Sdi Share Discussion Threads

[hydrus] 31/10/2024 13:02

Hmm an unusual take on management's role but ok. NChanning if that growth continues then I agree that the multiple paid would be reasonable. Let's see how it pans out.

[the millipede] 31/10/2024 12:45

Hydrus, FWIW I think you have the issue the wrong way round. Companies do what they do. It is up to investors to allocate capital accordingly.

[nchanning] 30/10/2024 10:40

Note the last 3 years progress in profits at Inspec Vision , courtesy of Companies House 2021 130k2022 400k2023. 900kPerhaps for the year ending dec 2024 we are buying at 5 x EBIT ( and appears they pay very little in tax , due to R and D tax credits ) . Falling interest rates certainly would help SDI in increasing the delta between cash flow and interest on acquired businesses . I trust Worldwide will be turning more bullish with every BOE rate cut !

[hydrus] 30/10/2024 09:57

Rivaldo I'm not suggesting they should be borrowing to buy back shares. My point is that companies shouldn't be buying other companies that are more expensive than the purchaser (unless there is some kind of strategic reason to do so which obviously isn't the case here). Question mark about their ability to allocate capital appropriately IMO.

[worldwidet] 30/10/2024 08:52

SDI had a meager ~£1m of its own cash to finance the acquisition. Another ~6m GBP had to be borrowed expensiv credits?

1st takeover multiple ~7.3x EBIT (hurdle rates ?)
2. takeover almost completely financed with expensive loans (SDI will certainly have to pay 3.5-4% interest?). Own business generates far too little free cash flow!


It looks to me like another far too expensive acquisition.

Debt is increasing massively but FCF is not!

My personal opinion.

[hastings] 30/10/2024 08:50

Bit more about the company here from last year which is worth a read.https://www.belfastlive.co.uk/special-features/inspecvision-puts-northern-irelands-vision-27258159

[rivaldo] 30/10/2024 08:35

Cavendish have raised their EPS forecast slightly after today's news to 6.1p EPS as stated above. And that's likely to be conservative given the usual guidance to analysts.

Personally I'd rather see SDI growing via acquisition and showing that it can actually achieve improved results via cross-selling and other synergies. There's much greater upside over time from this than from a share buyback.

I also suspect that the vendors probably wanted to achieve a sale prior to today's Budget moves on capital gains, which increases the likelihood that SDI achieved a good value acquisition price.

[hydrus] 30/10/2024 08:16

SDI are expected to generate £8m EBITDA on mcap of £55.4m so a ratio of 6.9They are buying a company on a (net) purchase price/EBITDA ratio of 7:3At an EPS level therefore it is likely to be dilutive. Therefore surely they would have been better off just buying their own shares back and that doesn't even take into account the transaction costs. Can't see the attraction of SDI unless they produce organic growth AND buy companies that improve EPS.

[nchanning] 30/10/2024 07:55

Looking at Companies House accts , the company appears to be growing rapidly with profits more than doubling in 2023 . Perhaps for the year about to end the purchase price is going to look attractive . Looks like the seller really wanted to avoid any tax rises in the Budget !

[rivaldo] 30/10/2024 07:31

Looks good - this is an "immediately earnings enhancing acquisition" and looks a good fit for the business with "intra-group cross selling opportunities".

Cavendish have increased their forecast for this year slightly to 6.1p EPS. That's a current year P/E of just 8.6.

Their target price remains at 135p.

To clarify, the RNS itself says:

"For the year ended 31 December 2023, InspecVision delivered revenue of £3.2m, adjusted EBIT of £0.84m (adjusted to reflect InspecVision's cost base as part of the Group) and a reported EBIT of £0.95m (all unaudited)."

[hastings] 30/10/2024 07:22

According to the Cavendish note, in 2023 it generated revenues of £3.2m and an adjusted EBIT of £0.84m, giving a margin of 26% and reported EBIT of £0.95m

[our haven] 30/10/2024 07:16

The acquisition sounds like a good fit but although they say that it is a profitable business, there is no mention of how profitable.Given this, it is difficult to see if the price they are paying is a fair price. Accept there should be cost savings.

[nchanning] 14/10/2024 10:14

Danske bank were buying right at the top in October 2021, are they selling at the low in 2024 ?

[red ninja] 10/10/2024 11:56

Tipped in Shares Magazine today

Three Small Shares To Buy Now

A casual glance at the share price chart might
put a quick end to investors’ research into SDI
(SDI:AIM), but that’s a mistake, in our view.
This is a small cap company which has stuck to
its largely successful knitting for years, and we
expect its fortunes to significantly improve over
time.
SDI is a collection of subsidiaries involved in
the design and manufacture digital imaging,
sensing and control equipment used in life
sciences, healthcare, astronomy, manufacturing,
precision optics and art conservation
applications. It’s a buy and build model which
closely resembles that of health, safety and
environmental kit maker Halma (HLMA), a
constituent of the FTSE 100, buying good value
businesses which add consistent cash flow and
profits to the overall company.
Not only does SDI’s growth stretch back
multiple years, it has been high-quality growth.
Gross margins typically run at around 60% to
65%, high for a manufacturing business, while
returns on investment and operating margins are
in the double-digits and above industry averages.
The end of the pandemic has tossed many
a challenge at SDI as customers de-stocked
after a prolonged spell of over-ordering. Higher
borrowing costs haven’t helped either, but both
issues now seem set to improve. This leaves
substantial upside on the table, partly as SDI
continues to find attractively priced acquisition
targets to supplement organic growth, and from
a change in market mood.
This is a stock which has previously traded on
a 20-plus PE (price to earnings), now just 12.
History is on its side, we believe. Over the last 10
years, SDI has grown turnover from £7 million
to £65.8 million in the year to 30 April 2024 and
adjusted operating profit from around £57,000
to £9.6 million. The share price has increased
from around 10p to over 200p at its peak,
yet today is available at 50p. Not for long, we
suspect. [SF]

[rivaldo] 08/10/2024 07:48

Late RNS yesterday shows Shareholder Value Beteiligungen Aktiengesellschaft, based in Frankfurt, as a new 3.94% shareholder with 4.12m shares:



Assuming I'm not mistaken - they weren't on the prior company list of major shareholders AFAICS.

Their web site is here:



"The business purpose of Shareholder Value Beteiligungen AG is to invest its own funds primarily in listed companies. The aim is to achieve the highest possible increase in the value of the portfolio through price increases and dividends received.

Shareholder Value Beteiligungen AG follows the concept of stock picking, which is based on investments in selected individual companies - and not in entire sectors and markets. The aim is to concentrate on a certain number of stocks. This achieves sufficient risk diversification (portfolio diversification) and at the same time enables effective focus on the selected individual stocks. This strategy enables an intensive analysis of the individual company, the balance sheet quality, the management, the products and the markets. The investment strategy of "value investing" is followed, i.e. investing in stocks with high substance and high returns.

Due to its existing know-how, Shareholder Value Beteiligungen AG focuses primarily on investing in small and mid-caps, i.e. small and medium-sized companies with a market capitalization of one billion euros. Due to the limited investment volumes, such stocks are rarely in the focus of banks and other large institutional investors. Accordingly, they tend to be neglected by their analysts. This repeatedly opens up exceptionally favorable investment opportunities in excellently positioned companies that are often world market leaders in their respective niches.

The investment horizon for equity investments is generally medium to long-term. However, individual short-term opportunities are also taken into account. The stock selection focuses primarily on German, Swiss and Austrian stocks. This deliberate regional restriction makes it possible to have a sufficiently reliable overview of the markets.

With this investment approach, the initiators have achieved sustained success over the past decades, including as managing director of the R 3000 investment club."

[our haven] 27/9/2024 11:39

The LTIP awards have an exercise price per share of 1 pence and are ordinarily exercisable three year from grant to the extent that performance conditions measured over a 3-year performance period are met. The LTIP awards are also subject to net of tax post vesting holding period to be determined by the Remuneration Committee and are subject to claw back and malus provisions. The performance conditions for the awards are linked to the Company's growth in EPS and total shareholder return

[nchanning] 27/9/2024 08:13

Well the LTIP element does have performance conditions but won't see what these are till annual report

[our haven] 27/9/2024 06:47

I must have missed the growth in the EPS and total return to shareholders given the size of the LTV shares.Not great timing.

[nchanning] 26/9/2024 15:06

I think you'd be naive not to dial down expectations for this year's earnings by 10 % after that RNS but a solid 50 grand buy by the chairman is reassuring. A lot of companies are struggling in this environment , there's probably still some natural recovery to come as the economy improves and interest rates return to normal in the Uk and Europe . Still buying at a cheap multiple at the bottom of the cycle here imo

[nchanning] 26/9/2024 14:19

Old Ken ford finally reached bit deeper into his pocket , perhaps this finally marks the bottom

[disc0dave46] 26/9/2024 11:07

On reflection. I guess the H2 weighting comment has been taken negatively despite the in line. By my reckoning they've had two profit warnings, so some concern a third may be a possibility.

[disc0dave46] 26/9/2024 09:46

rivaldo No problem.

[rivaldo] 26/9/2024 09:04

So:

- full year results are expected to be in line with 6.0 EPS forecasts
- net debt reduced strongly in H1 by almost £2m
- H1 has been slow, but given we're now half way through the period SDI hopefully have the revenue visibility to back up their belief that the final outturn will be nicely in line.

Either you believe the above, in which case today's fall is overdone and SDI are a complete bargain on a P/E of 8.9. Or you might not trust that trading will improve as flagged in H2, in which case any downside is hopefully priced in anyway at the current share price.

OT : apologies dd46, my post crossed with yours!

[disc0dave46] 26/9/2024 09:02

"Vague sort of profits warning?"When they've confirmed they are in line with market expectations!.I make that 6p eps assuming 25% tax (could be higher?).Revenue only +4.9% growth so didn't they forecast +5% to +8% organic growth, doesn't look like inorganic or organic growth is meeting their previous outlook / forecasts.A PE now of circa 9x, cheap based on historic ratings and a PEG of only 0.2. Tempting?