Once residential construction rebounds -- and that could take a combination of government policy and interest rate cuts -- I believe it will be a multi-year run, not just 12 months or so. There's too much pent-up demand. A lot of problems need to be fixed of course, such as a cut in red tape, getting levels of government on the same page, and more skilled tradesmen. Easier said than done, and no wonder we've consistently got double the sellers as buyers looking to trade this stock.
I note Fletcher Building Supplies' profit downgrade today and the 10% share price haircut as a result. FBU warned in particular of softening conditions in Australia (they are primarily focused on NZ). Comparing our graphs tells me it's a macro issue and not a Big River-specific problem.
Yes, the $1m recently invested in I.T. systems could easily have been delayed or not spent, to pad out last set of numbers and increase the dividend. The fact it wasn't, suggests management is focused on the future rather than cheap, short term wins. I've also been impressed at the restraint shown with acquisitions.
I am under no illusions. This stock may take 12-24 months to turn around. It won't be overnight. But for the very patient, value investor, I'm seeing less risk for a slice of this business the lower the price is.
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