Smith (ds) Share Discussion Threads

[phillis] 06/11/2018 18:34

Seems like Moorsie went to the wrong school of thinking
PS You guys should also spend time reading the Company's own propoganda about what makes them different

[nickname27] 06/11/2018 18:26

As an ex-online retailer I can assure you that online retail has exponentially increased cardboard usage. We used to get 100 widgets in one box and then send out 100 boxes with 1 widget in each. Offline shops got the same box with 100 widgets and then sent out no boxes. Disposing of our waste cardboard was non-trivial overhead (and something of a headache as no one really wanted it) and there was serious customer pressure not to use plastic packaging.

I would agree that board used in POS is of doubtful significance. Paper bags replacing plastic may be slightly more significant.

I have no idea is this is of any significance to SMDS whatsoever but I thought I'd chip in.

However I just noticed Odey is short here so I will be backing up the truck tomorrow. I doubt there's a better contra indicator out there.

[moorsie2] 06/11/2018 16:14

:)

There is a school of thought that online shopping has a very limited impact on corrugated production as the boxes delivered to our homes are simply replacing the larger boxes that were delivering product from distribution centres to shops.. However I do believe there is an element of benefit here but it has been significantly overstated by simplistic financial journalism and company's trying to sell a story.


As regards in store display this is a very small segment of the global use of corrugated that it is not at all a driver in any way of significance in the global increase of 3% per year of total consumption.


So I revert to my original points. Population size and disposable income growth (globally) of existing populations are the key factors. Which is very comforting to shareholders as these two phenomenon will continue to rise every year.

[phillis] 06/11/2018 14:21

a more precise answer would be online shopping and in store display

If you need this explaining you are definitely in the wrong place

Nice update

[moorsie2] 06/11/2018 13:40

Really Phillis? Please expand on that and educate me.

[phillis] 06/11/2018 10:36

Actually it is to do with online shopping

[moorsie2] 06/11/2018 09:30

Good point.

I am more bearish on SMDS than SKG due to their big recent acquisitions at very high multiples, but I am very bullish on the sector.

Medium term plastics will decrease and paper based packaging that is fully recyclable and recycled will be used for more and more purposes.

There are two main drivers to corrugated use - population size and disposable income of said population. Independently an increase in one of the two things leads to greater corrugated usage. That is why the market globally has grown by a steady 3% per year for the last 10+ years. I see this trend increasing even before the impact of plastic is considered.

The winners will have both very significant upstream assets (paper mills both virgin and recycled) and down stream assets in corrugated plants and service facilities.

[marksp2011] 06/11/2018 09:03

Moorsie

Could it be that the froth blew off? My view is that these are fairly priced as they stand. They are not a screaming buy when compared to the rest of the market. they are certainly good value and I have bought some a couple of weeks ago but all I am expecting is a slow rise maybe to 420 or so

[moorsie2] 06/11/2018 07:52

Based on this update, Smurfit Q3 results last week and IP's results in US two weeks ago this sell off is seriously overdone.

Value gap of 20% has opened up for investors who are prepared to take a bit of rough seas for a few months

[ygor705] 06/11/2018 07:31

Another strong trading update from a cardboard box maker but, as with similar comments made recently by Smurfit Kappa, the market will probably not be listening. Certainly one to keep an eye on.

[alan@bj] 05/11/2018 14:29

Tomorrow, in fact.

[scooper72] 05/11/2018 09:19

Trading update later this week, according to The Times

[phillis] 01/11/2018 15:13

nice bundle of divis today

[essentialinvestor] 01/11/2018 11:28

There will be another downturn as we are all aware,
there are now longer term structural support factors - less use of plastics,
online shopping etc. So I would be surprised if we repeat the financial crisis
meltdown for the sector, or anywhere near that.

[moorsie2] 01/11/2018 10:02

They still lad SKG in market share.

The cycle is definitely in the top quartile but how long it stays there is a very interesting question. Europe used to be a 4-6 year cycle but the US is now 109 out of 110 months of stable or increased paper prices which is a remarkable change.

[essentialinvestor] 31/10/2018 12:18

Moorsie, agree on more conservatively managed.
You've done very nicely on SKG.

[moorsie2] 31/10/2018 12:16

Phillis - please explain..


EssentialInvestor - no not the same case for SKG as they seem a much more conservatively managed company and have not done major deals at the top of the cycle. Look attheir most recent two - Reparanco and Serbia today - both at multiples significantly below the multiples of Ebitda that SMDS paid.

The downside of a conservative , Industry dense management is that they do not be brave enough to do the stretching deals but the upside is that they have lived through many cycles so know exactly how to play them..

[essentialinvestor] 31/10/2018 12:14

The market is beginning to anticipate the next cycle downturn,
that's how it looks to me. I've known the original Smurfit business
for 30 years plus.

The sector is highly cyclical, so appreciate what Moorsie is saying.
If you take a different view then you can buy considerably cheeper
than a couple of months ago.

[phillis] 31/10/2018 12:08

you guys need to listen a bit more closely to what the big players are saying about the market

[essentialinvestor] 31/10/2018 11:36

Moorsie, could you not make a similar point re SKG?,
or you view that differently..

[moorsie2] 31/10/2018 10:23

Dogwalker - you are right, it was sold this way.

But history shows that the most dangerous time to do big acquisitions in this sector is at the top quartile of the paper price cycle. DSS have done not just one but two!!

I really struggle to see how they add value at this prices at all points in the paper cycle. When things are going well every lauds such brave deals. When sentiment turns the same cheerleaders admonish the foolishness of such deals. Such is life

[dogwalker] 31/10/2018 09:44

Thanks, Moorsie2. ( Had to scroll back a bit to remember what I'd asked !).Interesting points , esp re the two large purchases which we were generally led to believe at the time were both good value, 'enhancing' etc..Or perhaps that was just me.

[moorsie2] 31/10/2018 09:13

Dogwalker - the industry write down is significantly over done so I would expect this to rise back to circa 450-470 in the coming weeks and months.

But I would have significant doubts that the US acquisition and Europac acquisition will be long term adding value. To me it looks like they significantly overpaid for these assets and that will prove to be a significant lag on their share price in the medium term.

It is a good move by them to get out of Plastics but at the wrong time. The business carries a negative now due to perceptions of plastics while just 12 months ago it would have carried a premium. I am sitting on my hands until I see what they get for plastics division

[phillis] 31/10/2018 08:37

Excellent update from Tony Smurfit this morning

[santar] 27/10/2018 00:28

Strong results from International Paper don't point to any slowdown:

The Tennessee packaging and paper company made a quarterly profit of $562 million, or $1.37 a share, compared with $395 million, or 95 cents, for the same period a year earlier. Excluding items, International Paper reported an adjusted profit of $1.56 a share for the quarter, compared with $1.19 last year and topping analysts' forecasts of $1.46. Sales rose to $5.90 billion from $5.52 billion, also beating analysts' forecasts of $5.89 billion according to FactSet.

"Looking ahead to the fourth quarter, we see continued healthy demand for our products and remain confident in our commitment to deliver strong full-year earnings growth in 2018," Chairman and Chief Executive Mark Sutton said.