Sanderson Design Share Discussion Threads

[disc0dave45] 19/10/2022 12:56

Eric"there is a lot of inherent "value" in those license revenue streams." Possibly, will have to see if sustainable.Anyway, hope it does come good for you and other holders.

[pireric] 19/10/2022 12:41

Yes, but also no in that you need a look-through for the licensing income that most companies definitely do not have. I.e. there is a lot of inherent "value" in those license revenue streams.

But I'd agree it's definitely PR. But I'd also say that it's why I have zero qualms whatsoever with at least attributing full intangible balance on the balance sheet into a real asset value. Hence this company is still trading 10% odd below its book value in my opinion, and the replacement value of SDG is comfortably into the triple digits £ms, and nowhere near today's (in my view, lowly) price. I.e. the takeout value today is certainly north of £100m.

Eric

[disc0dave45] 19/10/2022 12:28

EricBrand equity retail data (H1 slide 31), it's simply grossed up wholesale revenue to their retail equivalent according to what Lisa Montague said in the recent podcast. So in my mind every company could do the same thing with their inventories, but it doesn't relate to actual income.....just PR IMO.

[shrout] 19/10/2022 10:02

Very interesting interview. Lisa Montague came across very well imo.. enthusiastic and ambitious, especially re. the huge largely untapped market in the States. I'm tempted to add to my holding.

[essentialinvestor] 17/10/2022 20:06

I notice in the disclaimer he does not hold shares in SDG.

[pireric] 17/10/2022 20:01

FYI, Sanderson Design Group - CEO Interview, from today after market close



Eric

[essentialinvestor] 17/10/2022 19:44

This may already have been discussed - from the conference call..
without government support and at current rates, their energy bill increases
by £2 million per annum.

[salver2] 15/10/2022 01:04

Up to a point Sanderson doesn’t really at 103 p a share need to grow as this essentially stripping out the cash gives them a market cap of around 57 million - which gives them a price earnings ratio of around 5.7 times earnings- a level far too low when taking the value of their archive and assets into consideration.If they never grow their earnings again ( unlikely ) and they stay on this miserable rating it should translate to about a yield of around 15 percent per annum - I’m sure in the next few months they will be lining up a deal and the fact there is no director buying is surprising at these lowly levels makes me think something will be occurring ( it may be wishful thinking on my behalf).It’s essentially the same company at a pound a share as it was at 2 pounds a share( so ok the outlook is more difficult) but the value im sure will appear sometime

[essentialinvestor] 14/10/2022 20:57

Salver, who posts here, held 2% of CFX at one point, he knows this market very
well. If he considers there is value here longer term would tend to take notice.

Obvs none of us have a crystal ball and there may be further surprises in financial
markets over the next few weeks.

[disc0dave45] 14/10/2022 20:51

Fair point.

[barnesian] 13/10/2022 21:08

The company has managed 4% annual revenue growth and 8% annual net profit growth since 2017. Considering Covid and Putin in the last two years that's not bad. It's not flat. The licencing component is high growth and high margin.

But we'll see.

[disc0dave45] 13/10/2022 19:51

EricNo matter how you interpret it it's not revenue generated directly by SDG, it's a meaningless number and used for spin.One good thing about reducing eps forecasts is as you say they could then beat them.Good luck anyway, I'll keep my eye on these and see at year end how they've performed. Hopefully you are right and will have done okay.

[pireric] 13/10/2022 19:00

That's not quite what the brand equity value is saying in my interpretation. What it's saying is that the total grossed up (Estimate) of products which are either direct SDG products (i.e. SDG brand revenue), or which have the SDG patterns on is £300m (the residual difference between the 300m and the SDG direct brand revenue being the indirect revenue of third parties selling products with SDG designs, from which SDG will earn the £Xm of effectively 100% gross profit licencing revenue).

I'll take a different stance here where I believe forward broker forecasts on a 3 year view will prove to be materially wrong (too low). In the next 6-12 months that is more up to debate in the downside direction. But my baseline is never to trust broker forecasts, but to just use that as a starting baseline to assume what is priced in. E.g. have any of the analysts really factored in anything for the Disney collaboration into licencing revenues? I'd be 95% sure the answer is no and that this is simple revenue growth modelling and extrapolation

You either make money buying stocks when the P/E is depressed or when the earnings forecasts out there are wrong, and I actually think in this case we'll have both of those engines.

But the proof will be in the pudding and this stock has been a lot higher and lower here in the past so we shall see ! And it takes many views to make a market and clearly my view here is not prevailing, at the moment !

Best regards,
Eric

[disc0dave45] 13/10/2022 18:02

EricIt's my understanding that brand equity retail value is a perceived value of the products relative to cheaper brands, it's their own estimation and IMO completely intangible and a nice marketing exercise. The NAV from H1 is 115p, and IMO fair value for the share based on future earnings is circa 112p.When I said growth is flat I not only meant eps going forwards but revenue has also been flat since 2018 and only 3.9% average CAGR since 2017.Even from their H1, apart from licensing where's the growth?, there isn't any IMO.Not trashing the business, it's sound and well managed, it's just not for me as an investor.

[disc0dave45] 13/10/2022 17:40

Thanks EI, yes interested so will take a look.

[essentialinvestor] 13/10/2022 09:06

Dave, if you view Coats worthy of further investigation,
I posted a link yesterday to their CMD presentation on the COA board.
Hold a few but won't say any more than that given current volatility.


Apologies off topic.


Eric, I can see SDG trading near £2 again, it may take awhile!. A bid possibility
always in the background in the meantime - that's not to underestimate probable recession
now looming large.

[pireric] 13/10/2022 08:15

I think it's incredibly harsh to be disturbed by the lack of growth when the UK consumer has been in the trashcan all year long (look at consumer confidence indicators). You also have the headwind from closing down the Russia operations which is not immaterial. If anything, that top-line performance is pretty admirable, in my view.

There is no way that the company needs the £15m net cash balance to fund working capital - look at historical requirements through the balance sheet over the past decade. I'm sure they are just being overly cautious against the toughest macro outlook (structurally) since the GFC.

What's the replacement value of this business? Almost certainly triple digits £ms. The slide they put in their presentation deck indicates the total retail equity brand value they're running at is £300m per annum or so. That's not the replacement value, but there is serious value in the asset base that the balance sheet only just about captures (and which more than covers the share price).

Eric

[essentialinvestor] 12/10/2022 21:27

Expected a share price trough between 70-80 pence as posted a couple of months back.
Licensing income has been stronger than I expected, so let's see.

Macro outlook is now limper than a vicar's handshake.

[essentialinvestor] 12/10/2022 16:56

Investing in the business rather than ..propping it up!. Hopefully.

However, as previously mentioned would much prefer they hold on to cash
as the depth and duration of what's ahead next year is an unknown.

[rcturner2] 12/10/2022 11:40

I agree with discodave, good post.

The low dividend has always put me off and my conclusion is that they are retaining most of the cash profit within the business as it is needed to prop up the business.

[disc0dave45] 12/10/2022 11:27

Still concerned about their lack of growth, only +0.7% on revenue (although pbt was decent at +12.5%). If licensing hadn't increased profit would have been down, is the licensing growth sustainable as it's the only growth element within the business (brand sales and third party manufacturing sales were both down).Forecast eps has been trimmed slightly (as posted by eric), but so as the forecast eps for FY24 and FY25 (by 11% and 18%, 14.1p and 13.8p respectively).Pre covid, and the subsequent increased rating, the PE range was circa 5x to 10x, so taking say 8x as the forward PE (why higher if earnings are forecast to reduce?), then fair value IMO is around 112p, so minimal upside.This is a sound business excellently managed but there's just zero growth (as mentioned before) and think it's wiser to sit it out and see how H2 unfolds.Link to their H1 presentation:https://sandersondesign.group/umbraco/Surface/Download/DownloadPdf/2577

[hotfinance14] 12/10/2022 08:15

Article in the daily mail today :

[netcurtains] 12/10/2022 07:37

The cash sometimes comes into play - if for example the company does a share buyback or buys another company (cheap prices at present)....
So the cash does have hidden value.
Then there are the rising interest rates - that cash can generate 5%+ growth per year.