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Fin24 user Jeremy Samson is trying to
squeeze R500 out of his Hulamin shares, and will take any yield he can at this
Here is his story:
I WANT you to buy Hulamin [JSE:HLM]
shares. More specifically: my Hulamin shares.
In the most fleeting and ill-conceived moment of stupidity, I bought about R100 000 worth of them about four or five years ago.
My thinking was flawed but at the time didn't seem quite as idiotic as it does now.
The share price was down roughly 50% from the time it listed, trading at around R23.00 a share.
I am in the packaging industry and for years the monopoly Huletts had frustrated the hell out of me.
I despised their obstinate manner of doing business, their slow lead times and their daily pricing policy that appeared to be linked to the mood in the sales office when you called in to place your order.
I looked at importing aluminium foil but it is so heavy the containers would end up being half empty (or half full depending on your business optimism).
I knew they were squeezing the SA market for every cent they could and then, when someone sneaked something in, they would run like spoilt brats to customs and plead for the duties on their products to be raised.
So, instead of fighting them, I figured I might as well join them. I remember vaguely something about businesses requiring a moat and this seemed like one.
A big murky, ecoli infected one.
I ask for no sympathy but this is what happened next.
They then spent more than R1bn building a new plant. They were proud of this thing.
Then - I guess I can't blame them for this - the recession arrived and they discovered that they basically couldn't even give their product away. It dawned on them that they didn't really need that new fancy factory.
Next BHP, who supplies their raw material, decided to stop supplying them.
Then Eskom ran out of power and sent out a letter to say that prices would be going up. A lot.
So how did Hulamin management react to this? Well, with unwavering optimism.
Where do they find these guys? I remember hearing Alan Fourie, the previous CEO, harp on about how having no raw materials and no work shouldn't be seen necessarily as a negative. Huh?
We need to remain positive, he said. I would also sing the praises of a company that had just given me a 67% pay hike despite the profit graph looking like an exit arrow at the top floor of a skyscraper.
I remember going to a packaging exhibition a few years back. My shares were only about 40% down at that stage.
Hulamin had a nice stand with a pretty lonely-looking aluminium tray in the middle mounted on a polystyrene stand.
This, I was told, was their breakthrough product. You could pop it in the microwave.
This wasn't an iPhone launch, that's for sure.
"How is it doing?"' I asked the woman with the mousy hair and air hostess uniform.
"Great," she said, although I could tell that she secretly wished that another customer would come to take advantage of the free peanuts to create a feeling of activity at the stand.
Next up, a little envelope appeared in my postbox.
Exciting opportunity – Hulamin had decided to do "a rights issue". This is like hearing that the doctor needs to do "further examinations".
Oh well, what can I do? My shares are down to single digits anyway and I can get some more at a discount. I buy more.
Now I have got tons of these things but, obviously, so does everyone else. They are worth hardly anything anyway.
This is the bottom, I keep telling myself. These shares will claw their way out of here. Nope.
No sooner have they issued all these new shares then some wiz picks up that the rights issue has lopsided the BEE requirements.
Best do a silly BEE deal and – you guessed it – issue more shares. Have we left anyone out? Surely everyone has shares by now?
Then a glossy A4 book arrives with enthusiastic workers wearing hard hats on the cover. They are naively holding clipboards and smiling. I know why they're smiling; they just got some shares at a knock down price.
You won't be smiling for long, I tell myself. I am right, since a few weeks later everyone decides to go on strike. Not so happy after all, hey?
What does Hulamin actually do? I hear you asking.
Well, they have a nice social upliftment policy, a great downstream business (which helps some guy by giving him terms he wouldn't get elsewhere) as well as a very clean factory.
They are a proud and, now that they got a pay hike, a happy bunch of people.
What they don't do is make any money; neither do they seem to have any idea on how they might do so in the future.
Their shares are trading at around R4 a share. I am down 80%.
Their NAV, I am told, is around R14. But really how much is a factory worth that doesn't make money?
We all would have done better if, instead of building that new plant, the money had just been put into some sort of interest-bearing account.
I am calling this the bottom. I really think you should buy some Hulamin shares.
Actually, I could probably be persuaded to sell you some of mine… - Fin24
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