Sanderson Design Share Discussion Threads

[netcurtains] 22/7/2022 17:47

EI: I think you need to remember in previous share price falls they had factory flooding and factory fires.

This time the fall was due to "fears" of a recession.
But if Truss gets in the press will go on about tax cuts and stimulating economy.

Previously there were REAL cuts in production - this time it's been (so far) unrealised fears....

We get a PE of under 10.
A massive cash pile
And a dividend yield of 3.32%

[essentialinvestor] 22/7/2022 17:23

eric, agree and bought a small amount today as it happens.

Just highlighting that for some reason/s SDG/WGB has been hit by a truck on the
past 2 occasions, value and price can diverge markedly during market volatility.

[pireric] 22/7/2022 17:17

I wouldn't say looking at past share price troughs is a great way of deciphering whether a business is cheap or not.

Again, and most simplistically, you have £19m of net cash now (25% of the market cap). Into covid 19 you had £1m, the world was shut down and there were concerns for a very short point in time (alongside other companies) whether Walker Greenbank would even have the liquidity to avoid a deep fundraising or worse.

The other point is that you'd buy the socks off most stocks if GFC/Covid valuations rolled around again as both times proved to be completely driven by irrational investor fears (just like the 2021 year across the market had over exuberance).

Companies have already started to diverge between those that are trading fine and will weather a recession well, and those who will not. Unless we have a financial crisis, stocks will not trough in synchronisation through a mild or moderate recession. For example, I'm not even sure Experian or Bunzl will see their lows again this market cycle as the bounces off those lows has been huge.

Eric

[essentialinvestor] 22/7/2022 17:07

SDG share price no where near the trough based on the last 2 major market sell offs
(unless this time is different) - a lot may depend on where wider equity markets go from here, unless there is a bid.

[pireric] 22/7/2022 17:03

Buying anywhere near the bottom requires buying into a bad chart by definition. Of course, lots of bad buying opportunities also have bad charts. So why not overlay fundamentals on what you need to price in to get upside from here? The answer in my eyes is not a lot at all.

The market cap is now £75m compared to the total net asset base of £80m. Sure, there are intangibles to the tune of £27m or so, but the company regularly makes £5m odd of licensing income per annum (basically 100% GM) so valuing the intangibles effectively at 5x is pretty conservative/undervaluing the longevity of the brands anyway.

So in my eyes when you're close to 100-110p you're buying a business at a discount to defensible net asset values, that can chuck off moving forwards maybe £6.5-8m of post tax profit per year (about 10% odd vs. market cap and well >10% on an ex-cash basis).

Hard to quibble too much regardless of what happens in the next 6 months. Could it get 5-10% cheaper? Possibly, but on a 2 year view I'd take the bet it's quite a lot higher from here, and I'm fairly happy it's reached down to my re-buy levels as I like the business, pricing power and the management team and it's now fully frontrunning a recession and more than pricing it in. As I say, if in a recession the answer is 8p of earnings and not the 14p forecast, but 1 year thereafter it's back to 10p (conservatively) and you have a quarter of the market cap in cash... it's going to be a fair chunk higher than 107p (probably).

Eric

[netcurtains] 22/7/2022 16:44

who cares about charts nowadays? They are so 1990s.

[rcturner2] 22/7/2022 16:33

It's a terrible chart though, a total reversal and -ve momentum.

[netcurtains] 22/7/2022 16:30

Google (more up to date) gives 3.32%

[gswredland] 22/7/2022 16:28

Are SDG paying a dividend guys?
ADVFN quotes as 3.2%

[pireric] 22/7/2022 16:11

£19m net cash or 25% of the market cap. I'm back in and will build from here.

Eric

[netcurtains] 22/7/2022 16:05

Dividend Yield 3.33%
UK Factories working OK
PE ratio of about 7.3%
House prices still bouyant

"IF" Truss gets in tax cuts and
recession fears gone.

[pireric] 22/7/2022 15:51

I'll probably buy back in next week. Now at the point where 14p of EPS (which they say they are on track for) is just upside gravy. Can start getting the valuation to work just off say 10x 8p of EPS and adding in the net cash balance. Very close now to the 'closer to 100p' I was looking for.

Good weekend all.

Eric

[essentialinvestor] 22/7/2022 15:40

trt, Yeah sure you are.

[essentialinvestor] 22/7/2022 15:35

Under £1 looming large?.

[trt] 22/7/2022 15:27

Good time to grab a few more.

[salver2] 22/7/2022 15:05

This share seems to be melting quicker than a chocolate teapot -I hope the update is good in early August

[netcurtains] 21/7/2022 07:34

Huge growth at Frasers - possibly good news for retailers such as John Lewis (Sanderson's big outlet)

[essentialinvestor] 19/7/2022 19:37

net, recession looks pretty much nailed on to me, I see profit warnings
coming thick and fast as we head in to autumn fwiw. We are already seeing
this is multiple small caps on the daily.

Good to see you benefited from my mentioning MRO, BOD there are a class act.

[netcurtains] 18/7/2022 12:29

Recession fears ease:

[netcurtains] 12/7/2022 22:08

you certainly can write a lot of words eric. You should get a job as a novelist's padder.

[pireric] 12/7/2022 21:19

Totally - and I'd add to your list (and maybe most importantly), companies with moats that can secularly grow (versus just cyclically rebound).

I'm out of this at the moment (sold out earlier this year higher up), but also waiting for an entry. I'd pinned myself to sub-120p as a starting point a couple of months back. I'm doubting it gets below 100p if at all on this downturn (barring a massive economic depression - then quite frankly I want to own nothing, but I'm never going to forecast that), or not least in a capacity that allows me to build a decently sized position. That's the challenge more than anything; in bear markets the troughs look great, but good luck trying to buy them at the time...! There's hardly any stock.

This at 120p is not pricing in earnings much above that 8p I'd floated, in my opinion. It's just hard to bring yourself to pull the trigger when you feel there's limited upside risk but a good amount of downside risk to the forecasts! But the share prices in many cases in bear markets front run that....

Overall, I could probably see myself trying to build a position here not in an entirely different share price realm to where we are today.... but let's see. My thoughts on this have rollercoastered today, I will admit!

Eric

[disc0dave45] 12/7/2022 21:11

Agree Eric, I've been screening for quality stocks with net cash and above average gross margins, this will be vital IMO to be in positions to pass on inflationary and input costs whilst maintaining decent operating and bottom line margins. Do think premium high value products / services will do okay, and keen to see if that holds true for SDG, will see what they say in August, IMO todays update gave mixed messages and wasn't clear at all and "broadly" usually means below.

[pireric] 12/7/2022 19:44

It will be interesting to see the gross margin in the first half results as I wonder if that is what is keeping management confident for this year at this stage. Can't understand why else they would be in the FY profit outlook after 5 months. Investec actually raised their forecasts a smidgen today, surprisingly.

The net cash balance here is important as it's a quarter of the market cap. The debate has to be if there are trough earnings and where they trough. If the answer is 8p and you have a quarter of the market cap in cash, you could argue the downside from here is rather limited. E.g. take out the net cash balance and this would be on 11x trough 8p earnings. Then any earnings between 8p and 14p (forecast) is gravy.

Problem is that to answer that question relies on an answer to what on earth downturn there will be and how that impacts more luxury markets. Frankly I started the day thinking that flattish revenues is not fantastic. But in this market for homewares it's probably actually rather impressive that it's held up that well and suggests the operational story is going well.

Eric

[essentialinvestor] 12/7/2022 14:23

SDG, or WGB that was, has always been killed share price decline wise in bear markets,
why it gets hit so hard ..?, perhaps a popular PI holding. Perhaps this time
will be different etc..(already significantly down from the Sept '21 post covid high point).

[salver2] 12/7/2022 12:17

About 22 percent of earnings I think