Sdi Share Discussion Threads

[fillspectre] 27/8/2021 07:39

The news flows about Monmouth give off the impression that things are going well down in Bridgewater. Mike Creedon could well have his work cut out - to make his next major acquisition as good as the last. Fils

[rivaldo] 26/8/2021 12:14

Good to see Monmouth Scientific posting yesterday that they're supplying to Oxford Nanopore, one of the UK's "unicorns" likely to IPO in the near future and heavily involved in COVID testing:



"Monmouth Scientific
@Monmouth_Sci

The Class 2 Biological Safety Cabinet and a CT Filtration Fume Cupboard are two of our most popular products.

These two were both installed at Oxford Nanopore, playing a crucial role in their world leading DNA/RNA sequencing technology."

[gleach23] 26/8/2021 10:11

Yes steeplejack...it did seem as though the share price had been walked down for a fund to fill their boots in the 150s while PIs were left to go figure why the share price was tanking.

[steeplejack] 26/8/2021 10:01

I see Danske Investment Management has upped its holding to just over 4% an increase of 0.9%.This probably explains the shenanigans of the last few days as the marketmakers sort to shake out loose holders to fulfil the order.

[bigbigdave] 25/8/2021 17:57

Looks like that was the short term low point yesterday morning @ 7% off.
Onwards and upwards.

[steeplejack] 24/8/2021 13:52

Yes,almost has the look of a good old fashioned tree shake assisted with pithy comments on BBs by parties unknown espousing a fundamental overvaluation.Yet,i know the City to be staffed by honourable men so swiftly dismiss such crude,unsubstantiated notions.

[rivaldo] 24/8/2021 12:45

Nice bounce.

Looks like a rather badly handled and hasty series of sells from roughly 9.30-10.30 caused the drop? Which it seems many are taking as a buying opportunity.

[arregius] 24/8/2021 11:33

The problem is that market cant value what still doesnt exist. Long. Buy SDI

[gleach23] 24/8/2021 10:15

Large delayed buys showing up now from an hour ago...looks like some were happy to be tucking in @ 152-154

[steeplejack] 24/8/2021 10:14

Clean air technology etc ...demand for these technologies isn't going to evaporate.On the contrary,the technologies which SDI provides will become de rigeur.I've seen this again and again,scrutinising the numbers like reading tea leafs.In my old age,i tend to seek out areas with undoubted growth prospects.SDI has undoubted growth prospects,like Dechra for example which also,from time to time,suffers incredulity at its rating only to shrug it off and continue higher.I apologise for my simplicity,not what you'd expect of someone (like our Chairman Ken)who is a fellow of the CISI!

[melody9999] 24/8/2021 10:00

No position - to me it feels easy to take out COVID-19 related sales. But as the world learns to cope with the pandemic and move towards normality, won't the COVID sales be replaced by more normal sales activity? But these sales will not be in broker forecasts.

[steeplejack] 24/8/2021 09:57

Interesting post.The company has been quite open in referencing covid related gains/orders.To what extent these orders prove to be 'one offs' remains to be seen because Covid isn't going to disappear as quickly as it appeared.The positive business climate enhanced by covid will prove enduring.So,this price slump is a reexamination of the rating and whether a very attractive PEG stands scrutiny.The AGM in late Sept will clarify things no doubt.In the meantime,we are reminded that this is a company with a market cap of around £150m,easily manipulated in thin markets,great on the way up but disconcerting on the way down.

[mginvestor] 24/8/2021 09:57

I have topped up at avg 153p.

Some of us have been here for a bit longer than a few months so know what we hold.

[nchanning] 24/8/2021 09:52

All true but would expect c. £10 million to be spent on acquisitions by 2023, possibly adding about £2 million to net profits to replace COVID related business . All the signs are of a natural recovery in the other businesses that might be ahead of typically conservative management forecasts . All that being said a buyer is still being asked to pay a steep multiple of normalised earnings but surely the quality of the business deserves that .

[sphere25] 24/8/2021 09:49

Ello, ello, ello

What be going on here then?

Peculiar fall in a very bullish market, so bullish that even the recent weakness got gobbled up in an absolute flash but what about SDI?

Having a quick look...

Adj eps 6p for the year gone

Forecasts:

2022 6.4p
2023 5.0p?

Revenue
2022 42.1
2023 40.0?

How the hell do shares like this get up toward 200p and even higher for a time? Surely you need to be beating forecasts and putting out some strong growth to justify those multiples.

It doesn't even look worth a go down here. No doubt the bullish market spirits will give it an opportunity to bounce back at some point, but there are alot of companies like this about on nutty ratings imo.

Perhaps this is new norm of exuberance but this type of sell down looks well justified.

I'll pass unless it gets clobbered some more and there is no bad news in the market, which I am sure holders will be frantically checking right now.

Usually best to wait for a firmer bottom to minimise risk when a chart falls like that too, but let's see what it does.

Pass for now but had a look in seen as it stood out in a dull market.

All imo
DYOR

[trident5] 24/8/2021 09:45

Yes, the price got way ahead of itself, and seemed to factor one-off performance as recurring.

[elsa7878] 24/8/2021 09:31

Eps last year 5.5p

This years estimate 6.6p

2023: Back down to 5.2p.

The reality appears that last years and this years figures have been boosted by Covid related sales which forecasts indicate will disappear in 2023.

This is all highlighted in the results and shows that if you stripped those covid sales out the underlying business not expand by 19% but actually contracted. £4.5 million - £6.1 million = -£1.6 million. I'm not saying that is surprising...

SDI Group revenues for the year were £35.1m, compared with £24.5m in 2020, an increase of 43.2% over 2020. Sales growth from acquired businesses, including sales of Chell Instruments in the period to the acquisition anniversary at end November 2020 and post-acquisition sales of Monmouth Scientific and Uniform Engineering, contributed £6.1m, while organic sales growth was £4.5m or 19%. Sales arising from two specific one-off COVID-19-related contracts, at Atik for cameras into PCR instruments and at MPB for flowmeters into ventilators, totalled £6.1m in the year.

I understand that this is an acquire and build business but always good to look under the hood to see what they have now.
No shareholding...but have been looking...happy to be corrected.

[steeplejack] 24/8/2021 09:24

Bids inside the quote for 25000 but the price remains fragile.I presume they'll be broker calls to ascertain that everythings ok because this sustained fall is unsettling.Reiterating the bull case on a bulletin board is not going to steady the ship unfortunately :)

[our haven] 24/8/2021 09:13

And at 7 percent down this morning, even more attractively priced. :-)

[sweetunicorn] 24/8/2021 07:43

Interim results for the six months ended 31 October 2020

IMC Q&A

Q23:



In my recent discussion with Mike Creedon, the SDI CEO, I also asked if management was still committed to the long-term 28% target. He confirmed it.

It is a target. SDI also tracks other KPIs very closely and reviews them monthly. Among others, order pipline and profitability ROIC etc.

ROIC is reported to be over 30% for FY21. This also puts SDI well above its peer group.

For serial acquirers, I generally use cash flows / FCF as the valuation basis because it is the key metric along with profitability figures to evaluate the compounding factor.

SDI can report a strong long-term FCF growth factor of >30% p.a. with a high profitability of ROIC >30%. The growth and profitability factors are in expansion.

The peer group shows far less strong factors that are even still strongly negative in contraction.

I think the valuation for SDI is very attractive.

When evaluating the cash flows, one must also consider the composition of the sources from which they are generated.

SDI's portfolio is focused on less cyclical industries and the service and products are predominantly in the low to medium range of 500-5000 GBP and are largely supplied in customised versions to sticky customers and many OEM customers.

The low price range and the low cyclical sectors in which the products and services are offered ensure that they are not financed by the customer in the cone, which makes the cash flows less sensitive to interest rates. As the cash flows are predominantly generated in less cyclical and narrow niches, the cash flows are stable over a full interest rate and economic cycle, which enhances their value in the DCF model. In addition, these factors provide strong pricing power, which also supports the high and consistently rising margins

NO investment recommendation!

[ymaheru] 24/8/2021 03:45

Hiya Sweetu

The way I value shares, SDI is at a far lower discount than other stocks, most of which are not in that peer group.

However, I didn’t know that management were indicating 28% growth over the next few years. Do you remember where they say that, please?
I’m working off slower growth, but can imagine that they’ll achieve 28% if they say that.

Thanks

[sweetunicorn] 23/8/2021 19:07

You write that your focus is on companies with a focus on M&A growth.
Such companies (serial acquirers) should be compared and valued on an FCF basis.

SdI reported FY21 FCF adjusted for one-offs of ~£6.2m.
With a current MC of ~£160m, this results in a current MC/FCF multiple of ~25x.

SDI Management continues to forecast long-term annual growth of ~28% (8% organic and 20% m&a growth).

SDI was able to increase FCF by an average of 100% p.a. over the last 5y.

If one now assumes a forward-looking 20% growth for the current FY (SDI's management expects 1-2 acquisitions and moderate organic growth), this would result in a Fwd FCF of GBP 7.5m for FY22. This would put SDI at ~21x fwd FCF. This is a massive valuation discount to the peer group (Halma Judges Diploma mean fwd FCF multiple >35x).

Note that the peer group has much lower growth factors than SDI!

SDI has an excellent business but needs to work more on its financial market communication to provide the stock market with the necessary information on a regular basis and in the right format to adequately assess the quality. But in the long run, price follows cash flow.

Currently, there is a mispricing in a seasonally difficult environment, but this will dynamically dissolve upwards in due course, as it has in the past.

[ymaheru] 23/8/2021 18:49

Yeah, I invest in growth companies (generally acquisitive ones), and value them all the same way.

SDI had way overshot compared to what the market knows about the company and it’s earnings.
They’ve not historically increased earnings by 70% at all and I doubt they will in 2022 or 2023.

The SDI share price is barely under a fair value, whereas a lot of decent British stocks are trading far under my calculated values.

[az4hr] 23/8/2021 17:18

130s are you serious 164 is low enough very surprised that forecasts have gone down

[arregius] 23/8/2021 17:09

The cleantent product is an addition to the range and is complimentary to the Monmouth cleanroom range. It is a product that has been largely ignored from a marketing perspective and the team at Monmouth think with some promotion it will sell much better than it did in the hands of the predecessor.