Replies to post #3053 on Alloy Steel Inc. (fka AYSI)

[seeksup]

dokkay, let me help. I highlighted the parts applicable to your questions of littlefish:

Posted by: littlefish Date: Wednesday, October 01, 2008 1:38:07 PM
In reply to: dokkay who wrote msg# 3011 Post # of 3053

dokkay- I just got on the computer and see things are still not going well as far as price on AYSI. Let me say several things:

I'm a nonprofessional smalltime investor, I am not someone that should be looked at in a light other than that although I try to be open about things. Hopefully most of us do.
So I will try and be open here.
I personally think that the company suffered a bad Q last report at least in par tbecause of timing on a large order that I am thinking will be recouped in Q4. I can't guarantee that, but it is what several on here think.
I am not a close buddy or anything with Gene nor Alan (never met either of them).
I have talked with them and try to keep in E-Mail contact. I personally like Gene's fiscal stewardship so probably am more willing to stay with the ship whether it is sailing smoothly or going down vs what others might do. That's just me.
There are a lot of headwinds in the industry that weren't there just months ago. Realest mentioned how steel markets were falling apart in the US and it has spread it seems. And miners worldwide have suffered some tough stock performances. But as mentioned Alloy has been mostly reliant on one customer, hopefully that changes in the next year or so but how can we know at this juncture? I don't know. I'm hopeful because I thnk the product is excellent. But I have no idea what the exact reasons are for miners to use one wear plate vs another excpet it would be logical that price and performance be key elements in that equation.

This is a very small company with only one product and 2 directors (none independent) so I am taking on a lot of risk betting so big on that kind of company. Hopefully everyone understands the potential risks in microcap land.

I don't have a ton of time right now but my thoughts are that if we wait until after December, we will get a much better feel for whether last Q was actual weakness in demand or if it was just timing issues with product and delivery. Considering how much finished goods they have (highest ever) and how much raw materials (highest ever), it sure seems to me like that one mill is still working hard.

As far as the 2nd mill, it has been mentally in the works for a long time and only physically been manifesting itself more recently IMO. Gene should be back 2nd week of October so hopefully we can get some kind of update then. I'm not holding my breath on the JV with the world makrets in turmoil but who knows, maybe that will get clarified and worked out eventually too.

The company has always been lacking with investor updates and such compared to many companies, probably because in part the inability to know specific timing on things (like this 2nd mill).

The selling recently looks technically negative but has been fairly light and I picked up 1500 shares today at $1.26, small but I have quite a bit and am just doing the 'OK I'll support for a few more' even though I do want to get more in a bigger way if it breaks down on volume (as long as it isn't news driven).
In the past, the stock has had these downdrafts and people have eben nervous only to havee it recover. But this time is different in that the world markets have shifted substantially more negatively.

All that said though, I remain with my UNPROFESSIONAL opinion that next Q will be very good and hopefully reassuring to those stubborn in holding onto their shares going forward. BUT like I said I tend to hold on 'too long' compare dto others in microcap land so wew'll see where it takes me this time. I don't have any kind of big advantage either, there are several people in contact with the comapny thru E-mail now and I've never been given any kind of financial info or anything like that before. But I have been able to get at things like Gene being overseas currently and due back 2nd week oct. Probably some of you could get that info too by calling the comapny.

Anyhow, they are not very transparent and are rough on the edges for many like institutional investors but I live with it because I like the product a lot and like Gene's fiscal responsibility.

Good luck to you! I hope we all end up feeling better about things at the beginning of next year.

Gotta go. Hopefully the share price weathers the time between now and December, it is a bit of wait for news as far as earnings being their fiscal Q4.

All IMO of course.

[littlefish]

Dokkay I never said I never sold AYSI.

When I found MXC, I sold a pretty good chunk of my AYSI back then to buy MXC (that was back around Feb-March 2008 I think approx).

AYSI was still my biggest holding, but when MXC took off, it overtook AYSI in my port briefly before I got more aggressive selling down MXC.

I have since sold almost all shares of MXC and have rolled a good portion of that cash back into AYSI.

However, my current AYSI position is SLIGHTLY smaller in share count than at my highest point.

As for my thoughts on management, I like Gene's fiscal stewardship the most.
I also find the product very compelling. That has not changed, and the launch of what should be the world's thickest single pass alloy overlay wear plate enhances my thoughts on the company's product reliability and separation from the competition.

However, it is clear steelmakers are getting pounded, car sales are down dramatically, the Olympics are over, etc... So world demand for iron ore should be softening quite a bit in the near term. But there wasn't nearly enough capacity available beforehand so now we're more into a slowing of demand than a contraction.
And FMG is capitalized well enough to get their 2nd expansion off and running.

Plus as I've mentioned,I think the 2nd mill will probably help the company leverage itself to potential customers that may have not taken a 2nd look at them before.

Maybe they can get something like an OEM agreement going like they initially had as an MOU with UT awhile back (but that fell apart before being finalized- who knows maybe Gene saw FMG coming down the pike and felt they couldn't get enough plate made fro the UT deal possibly but that's just total spec on my part and could be totally off).
It would be great to see some kind of stream of/recurring orders like the way the UT deal was set up. But apparently the conditions UT sought in the deal weren't good enough for AYSI to accept or at least something held the deal up.

For now though, just having FMG has nearly overwhelmed them with just the one mill and their existing customers.

I know things are softening significantly in the mining sector obviously but I am still thinking this company can take advantage of opening up into new markets with time (harder in current environs but still doable). It is very hard to expand when one major customer has tied down that much of your production.
Getting the 2nd mill will allow them to reach out more and hopefully take on these larger orders like the $600K+ order from Malaysia. The more orders they can land in that range that are not from FMG, the more potential I see for the company going forward.
Most of their customers, once they try the plate they stick with it IMO.
As I recall from phone conversations, the US distributor person (before they stepped down as a distributor) mentioned their customer retention rate was excellent if they could just get the plate.

Anyhow, I'm not gonna give you all my info no matter how much you try to get it out of me :)