AFL FJARFESTINGARFELAG HAS BUILT UP A 17% HOLDING.

Well. Having bought some at 65.8p, I bought some more at 53.25p Not great seeing the price drop 20% just a few days after my first purchase.


Why I’m trying to catch this falling knife after today’s 20% slump

Rupert Hargreaves | Wednesday, 20th December, 2017 | More on: LWB
Image: Public domain

Shares in Low & Bonar (LSE: LBW) are crumbling this morning after the performance materials company announced its CEO Brett Simpson has jumped ship to peer Fenner.

Simpson has been at Low & Bonar since 2014, and during his time performance has been mixed. Indeed, at the time of writing, shares in the group are changing hands at 53p, 44% below the five-year high of 96p recorded at the beginning of 2014.

Simpson will remain an employee until the end of April but will resign from the board immediately. Non-executive director Trudy Schoolenberg has stepped in to take over the CEO role.
All change

According to today’s news release on the matter, Schoolenberg has been non-executive at Low & Bonar for four years and has “extensive executive experience in the chemical, technology and petrochemical sectors with significant engineering and product development expertise from over 20 years’ spent at Royal Dutch Shell.” So it looks like Schoolenberg is an excellent pick for CEO.

Alongside the news of the management reshuffle, Low & Bonar also issued a trading update today in which it noted a “weaker than expected” final quarter due to an adverse product mix and timing of sales. Due to these pressures, the group is expecting pre-tax profit for the year to range £30m and £31m, marginally below City expectations of £32.2m. Net debt is expected to increase to £138m at the end of the period, from £111m.

Although the market dislikes today’s update, I believe the declines are overdone and, as a result, I’m looking to buy into the group’s recovery.
Starting to look interesting

Even though the company now expects to miss City expectations for growth for the year, it’s still on-track to grow pre-tax profit substantially year-on-year. For the fiscal year ending 30 November 2016, the firm reported a pre-tax profit of £26m. So, even if profit comes in at the low end of expectations for 2017 (£30m), it is still set to grow by 15% year-on-year.

And according to my figures, after today’s declines, even with a lower level of profitability, shares in Low & Bonar are trading at a deeply-discounted multiple of around 8.5 times forward earnings. The shares also support a dividend yield of 4.9%, covered twice by earnings per share.

But it’s not just the low valuation that attracting me to the shares. The company has recently gained the attention of an activist hedge fund Sterling Strategic Value Fund SA.

Sterling claims to “work together with management and other shareholders to initiate change in a concentrated number of companies.” At the beginning of December, Sterling hiked its interest in Low & Bonar to 10.9%, from 6.9% previously, which indicates to me that the firm is looking to shake up the materials business to unlock value for shareholders.

This means that as well as an attractive valuation, steady growth, and market-beating dividend yield, there’s a catalyst that could ultimately unlock value for shareholders. That’s why I’m looking to catch this falling knife today.
Not suitable for all

With an activist on board, I think it's only a matter of time before Low & Bonar makes a turnaround. But if this company does not look attractive to you, I highly reccomend that you check out the business is profiled in this free report from the Motley Fool.

Our top analysts believe this opportunity could be one of the market's top small-caps that is set to generate outsized returns for investors over the long term.

Bought these Feb 2017 @ 70p and sold April 2017 for 85p and also received the 2p divi. So with that in mind I've bought in again.

Good luck with this.

I'm in at 65.5 and 53.0

I fail to see how missing the profit target by about a million to a million and a half on £32m validates a fall in share price from 90p to 53p.

Yeah I know it reduces the EBITDA from £51m to £49m and they have a pile of debt and net debt didn't come down by as much as would be preferred but it's still going in the right direction.

I think the market has lost the plot on this one. As it has on a number of stocks which involve making or building stuff.

Finals 31st January so not long to wait CC, I don't know whether they have any exposure to CLLN but would have thought they'd said so by now if they had.

There's a decent article here although I'm not sure how independent Edison are.

http://www.edisoninvestmentresearch.com/research/report/low--bonar317786/preview/#js

Seller at 53 has finished now and stream of buyers continue to come through slow and regularly.

Looks to me those there are a few flipping for a couple of pence who bought at 53 and 54. Inevitable I guess. I think they are getting exhausted bit by bit.

A few moderate sized trades this morning at 56 which seems a pretty good risk/reward to me.

Sterling buy again. Now up to 14%

Copy of results presentation from 31/01/18 here.

https://investors.lowandbonar.com/~/media/Files/L/Low-And-Bonar-IR/company-reports/final-results-2017.pdf

And audio file to go with it here
http://media.investis.com/L/LowandBonar/low-and-bonar-results-audio-310118.mp3


I've just spent the last 40 minutes listening to the audio file and now understand why the share price rose so positively. It's worth a good listen, defines a clear strategy and gives confidence the management are doing something about the issues.

At present I plan to exit half my position at 90 and keep the rest.

CC assuming you mean 90p and not 90 years old lol, I would be quite happywith that.

At their current 61p mid price LWB have a pe of 10 and a well covered yield of over 5%. The downside appears limited.

PCA of chair bought 50k at 62 the other day.

Share price nudging up a penny despite global sell-off and buyers being made to pay 62.

Unfilled buyer in last nights auction of 150k shares which I'm guessing it Sterling still collecting shares.

What I like about this amongst many things is only 5% of it's business is in UK and all it's manufacturing is based where it sells stuff. Also, it's loans match the exchange rate it trades in.

It gives me diversification away from UK, access to a global economy doing much better than UK, and no Brexit risk (I have plenty of that so anything to spread the risk a little is good for me)

As you say George the company has 10 years of distributable reserves so all good there

This is one where I have a high level of conviction we will see 90 again in the coming year and my biggest issue is trying to work out where to sell after that. I shall have to re-appraise nearer the time but if the management team get a grip like they say they will figuring out an exit won't be easy

I bought these 17th Jan this year @56p and managed to sell 31st May @ 53.75p----what a lucky escape. Not so lucky with ITV; MARS; SLA or WMH but hey ho! you win some and you lose some.


Our comments above are looking somewhat out of kilter now with the sp around 16p

I'm still in this and feeling the pain. My worst trade of the year by a long way and there seems no end in sight of the sellers.

I added at 20p but even that proved a problem as it's lost 5p in just a few days.

The sellers just keep coming and coming.

The thing is I bought this as it has no exposure to Brexit....

Ouch.

They have quite a large debt, but it's well below the current t/o. Nevertheless reading the RNS, it looks like Trading isn't as good as they'd hope and maybe a reduced dividend is almost certain ( at least something?).... so forget the notional yield of 19% caused by the sp falling from 50p to 15p ( -ish). Maybe a yield of about 4% would be reasonable, if this can prevent Fundraising - the fall in sp has been gradual, whereas if "sharp" I'd expect some folks already know what's about. At these levels, any Placing would have to be 12p-ish.... so maybe wait a while before "Topping-up" = Av Dn. - - - - Today sp=17p
Oh deary.....
AND - Can't Moderators remove this "Iceland" - Heading, for 2019.?

IC says :- Ann:30Jan"19. LWB raising £54m @15p. Mkt price 18p1...due to "challenging period" due in part to huge rise in raw material costs (that's Oil, I guess ), If shareholder don't participate, they will be diluted by 41%
-That strikes me a really bad.... if their finances are so poor (don't competing products rise the same?), it is likely this won't be the last tug on shareholders . . . and I recall that any "Open Offer" really means the City doesn't want to know ! . . . So, maybe, I'll hold back too...that way it cash-costs nowt.?
EDIT (9Feb2019)-Thanks CC - FWIW I doubt LWB Execs will do much with that £50m - much the same as they've done since Dubai move. Also, if things don't improve, that 15p OO may be a tad too high. The discount is too low - and the Qty is too high, er IMHO.

I have some of these. Or at least I did until a few days ago where I sold them all.

I suspect the reason for the OO is that some of the larger shareholders (Sterling) simply don't want to fully take part in a RI. I'm with them on that. I've lost enough on this and certainly didn't want to invest any more.

However, LWB are going to get £50m out of this so that's an extra £50m on the balance sheet which is worth something. £50m enables them to do something rather than thing just dragging on forever.

Now, the price of oil and therefore polymer resin has fallen dramatically since November which should mean LWB is in a good place right now with regard to EBITDA. They didn't mention this in the OO statement which I didn't like.


So, initially I sold most of my holdings at 16.5p and decided I had had enough. This share was mucking up my headspace, absorbing too much of my time and although I think it is due a relief rally I'd just had enough. There are 2000 other shares out there and surely I can find something better. I then last the last bit go at 18p and those I plan to buy back at 15p in the OO. I need to keep these few as they will help to reduce next years capital gains tax bill.

I now have the choice to buy back the shares I sold at 16.5p at 15p. I think... this makes sense in that I believe the share price will stabilise above 15p and I can then sell them again at say 17p. A quick in and out for a few quid. On the other hand I'm so fed up with this share I'm not sure I want to. I certainly don't have a good rationale for buying this share now and wish I had realised this earlier. Maybe I will just let the OO pass and move one.



In so far as I'm not taking up the OO and continuing to hold my existing shares I'm going to get diluted to hell (or already have been)