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Schaffer and Loftus worth a look

TWO Perth companies worth keeping a close eye on at the moment are Schaffer Corporation and Loftus Pooled Development, companies that are related through mutual directors.

Schaffer Corporation has been a publicly listed company for a number of years, while Loftus Pooled Development has listed in the past two years. Loftus Pooled Development has been a fairly disappointing investment for original investors, with the issue price being 90 cents per share.

The stock listed in January 2001 and has been steadily falling ever since. It is now trading at 55 cents per share, almost down 40 per cent from the original price. Right up there with managed funds performance recently.

Schaffer Corporation’s share price performance reads a lot more attractively. The shares closed at $8.40 on Tuesday, having risen from about $4.30 last December. This equates to around a 95 per cent increase in the share price within four months, a spectacular performance.

The companies are related through a mutual director in John Abernethy. He is a fund manager of considerable experience, having learnt his trade at NRMA in New South Wales. He is the managing director of Loftus Pooled Development and a director and shareholder of Schaffer Corporation.

Loftus is a Pooled Development Fund, a structure that has impeded the investment opportunities available to it and its management. This is about to be fixed, subject to shareholder approval, when the company has a shareholder meeting next month to vote on a restructuring.

The restructuring is to turn Loftus into a ‘straight up’ investment company, with a major shareholder supporting a 50-cent rights issue to existing shareholders. As most existing shareholders would be reluctant to take up any more shares considering their long positions, a change in the structure may create a change in fortune.

The company has recently listed its major shareholders, with a who’s who of the investment community on its register. The major shareholder in Loftus is the other billionaire in Australia, Dick Pratt through Thorney Group. Other prominent investors include the Smorgon family, Jack Cowin, John Poynton and Sam Kaplan.

Mr Kaplan is possibly not as well known at this stage as the other names, but he is rapidly moving up the line as a mover and a shaker. He is a major player behind the scenes in the latest share market sensation, the Patrick Corporation. Patricks have firmed from $2 when they were embroiled in the waterfront dispute some years ago, to $16 this week.

With the above following in this funds manager minnow, investors would be well advised to keep an eye on this company. There does not appear to be much downside at these levels, with a substantial amount of upside.

Schaffer Corporation is also going through a transformation, as the major shareholders – Schaffer family members – have recently sold down their holdings. The stock has benefited greatly from this increase in liquidity, and some major institutions buying in.

Schaffer Corporation is a diversified industrial company currently capitalised at $107 million. It is involved in building products, leather manufacturing, property development and funds management.

The company has recently mopped up other shareholdings in Australian Leather Holdings Limited, going to 83 per cent ownership. The remainder is owned by management of Australian Leather. This has given Schaffer more earnings potential and stronger multiples.

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Share Price

Closing price for the last 90 trading days
Source: Morningstar

Total Shareholder Return as at 31/10/18

1 year TSR5 year TSR
64thSchaffer Corporation77%29%
137thMMA Offshore37%-39%
221stImdex19%10%
361stCedar Woods Properties-3%-0%
485thGlobal Construction Services-21%5%
744 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

27/11/17
$211k Bought
27/11/17
$0 Sold
24/11/17
$259k Bought
Total value as at the date of the transaction
Source: Morningstar

Revenue

24th↑Global Construction Services$249.5m
25th↑Cedar Woods Properties$242.6m
26th↑Schaffer Corporation$227.2m
27th↑Imdex$218.6m
28th↓MMA Offshore$200.9m
239 listed industrial companies ranked by revenue.
Source: Morningstar

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