't know where the low is yet, P/E ratio is 6.99 (!)

$6.99 was a 30 month low. Earlier today, hit 6.82. Don't know where the bottom is, I've heard mutterins as low as $5.00. In the press, it said despite reassurances that there is a backlog of infrastructure work, the majority comes in from residential construction. Long term I'd still say this is a safe bet, but now is just not the entry time yet.

[utopian201]

Based on activity during this week, Id say this stock has stopped its fall. According to some of the indicators I now follow, this stock has started its turn around and will not hit low levels as it did before (low 6s). Last price is $6.81

[Bongo666]

Based on activity during this week, Id say this stock has stopped its fall. According to some of the indicators I now follow, this stock has started its turn around and will not hit low levels as it did before (low 6s). Last price is $6.81

You seem to be right Utopian. The share price seems to have settled in the 6 buck range.

Bugger about the no profit projection for the coming year though.

Bongo

[utopian201]

Several weeks before the announcement, FBU could have been considered oversold, for no apparent reason (other than the downturn of the housing market, but that is countered by FBU's backlog of infrastructure work). That is, the price went down, for no real good reason.

Now that there is uncertainty over the future's profits, in addition to the situation with Formica, and it has reached as high as $7.25 today. So the price has rocked up when I would have expected it to go down!

I guess this goes to show how strange being in the stockmarket can be...

[utopian201]

Analyst presentation of the Formica group - Ohio - USA - Sept 2008
http://www.fletcherbuilding.co.nz/Corpo ... 202008.pdf

[Bongo666]

Hi Utopian,

FBU are going to suffer badly in the US, especially with their ill timed Formica purchase.

B

[Bongo666]

Bruce Sheppard has been hot over this weeks Fletcher Building capital raising:

"It makes Nuplex look generous," Sheppard said of the arrangement whereby Fletcher Building's institutional shareholders will receive 75.7m new shares at a placement price of $5.35 each, a significant discount to the company's share price of $6.20 immediately prior to the capital raising being announced. The company's Australia and NZ-based retail (small) shareholders will also be able to buy up to $100m of new shares, most likely also at $5.35.

While the arrangement had an immediate negative impact on the share price, Sheppard believes the bigger issue for small shareholders is that it dilutes their proportionate share of the company and ultimately their share of its future profits.

"It is a fundamental right of shareholders that when you own a share, it's also your right to own a proportionate share of the whole," he said. "And if the company or the board want some more capital, it is our belief that, in the absence of compelling commercial circumstances, it is the current owners that should be given the right to put the money into the company proportionate to their holding ie, a rights issue."

Sheppard believes compelling commercial circumstances against a rights issue did not exist in Fletcher Building's case, because in its statement announcing the arrangement it restated its belief that its "capital position is strong".

"So they had time, unlike Nuplex which had no time. But it's worse than Nuplex because of the arrogance of it announce it one day and do it the next. Rod Deane [Fletcher Building's chairman] should know better than that and he needs a kick in the bum," he said.

However Sheppard saved his harshest criticism for the third leg of the deal, which will give special rights to large non-institutional investors to top up their shareholdings to reduce the diluting effects of the placement to institutions, an arrangement he said smacked of cronyism.

"You've got a bunch of institutions being offered favourable placements, the rest of us being offered a piddly rights issue, and then you have a select band that get an anti-dilute [deal]. Well f---, if that isn't cronyism I don't know what is," he said.

However Fletcher Building's general manager (investor relations) Philip King said two main factors worked against the company deciding to use a rights issue to raise all of the extra capital. See Full Story at Stuff.co.nz

I am a shareholder myself and was wondering about the dilution effect for smaller holders because of lack of a rights issue.

I will wait until I see the offer made to me before I comment but shep does have a point

[Bongo666]

O.K. further to my last post and after some thinking I have decided to buy my more FBU shares to negate the dilution via the institutional placement last week and the further "mom and dad" capital dilution when that happens in a few weeks.

I have a right to be pissed off!

I will tell you about it in detail in a piece I am writing on my blog...

It is worse than I thought.

[utopian201]

Current price is about $6.50. The share placement plan price is $5.35
Where do you see the price after the plan? surely it will drop due to dilution?

[Bongo666]

Jeez, who can guess share prices, not moi. You would have expected dilution already. What I do think though is that there will be opportunity to get shares at lower than $5.35 because they were much lower than that not long ago.

Having said that there is talk of housing stock being low and more houses having to be built to satisfy demand so that is cleary a positive for FBU.

Are you going to take up the offer?

[utopian201]

I was originally going to, seeing that the placement price was $1.20 below the market price. But I'm betting that the prices will drop due to dilution after the placement plan.

[Bongo666]

I was originally going to, seeing that the placement price was $1.20 below the market price. But I'm betting that the prices will drop due to dilution after the placement plan.

So you are going to get some on the open market?

Id like to get about 500 because my current holding of 1000 is too small AND I will be diluted by about 150 shares if I don't get some extra. I'm torn about which route to take.

Bongo

[Bongo666]

Utopian, the terms of the "top up" offer to shareholders has changed (PDF) allowing for an extra 20 million bucks of shares for little shareholders like us.

As originally proposed, participation in the Top-Up Offer was conditional upon the Share Purchase Plan (“SPP”) not being fully subscribed. This meant that if applications under the SPP exceeded the maximum limit of $100 million, there would not be any shortfall of shares available for issue to those shareholders who applied under the Top-Up Offer.

To provide certainty to eligible investors, Fletcher Building is varying the terms of the Top-Up Offer so that it is no longer conditional upon there being a shortfall under the SPP. The effect of this variation is that even if applications under the SPP exceed the maximum limit of $100 million, shares will still be issued to eligible applicants under the Top-Up Offer, up to the maximum value of $20 million. With this variation, the maximum amount of new equity that Fletcher Building can potentially raise under the SPP and Top-Up Offer will be $120 million, compared with $100 million prior to this variation. The underwritten SPP amount of $60 million remains unchanged.

5 of May to be eligible.

A touch of the guilts?

[Bongo666]

I sent a cheque into Computershare today for NZ$1070 for around 200 shares. I would have had to get around 150 to hedge dilution of the 1000 shares I already own. I decided to hedge my bets by getting a small amount now and hope that latter on the share price goes below the $5.35 issue price of my 200 shares so I can buy some more.