Forum Archive Index - April 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Phaedrus,

>
> 
> OST has been in a downtrend for most of this year, with a nice
>  tidy confirmed trendline in place. I have plotted the chart
> with todays current price of $1.72. This is up 4 cents on
> yesterday, and if it closes at this, price action will have
> broken above the trendline. A Close of above $1.72 would mean
>  the start of a new uptrend, as well as a trendline break.
>  

Thanks for this.    For those who came in late, here is the fundamentals 
commentary to 
go with Phaedrus's chart.   

OST was an unwanted steel producing/distributing child of BHP.  It was spun off 
into the 
market with significant debt shareholders who wanted 'out' and an unknown 
future.  The 
nadir here was a low point of 90c in September/October 2001.

Then things started to change.  There was a share placement that reduced debt.  
 OST, 
as no.1 in steel distribution was involved in a bid with rival Smorgon Steel ( 
the no. 2) to 
take out the number three competitor in the market,  'Email'.   Then all of a 
sudden the 
world price of hot rolled steel, a proxy for the value of recycled scrap steel, 
rose 
significantly.     OST was able to dodge the consequent cost rises due to 
manufacturing 
most of their raw materials from scratch.

Today residential construction, commercial construction and big infrastructure 
construction projects are all on an upturn.   Furthermore the MD at an 
analyst's briefing 
today seems to have changed his tone from being rather cautious at the time the 
latest 
half year results were announced, to quite being quite bullish.  He is 
predicting a 3 year 
boom cycle in construction.

The OST share, which has just shed a dividend, is trading on an earnings yield 
of some 
8% allowing for franking credits.     I say 'allowing for franking credits' 
because the very 
profitable New Zealand arm of OST, Steel and Tube, means that these franking 
credits 
should soon be available to NZ shareholders thanks to recently thrashed out 
trans 
tasman tax arrangements.

But I am a little concerned that all of this seems a little too sweet.   It is 
hard to imagine 
the current Australian domestic building boom continuing for another three 
years, and 
will Australians want to keep money into infrastructure projects as well as the 
war effort?
Mind you the Australian government probably has the financial means to do both!

I have a gut feeling that OST might be one to buy on weakness, rather than 
trying to 
jump on the end of a long term trend.

OST has certainly been bouncing around a bit in price as shown by on Phaedrus's 
chart.    And who knows, that closing above the trendline today might just be 
another 
'outlier' point.  If you look closely at the right hand side of Phaedrus's 
chart you can see 
other incidents of that!

SNOOPY


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