Sdi Share Discussion Threads

[gnnmartin] 13/5/2023 21:17

Hastings, thanks from me too.

[hastings] 13/5/2023 11:29

Cheers JAF. I don't, I tend to just follow the broker guidance, but obviously aware that SDI has a decent track record of outperforming. Hopefully that will resume in due course.

[jaf111] 13/5/2023 11:16

Interesting and a very balanced read Hastings…thanks for taking the time and sharing.

Do you have your own eps projections over the next couple of years that you could share?

[hastings] 13/5/2023 10:06

Brief write up following a catch up with management that may be of interest.https://martinflitton1.wixsite.com/privatepunter/post/catching-up-with-sdi-13-05-23

[steeplejack] 11/5/2023 15:46

There’s always money to be made in selected equities.If you’d bought the likes of BP or Shell,BASpace etc,you would have doubled your money over the last couple of years.A far superior return than cash or treasuries.

I’m not quite sure why SDI has been selected as an example of a company on the road to rack and ruin.It seems to be coping pretty well and a small purchase by a couple of directors today seems to confirm as much.The management have assembled a useful collection of businesses here.I suspect that if the SDI were to stumble,someone will more than likely acquire the group.

[worldwidet] 11/5/2023 15:25

@oilinvestorAl

Posts like yours and the way critical posts are reacted to by the predominantly bullish small investors confirms to me personally that it is still far too early to think about a return to stocks.

Risks are ignored and criticism is not tolerated.

It can still be a very painful path for investors in the stock markets.

Secular bear markets in the context of secular structural upheavals in the interest rate and economic cycle can be very unpleasant.

I am pulling back again and leaving the field to the bulls.

Good luck!

[oilinvestoral] 11/5/2023 15:09

"I think the risk premium of equities compared to safe government and corporate bonds is currently very uninteresting."-------Yet you seem to live your life on a share BB spouting reams of irrelevant nonsense? LMAO citing Taiwan is a bit of a stretch lol! I see you have immigrated from VLX (despite your doom mongering) to here after the former's share price increased by 35% in a few weeks to bestow us with your pearls of wisdom!

[worldwidet] 11/5/2023 14:46

1. the M&A multiples at SDI are getting worse and worse because SDI has to make larger Acquisition and thus has to fight for M&A with JDG Diploma and other high-profile financially strong buyers.

2. SDI has hardly any financial Power to make enough acquisitions.

In a recession and with interest rates around 5-6%, companies will sharply reduce their investments, which will have a strong negative impact on SDI's order books and further negatively affect FCF generation.

Analysts have also massively cut the FCF outlook.

SDi is facing huge problems.

In addition, there is a China risk in the event of an escalation in the China-Taiwan conflict.

The current price of 150p does not provide a sufficient safety margin.

I expect a massive impact of interest rate hikes on the economy in the next 12-18 months, leading to a recession.

The stock markets and especially the small investors are still greedy but I think that will change if the central banks cut interest rates in a panic because the economy is completely collapsing. The YieldCurve will then reinvert fast and then the stock markets will panic and look for the emergency exit.

With 5% interest rates on high-quality government and corporate bonds, investors can relax and wait to see what happens next.

You don't always have to be invested in shares. Nobody wants to hear that after 13 years of stock market bull market, but times have changed.

I think the risk premium of equities compared to safe government and corporate bonds is currently very uninteresting.

[oilinvestoral] 11/5/2023 14:32

"Add to that the risk of a deeper recession and SDI will be hit even harder."-----------Won't a recession give SDI the ability to pick up a few distressed businesses at very low multiples ?

[steeplejack] 11/5/2023 13:44

SDI Group plc announces that it was notified today that Mike Creedon, Chief Executive Officer and Amitabh Sharma, Chief Financial Officer of the Company, purchased 6,597 and 6,575 ordinary shares of 1 pence each in the Company at a price of 150 and 151.9 pence respectively.Following the purchase, Mr Creedon's beneficial interest in the Company has increased to 357,969 Ordinary Shares, representing approximately 0.34 per cent. of the total issued share capital.

[trident5] 11/5/2023 09:56

I thought it was a reassuring update.

[worldwidet] 11/5/2023 09:12

The executives hardly own any shares. If the share is really as attractively valued as the bulls write here, we should see strong insider buying. But the opposite is the case. Executives are selling their shares heavily.

I can only emphasise this once again.

The economic environment has deteriorated massively.

SDI has already been experiencing a sharp decline in organic growth for some time, which will be brutally exacerbated by the loss of the Atik orders.

For structural reasons, SDI has to make more and larger acquisitions, which is a problem because it lacks the FCF and the cash to do so.

It is nice when the bulls constantly promise acquisitions, but these acquisitions are also urgently needed.

SDi is sitting on debts caused by the last takeover and can hardly generate FCF.

With shrinking organic growth and stagnating FCF, where is the firepower for the urgently needed acquisitions supposed to come from?

Debt? at 5-6% interest rates and the credit crunch in the monetary transmission system continues to grow.

SDI would need to make 3-4 acquisitions in the range of GBP 4-6m per acquisition. SDI would have to produce an FCF of ~£20m annually.

I don't see how SDI can sustain the 28% annual long-term growth (20% M&A 8% organic) that management has promised.

I think we will see more downgrades and profit warnings in the next 12-18 months.

SDI is miles away from a stable dividend growth like JDG or HAlma can pay, which also justifies the valuation discount. In addition, JDG executives hold a good proportion of JDG shares.

I am not saying that JDG is attractively valued but SDI cannot be compared to JDG.

SDI has a long way to go to maintain the corporate substance of JDG.


Mike did a very good job of leading SDI through the post-2009 economic upturn in an interest rate cut cycle, now he has to show how he can steer the ship through a prolonged recession and solve the structural problems of a growing serial aqcuirer.

With ~5-% p.a. in high-quality government and corporate bonds, I can watch what happens on the stock market from the sidelines in peace over the next few months.

No reason to be greedy at the moment.

[steeplejack] 11/5/2023 09:05

Other than a confirmation that there will be no further PCR camera sales,everything seems to ticking along quite nicely.Worldwides points are valid and are apposite for equities in general.Note Buffet is sitting on a pile of cash and has a penchant for treasuries.Organic growth appears reasonably robust,some supply issues seem to be dissipating.The tricky issue remains as ever what sort of rating SDI deserves in a 'flighty' equity market.

[worldwidet] 11/5/2023 08:42

Bulls. I have been describing it for months. SDI faces structural problems that affect serial acquirers as they grow.

Add to that the risk of a deeper recession and SDI will be hit even harder.

SDI would need to make many more acquisitions to turn the M&A wheel faster to maintain growth and compensate for the lack of organic growth. But there is no FCF, which is increasingly disappearing because it is not growing enough.

Around 100p, the price could be interesting.

SDI investors have been spoiled for the last few years but the environment has changed.

With 5% safe yields in bonds, equity valuations are far too high.

Discount factors have changed at 5% government bond yields.

[cockerhoop] 11/5/2023 08:25

Not sure I'd describe 2.9p Eps in 2020 to 9.1p Eps this year as humdrum Shanklin.

[shanklin] 11/5/2023 08:19

Given the relatively humdrum growth here over the last few years, what P/E does this merit. 18 x the forecast 2024 7.8p EPS is circa £1.40, which is where we are at 08:15.

Not sure I would want to be buying above £1.20.

[cockerhoop] 11/5/2023 08:17

FinnCap have actually removed £3.5m of PCR orders from new FY24 f/cs so would presume Progressive similar.

[rivaldo] 11/5/2023 08:13

Hi redwing. Absolutely - I'm just going by their 7/12/23 note, which specifically stated they were "not factoring any further orders (PCRs), or acquisitions, into forecasts".

[redwing1] 11/5/2023 08:07

Rivaldo - I'm not sure that it is right to say that Progressive had already factored in the lost PCR business. Their eps forecasts are today cut by 19% for 2024.

[mortal1ty] 11/5/2023 08:03

6m ebit. Put that on 10x. That is a 60m value of business lost. Or about 30pc of the market cap.

[mortal1ty] 11/5/2023 07:56

That you Tristan?

[hastings] 11/5/2023 07:49

I think it's worth remembering that whilst short term ATIK has been impacted after a good run with that OEM, (previously well flagged by the co) it continues to have excellent growth prospects in the mid-long term. New products trials with potential new OEM's, I remain positive.

[tkamp] 11/5/2023 07:35

SDI will recover eventually but I suspect its going to go through a period of weak trading over the next 12-18 months. These camera sales had a much greater impact on profits than on revenues

[tkamp] 11/5/2023 07:33

This was very predictable. They did ~9m in sales from that single customer at a gross margin of 65%. That's 6m in contribution profit that now falls away, or half of your EBIT. SDIs EBIT margin adjusted for the OEM sales have declined strongly in recent years, which is troubling.